Key Take Aways from Northern New Jersey’s November, 2021 Meeting
Environmental
- While the NJDEP and EPA continue to put out new site remediation guidelines and regulations, a crisis in expert implementation is looming. A large number of people with 20-30 years of LSRP expertise are retiring and being replaced with new graduates without experience in the nuances of site/soil remediation. (John Tregidgo, Dresdner Robin)
- It continues to become more economically viable to clean up industrial properties. Several concerns persist: Changing environmental standards and deadlines, especially for certain contaminants; increased land use needs; massive changes in the future co; impact of climate change, etc. (Davis, Davis Environmental Law)
- Climate change and resiliency are large parts of urban planning; there’s interest to bring in speakers to address stronger infrastructure hardening, energy creation and microgrid. (Charles Hecht, Dresdner Robin)
- 2021 has been a solid business year in solar panels as global issues of climate warming, environmental concerns and impact have motivated companies to switch to solar energy. The result: a 10% uptick in sales of solar panels for businesses compared to last year. (Paul Abramson, SolarKal)
Cyber
- Cybercrime and security is affecting insurance costs; cybercrime and ransomware are way up in every industry. As a result, cyber carriers are changing underwriting guidelines, requiring much more information from clients. (Paul Hacker, Axis Insurance)
- There has been an uptick in internal cyber security education, including tutorials on phishing, malware and ransomware emails. Cyber security was a key part of the land use RFP for the NJ tri-military joint base operation in McGuire, Fort Dix and Lakehurst. (Charles Hecht, Dresdner Robin)
Shipping
- Despite price hikes due to delivery shortages, there’s been a projected 8-10% boost in overall holiday sales, especially via the Internet. The container bottleneck, especially on the West Coast, has resulted in large retailers chartering their own container ships to bring in goods from overseas to meet demand. While container deliveries are still stalled on the West Coast, ports on the East Coast are expanding delivery points not usually utilized, such as Staten Island. (John Tregidgo, Dresdner Robin)
- A decrease in long haul truck drivers has added to the crisis; a cancellation of independent drivers on the West Coast and a crackdown on 1099 drivers on the East Coast have affected deliveries. Demand for truck depots, surface pavement and staging of trucks and trailers to make connection uptick and infill of trucks may also have to do with a shortage of drivers. (Bill Hanson, NAI James E. Hanson)
- Supply chain delays in retail products will likely increase online orders; however, the ramification for construction materials into 2022 may affect real estate.
- Long term delivery issues with steel, lumber, appliances, and other items in the supply chain are affecting the strong multifamily market. Some items are impossible to get without ordering 6 to 9 months in advance and paying at least 50% upfront. (Lucas Gruenberger, Tulfra Real Estate)
Industrial
- Bill Hanson noted his firm has been busy, almost all industrially related; pricing continues to go up. A couple of years ago, industrial complex buildings were at $200/SF; now deals are up to $400/SF. Rents and land pricing are way up, whether for new construction or refurbishing existing buildings. Rent pricing for land is pushing $30K/acre/month – double what it was a year ago. Bill expressed concern that people are thinking there is not end in sight for this situation, but he is worried about inflation.
Multifamily
- Lucas Grunberger (Tulfra Real Estate) reported the near completion of its major residential project in North Haledon. The first 48-unit apartment building opened October 15th and is 75% leased; the second 45-unit building is scheduled to open in a week at 25% leased. Rents exceed $2400/month for 1BRs and $3100/Month or more for 2BRs, plus fees for amenities, pets, assigned parking, etc. Renters are generally older couples who are downsizing.
Speaker Highlights: Gregg James of NAI James Hanson presented a brief overview of the economy via M1 Growth Since 2020 (aka the amount of coins and currency in circulation) as reported by the Federal Reserve Bank of St. Louis.
- M1 was up to $4T in 2020 and the government has printed an additional $5T this year that is in the system. Just from the CARES Act alone this year, there is $800B that has not been spent yet. These kinds of activities generally create inflation.
- The average person, as shown recently in VA, NJ and NY elections, are responding to pocketbook issues – healthcare, gas, etc.
- Price discovery in context of the pandemic covered 4 areas of concern with consistent price discovery: industrial, multifamily, net leased real estate, and land for leasing (esp. storage and industrial). $200/SF was a ceiling in industrial space until 18-20 months ago now trading at $200 to $250/SF. New buildings developed for industrial use are at $350 – $400/SF especially along the airport and harbor areas.
- On the retail side, investors look for names like CVS, Walgreens, Home Depots, Target, etc. Medical office has traded well during the pandemic, continuing to be a targeted asset with cap rates at 6% or higher.
- Land for industrial use is generically $2M to $4M an acre. Some outliers in the Newark airport market are at $5M per acre. Because we are running out of land, old office buildings and old shopping centers are lucrative alternative properties. Demand for self-storage is also still high.
- Banks are “kicking the tires” looking for solid clients with good business and strong financial plans. A wide array of financing options is available – banks, HUD, Fannie/Freddie. Life companies have cherry picked for industrial buildings with low 2-1/4 to 3 %. CMBS is still out there but they are 50 to 60 basis points higher than what you’d get from Fannie or Freddie or local banks. Banks provide the best execution at the lowest cost.
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