Northern New Jersey November 2020 – Key Takeaways

• COVID-19 Update and Adult Marijuana use – see additional documentation below.
• Industrial demand for warehousing is way up – from REITs as well as small Brooklyn/Bronx manufacturers and distributors looking for NJ space. Note: REDCOM has six industrial properties in development. A large warehouse in Passaic County that could not be leased before COVID recently rented for 2 to 3 times the previous rate.
• Construction costs continue to rise due to 30-50% increase in lumber pricing.
• Sales of single-family homes have skyrocketed, with residential multifamily following suit from pent-up demand due to the shutdown and migration from NYC. Some firms can’t keep up with financing and refinancing demands of higher sales volume.
• NNJ residential rentals: evictions and rent prices are frozen due to COVID state-of emergency in NJ. Once it lifts, there could be a ton of evictions.
• Nursing home facilities: previous problems have accelerated during COVID; 200-250 bed facilities now reduced to single-bed rooms; Medicaid payments have been reduced; some facilities are struggling to generate new programs, such as rehabilitation to increase margins.
• Healthcare projects are up, with many hospitals upgrading their facilities to make them more adaptable to meet pandemic demands.
• Film and TV projects are exploding demand due to more content.
• Adaptive reuse projects have also resumed in urban areas; Newark’s old United Way office building added 5 floors & converted to rental residential.
• NNJ Employment figures plummeted in 2020 due to the pandemic, with unemployment just below a 10% record high – not good news for the office market.
• The exodus of people from NYC to NNJ benefitted the apartment and industrial markets and potentially retail as well.
• Apartment market is strong and well-priced for 2020. Vacancies down, with Union City leading the way with the most units under construction. Expect rents to decrease this year but bounce back in a couple of years as more new apartments come online.
• Industrial is keeping up with demand in 2020-22, with 8M SF under construction; while NNJ rent dropped by 1% in 2020; it is expected to bounce back in 2022-24
• Office market is struggling due to several factors: decreasing employment, more space coming offline than online, and properties converting to reuse. Companies are also shifting to smaller offices due to COVID.