Northern NJ industrial market remains strong.

The industrial market in northern New Jersey remains among the strongest segments of the commercial real estate industry. In traditionally industrial pockets, such as the New-Jersey Meadowlands, we are already noticing new requirements from corporations.

However, due to absorption of first-class industrial space during the past year, these companies may discover few suitable options. As a result, they will either become more flexible geographically and look at other areas, or they will select build-to-suit or renovation opportunities.

The latter market is likely to have the most potential for developers of quality industrial space in the years ahead. In the Meadowlands, for example, the major industrial space available is in older buildings. Many of these structures are obsolete for today's warehousing requirements because of low ceilings, poor loading, a shortage of parking, inadequate power and building systems, and small lot sizes. The properties simply cannot accommodate modern trucks which are longer now, or the high-tech requirements of executive and support staff.

Renovations of these buildings are possible, but pose some tough challenges. Since older buildings often cover as much as 60 percent of the land, it is difficult to create enough parking and loading areas. Additionally, renovations may require major changes such as raising roofs.

Financing is also difficult to obtain unless buildings have good tenants with long-term leases. Availability of financing on vacant buildings is virtually non-existent. While financing markets are opening, lenders are still very cautious. In order to qualify, developers must have their own capital invested in a project and the strength to carry the property in the future. In most cases, they must also have a major user.

At the same time, there are a number of good opportunities for owners and investors in the market today. For example, we have been pursuing land sites for industrial as well as retail development. We are also conceptually interested in buying older buildings for renovation. But we are also very cautious - the buildings must have adequate land to enable conversion into first-class industrial facilities, and they must be priced and located to justify the conversion.

As we move into the second half of 1994, we believe that demand will continue to increase for first-class industrial property. A tremendous amount of absorption has taken place in the past several months, and the market is tightening. The build-to-suit market and renovation activity are likely to pick up significantly in the in the years ahead.