New Jersey's leasing velocity already surpasses last year.
Additionally, the State's leasing velocity of 11.7 million square feet year-to-date has surpassed the total volume for all of 1999. This tremendous velocity is a function of overflow from the tight New York City market; pent-up demand from New Jersey tenants; and specific industry growth from the financial services, telecom and other computer-related sectors.
Proactive owners throughout Northern New Jersey are redeveloping under-utilized properties to meet this surging demand. In Jersey City, for example, Highgate is converting a 900,000 square-foot former warehouse facility at 215 Coles Street near the Holland Tunnel into a "telco hotel" in an area where the level of demand is strong for this type of product. Ideal for web and data hosting tenants, with heavy power and floorload capacity, high ceiling heights and redundancy of fiber and power service, space at this new facility is expected to lease quickly.
In Montclair, NJ, York Hunter is redeveloping 56 Church Street as a multi-use retail, office and telco facility. At 160,000 square feet, with the opportunity to expand by 60,000 square feet, the property offers terrific amenities in a downtown area convenient to bus and rail lines.
Tenants see New Jersey's pricing structure as a discount to soaring NYC rents, often getting new construction product in the low-$30 to $40 range with attractive state incentives. They also have the ability to work with landlords to create their own "building within a building."
The primary weakness we see in the market is that as positive economic growth continues the shortage of labor becomes exacerbated. However, the State's wealth of quality educational institutions will help keep the flow of qualified labor on pace with market demand.
If the U.S. economy stays on track, this bull market run still has a way to go, especially if the financial markets remain positive. Demand is still outpacing supply, as developers and financiers continue to be both conservative and responsible, insisting on tenant pre-leasing commitments of 30 to 50 percent and avoiding speculative construction.
Cap rates for "A" quality product fully-leased in good locations are trading at 10 percent or below, and investment grade "B" quality product is selling at cap rates between 10 and 11 percent. "B- and C" properties are being repositioned by value-added development players to be brought to the market as higher quality product. There are still more buyers out there than product, however, some sellers are unrealistic, overpricing some properties due to the recent run-up in benchmark pricing.
The current market throughout New Jersey shows little sign of slowing down, with several sub-markets characterized as "super-heated." The 287/78 Corridor, Parsippany, the Waterfront and the Meadowlands are several such markets seeing tremendous activity.
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|Publication:||Real Estate Weekly|
|Article Type:||Brief Article|
|Date:||Oct 25, 2000|
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