Pace of NJ's investment sales sounding like broken record?

When it comes to reporting on the investment sales market in New Jersey, it has become almost mundane to discuss the incredible pace that has defined the past several years. Yet the first half of 2007 has maintained the pattern--robust demand, plenty of capital in the market and an outlook of strong performance through the remainder of the year with no sign of abatement.

So what's new?

During the past month, changes in the debt market have begun to impact deals. The CMBS market is feeling a carryover of the sub prime issue, and rating agencies are looking very closely at the percentage of debt. Where a great deal of existing debt is interest only, lenders are now looking for amortization. As such, highly leveraged private investors are becoming less aggressive than they were even recently.

Of course, there is plenty of institutional capital--a sector that is not as reliant on open debt--to fill the void. Yet at the ICSC national event this spring, I asked several institutional players whether this shift is prompting them to become more active. The general response was that they have been aggressive in pursuing good opportunities. Now they expect that, with less competition, the market may be pressed to pursue them instead.

We have seen a particular emphasis on deals involving 1031 buyers. This can be credited, in part, to record-high pricing on sales and resulting higher profits. Many non-tax-exempt sellers are looking to roll their proceeds into other deals, which enables them to take advantage of the current market to achieve strong ROI without creating a negative tax issue.

Other notable changes include the beginning trend of some investors moving away from core investments to more value-added investments. In New Jersey, this may be especially interesting because we have a fairly high office vacancy rate. The Garden State may be viewed as a prime area for these players to find buildings with partial leasing or near-term rollover.

In general, investors are hot for quality product across all real estate sectors. Our team at Cushman &

Wakefield is online for a record year in 2007, thanks to a continued volume of diversified business involving office, multi-family, industrial and retail properties.

In contradiction to a weak overall office leasing performance, investors still compete to buy office product.

Looking back over the past six months, activity has been dominated by several large transactions, such as the sale of Metro Park Office Center in Iselin for $228 million and the sale of Merrill Lynch's Plainsboro campus for $122 million.

From a housing perspective, places like Jersey City, Hoboken, and Edgewater appear to be immune from the softening of the for-sale market. This can be attributed to a ripple effect from Manhattan, which is one housing market that continues to thrive. Elsewhere, investment demand for rental properties is helping to maintain aggressive pricing.

Retail and industrial properties have not been quite as fluid, with very few assets coming on line. Among those that have traded this year, Grand Plaza Shopping Center in East Brunswick recently sold for nearly $14.7 million. On the industrial front, 190 Jony Street in Carlstadt sold in June for $12 million.

Looking ahead, we expect continued strong activity. In fact, we see no reason for things to change from where they have been since the turn of the century (with the exception of the fourth quarter of 2001).

And while this is beginning to sound monotonous, no one is complaining. The continued strength of New Jersey's real estate investment sales market is good news for the state and for those involved in this business.

BY ANDREW MERIN, VICE CHAIRMAN CUSHMAN & WAKEFIELD, INC., METRO AREA CAPITAL MARKETS