Key Take Aways from Northern New Jersey’s June 2023 Meeting
• Dresdner Robin Survey Group now offers a quick and affordable service to create floor plans using lasers. (John Tregidgo – Dresdner Robin, (Tony Ianuale – Dresdner Robin)
• Planning group continues to be active. (John Tregidgo – Dresdner Robin)
• There are a lot of regulatory changes coming. PFAS has new standards in the state and with the federal government. (John Tregidgo – Dresdner Robin)
• DEP is coming out with a state regulation requiring perimeter air monitoring, which has been discussed for nearly a decade. Will add significantly to construction costs and is expected sometime this year. (Al Moffit – GEI Consultants)
• Premiums are going up substantially for E&O, which often happens when times get tough. Some are using it as an excuse to load up rates. (Paul Hacker – Axis Insurance Systems)
• Premiums may go down when the economy turns around – hopefully in 18-24 months. (Paul Hacker – Axis Insurance Systems)
• Many expect at least one more rate hike, though it may not be the next one. May not be as quick to lower rates this time around. Fed may hold steady for awhile. (Gregory James – NAI James E. Hanson Inc, Paul Fiorilla – Yardi Matrix)
• Cap rates have not adjusted enough. (Bill Hanson – NAI James E. Hanson Inc)
• Some capital has gone back into short term bonds and some companies are looking for distressed opportunities. (Paul Fiorilla – Yardi Matrix)
• There is a lot of uncertainty and it’s difficult to plan for the next ten years. (Tony Ianuale – Dresdner Robin)
• Treasury bills are returning over 5% and it’s low risk and easily accessible. Expects it to play out over 3-4 years as a new equilibrium is found. Inflation is not going back to zero and will probably settle at 3-4%. Banks are offering 4-5%. (Gregory James – NAI James E. Hanson Inc)
• Construction financing is high and some developers are waiting to close on loans. (Tony Ianuale – Dresdner Robin, Gregory James – NAI James E. Hanson Inc)
• There are a lot of loans that will be maturing soon. (Gregory James – NAI James E. Hanson Inc)
• Office market is going under stress it’s never had before. (Tony Ianuale – Dresdner Robin)
• Expectation is we won’t go back to all work being done in the office, but expects it to be more of a perk. Companies are seeing the down sides of work from home in things like loss of mentorship. (Bill Hanson – NAI James E. Hanson Inc, John Tregidgo – Dresdner Robin)
• Wrote a recent piece on stress on the market and how lenders will negotiate. (Paul Fiorilla – Yardi Matrix)
• Monthly multi-family rent growth was still positive. NNJ is at 7% year over year, though it is decelerating. Some of the sunbelt markets that had big bumps are turning negative. Northeast and Midwest were more consistent. (Paul Fiorilla – Yardi Matrix)
• Has seen a slow down in some of the Phase One projects. Development in progress is moving forward. Not as much building on spec. (Al Moffit – GEI Consultants)
• Prices in Bunker Hill are strong and has worked with a warehouse owner with a 100K sq ft building who is buying another one because his business is growing, which is a good sign. (Gregg Manzione – Nationwide Consulting Company, Inc.)
• In Jersey City, there are micro apartments with the max apartment at 400 sq ft. Industrial land values are strong there. (Gregg Manzione – Nationwide Consulting Company, Inc.)
• Newark has been doing more spot zoning, especially in the multi-family area. On a larger level, they haven’t done a re-val in 40 years and it’s been making it difficult on developers. Not-for-profit entities are given priority in bids over profit entities, which is causing backlash. (Gregory James – NAI James E. Hanson Inc)
• Large markets have seen a lot of negative office absorption. (Mateusz Wnek – CoStar Group)
• Working on a piece on the Linden industrial submarket. Large jump in vacancy recently and they are looking into that. (Mateusz Wnek – CoStar Group)
• Looking into a correlation between activity at ports and other activity in Northern New Jersey. (Mateusz Wnek – CoStar Group)
• Lots of sublease industrial over the past few months. Some companies over-expanded. (Bill Hanson – NAI James E. Hanson Inc)
• Significant volume decreases year over year in Industrial, Multi-Family, Retail and Office sales. (Gregory James – NAI James E. Hanson Inc)
• Primary sources of funding are local and commercial banks, multi-family is a favored asset class which is supported by the government. With higher rates, some projects are less favorable. (Gregory James – NAI James E. Hanson Inc)
• Has been a strong sellers market during recent history. (Gregory James – NAI James E. Hanson Inc)
• Many lenders in the local market are essentially out of the market because their rates are so high. Has not seen this since 2008. (Gregory James – NAI James E. Hanson Inc)
• Companies are giving buildings back. Special servicer at the bank doesn’t have the resources to handle the property. (Gregory James – NAI James E. Hanson Inc)
• Orthodox Group has been the largest buyer of office buildings over the past few years. Typically not investing in renovations. (Gregory James – NAI James E. Hanson Inc)
• Banks are not as likely to lend out of their market. (Gregory James – NAI James E. Hanson Inc)
• Seems like a recession, but the consumer is still spending money and GDP is still expected to be positive. Despite Fed hiking, economy has held pretty well and the residential market seems to be holding. (Gregory James – NAI James E. Hanson Inc)
• Some landlords may not properly be considering the credit of potential tenants. (Gregory James – NAI James E. Hanson Inc)
• Multi-family market seems to be filling up in all areas of the state, despite the high rates. Some people are migrating from New York City for larger space and better schools. (Gregory James – NAI James E. Hanson Inc)
• There is still a lot of demand for single family homes. Multi-family occupancy is still historically high. At some point, that will likely crack. There are more people moving out of the city into the suburbs. (Paul Fiorilla – Yardi Matrix)
• Regulations have pushed people toward larger banks and away from mid-tier banks, which is concerning. (Gregory James – NAI James E. Hanson Inc)
• Signature was the largest affordable housing lender in New York. Some rent controlled landlords had expenses going up way more than rents. (Gregory James – NAI James E. Hanson Inc)
• There was a lot of non-payment during the pandemic. (Gregg Manzione – Nationwide Consulting Company, Inc.)
• Special service rates are going up slowly. (Paul Fiorilla – Yardi Matrix)
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