Office and industrial sales spark first half in N.J.

Numerous industrial acquisitions combined with several large office building sales define New Jersey's real estate investment sales in New Jersey for the first half of 2001, according to statistics issued by Cushman & Wakefield's Metropolitan Area Financial Services Group in East Rutherford, N.J.

Through June, office and industrial sales totaling $720 million have closed. Thirty additional office properties worth $1.2 billion are on the market with many expected to close during the coming months. "If activity continues, we will be slightly ahead of 2000, in which $1.3 billion of office sales were completed," noted Andrew J. Merin, FSG executive vice president. In 1999, 33 office buildings changed hands totaling $1.2 billion.

Yet despite the overall healthy picture, the profile of sales activity in New Jersey has changed dramatically in recent months, according to Merin. "We are seeing a great deal of caution, particularly on the office front," he said. "This sector, which historically has experienced an incredible amount of activity during the past few years, has become a mixed bag."

An unusually large amount of office sublet space coming onto the market and a fall-off in demand has contributed to this shift. "At the same time, demand still exists for long-term, net leased tenancies, yet few trophy buildings are being offered," Merin continued. "Still, some major corporate dispositions are providing opportunities for value-oriented investors."

Highlights of office sales for the first half of the year included such notable transactions as Lexington Properties Trust's purchase of the 340,000-square-foot Morris Corporate Center IV, phase I, in Parsippany, for $81 million. Also in Parsippany, Benenson Capital bought a 256,000-square-foot office building at 169 Lackawanna Avenue for $61.5 million and Mack-Cali purchased Maple Plaza I and II for $48 million.

"The industrial market benefited, in part, from the office slowdown. Institutional investors, over-weighted in office product, have refocused their activity to rebalance their portfolios with investments in modern, high-quality industrial product," Merin said. For example, Keystone Property Trust's purchase of the 812,739-square-foot 66 Cranbury Station Road in the thriving 8A corridor represented the largest industrial sale in the first half of the year, valued at $32.3 million.

"Other large transactions, like the Read Property Group's purchase of a 654,375-square-foot building at 1600 Route 1 North in North Brunswick, contributed to vigorous industrial activity during the first six months of 2001," Merin noted. "In spite of the slowing economy, record low cap rates and high per-square-foot pricing is being achieved." An example would include the recent sale by AMB Property Corporation of 1265 and 1267 South River Road in Cranbury Township at Exit 8A. This property recently sold for $33.5 million -- $53.59 per square foot.

As industrial and office activity juxtaposed one another during the first half of the year, so did multi-family and retail investment activity. Demand for multifamily property remained strong, and Merin expects that it will continue to thrive through the remainder of the year. At the same time, retail property sales have slowed significantly. "Interest is limited to grocery-anchored neighborhood centers," he said. "Even within this sector, investors have begun to look at the credit of those anchors."

Through the second half of 2001, Merin expects that the real estate investment market will operate on continued uncertainty. "Deals will get done, but they will take longer," he said. "Pension funds will remain active, yet they will operate conservatively. We expect that the bulk of activity will involve wealthy individuals, syndicates and other entities looking to take advantage of the cyclical downturn in New Jersey's real estate market."