Key Take Aways from Northern New Jersey’s February 2024 Meeting
• First Commerce Bank has 11 branches in NJ, and they pride themselves on personalized service, local decision-making and local customer service representatives. (Jeffrey Schneider – First Commerce Bank, Michael Kahn – First Commerce Bank)
• Most contractors are inexperienced in dealing with environmental remediation. Dresdner Robin now has a new construction management arm to help streamline the process. (Charles Heydt – Dresdner Robin)
• With the governor’s race in NJ coming up, it’s important to remember that politics has a big influence on real estate in the state. (Charles Heydt – Dresdner Robin)
• Aspire program was just updated, and cities are no longer limited to 2 transformational projects and there is a lower minimum unit that can be phased in over time. (Charles Heydt – Dresdner Robin)
• Kelley Drye & Warren works on two sides of real estate – one is lending, the other is equity investments. (James Jacobus – Kelley Drye & Warren LLP )
• It has been a choppy market for a year. Some new deals are coming in, deal flow is improving. Everyone is confident we’ve seen the top of the rates, which allows you to price a deal. (James Jacobus – Kelley Drye & Warren LLP)
• Expects a lot of opportunities in rescue capital. (James Jacobus – Kelley Drye & Warren LLP)
• All the markets have been priced to perfection with the idea the Fed would be lowering markets in March, but now expectations are June or July. (Gregory James – NAI James E. Hanson Inc)
• There was an issue with New York Community Bank, who wrote down $500 million after anticipating a much smaller amount. Concerns arose about local banks, but likely overblown. (Gregory James – NAI James E. Hanson Inc)
• Many banks are lending to existing clients, but not so much to new clients. First Commerce Bank works with new clients in some cases. (Gregory James – NAI James E. Hanson Inc, Jeffrey Schneider – First Commerce Bank)
• The Fed is expected to take a measured approach to lowering rates. (Gregory James – NAI James E. Hanson Inc)
• On the industrial side, it’s becoming more difficult to get large tenants and owners are having to subdivide. (Gregory James – NAI James E. Hanson Inc)
• Kingsland property in the meadowlands is a lot with 700 acres that just announced its first deal with TJ Maxx. (Gregory James – NAI James E. Hanson Inc)
• The state has allowed extensions for a lot of remediation projects, providing a 2 year extension which is generally being approved as long as the owner is in compliance, keeping these properties out of direct oversight. (John Tregidgo – Dresdner Robin)
• The permitting process for remediation took years, and permits can now be approved by an LSRP for less risky sites. (John Tregidgo – Dresdner Robin)
• There is often a disconnect between design and implementation for remediation projects. The construction management arm will help streamline the process. (John Tregidgo – Dresdner Robin)
• They continue to be inundated with public projects. (John Tregidgo – Dresdner Robin)
• Projects in Jersey City have been heating up. (John Tregidgo – Dresdner Robin)
• There has been more activity in investments that expect a longer development period. (Charles Heydt – Dresdner Robin)
• THA Consulting focuses on parking and does lots of consulting relating to parking. (Jim Zullo – THA Consulting)
• As the area gets denser and denser, structured parking becomes more necessary despite the costs. (Jim Zullo – THA Consulting)
• Has seen a bit of a tail off in business with interest rates in the early part of the year. (Jim Zullo – THA Consulting)
• Healthcare is strong and universities are busy. Because of work from home, some spaces require less parking. (Jim Zullo – THA Consulting)
• Parking needs vary significantly from town to town. (Jim Zullo – THA Consulting)
• There is new liquor license legislation going through. Can be as much as $1.5 million, which can be unbearable even for big corporate restaurant groups. (Rob Mackowski – Pierson Commercial Real Estate)
• Retail has stayed fairly strong. (Rob Mackowski – Pierson Commercial Real Estate)
• A lot of malls are recreating themselves and some are adding multi-family components. (Rob Mackowski – Pierson Commercial Real Estate)
• New Jersey is 2nd nationally in rent growth. Occupancy rate of stabilized properties is over 97%. (Paul Fiorilla – Yardi Matrix)
• Emerging Trends in Real Estate report was sponsored by PwC and ULI. (Paul Fiorilla – Yardi Matrix)
• The forecast has been expecting a recession, but that has changed. (Paul Fiorilla – Yardi Matrix)
• The theme of the report this year is the Great Reset. Changes to interest rates and expectations of “higher for longer”, sticky pricing and high capital costs have reduced transaction activity. Expect it to pick up some in 2024. (Paul Fiorilla – Yardi Matrix)
• Most owners don’t want to sell unless they have to. (Paul Fiorilla – Yardi Matrix)
• Increased attention on operational efficiency due to increasing expenses, particularly in insurance. (Paul Fiorilla – Yardi Matrix)
• The office market has had the biggest increase in cap rates. (Paul Fiorilla – Yardi Matrix)
• There is a question about how much distress we’re going to see. Delinquency rates have gone up, but not as drastic as the GFC. (Paul Fiorilla – Yardi Matrix)
• Office distress is expected to go over 10%. (Paul Fiorilla – Yardi Matrix)
• Vacancies are low and rents are stable for most retail. It helps that there’s not a lot of retail construction. (Paul Fiorilla – Yardi Matrix)
• If the Fed rate holds or goes down, there should be less distress than there might have been. (Paul Fiorilla – Yardi Matrix)
• Properties coming up for refi have had the benefit of a strong commercial real estate industry over the past 7-10 years. (Paul Fiorilla – Yardi Matrix)
• Lots of indicators are better now than they were before the GFC. (Paul Fiorilla – Yardi Matrix)
• One positive thing from Covid was that forbearance and deferral happened, which kept some of the catastrophes from happening. By Jan 2021 most people had made rent payments, and it wasn’t as bad as forecasted. (Gregory James – NAI James E. Hanson Inc)
• Most of the losses will be taken by the equity holders. The GFC had a lot of credit default swaps that exacerbated the problem. (Paul Fiorilla – Yardi Matrix)
• Opportunities right now in gap capital, debt, niche asset classes. Has been a lot of growth in self-storage, student housing and data centers. (Paul Fiorilla – Yardi Matrix)
• Multi-family rents are flat year over year, but they’re up in the midwest and the northeast. A lot of Sunbelt markets that had been really hot, rents are coming down. Lots of units under construction right now, and most are in that Sunbelt region, will take some time to absorb all the new stock. (Paul Fiorilla – Yardi Matrix)
• Occupancy rates are high in New York and New Jersey. (Paul Fiorilla – Yardi Matrix)
• Multi-family demand is coming from household growth, but also immigration. (Paul Fiorilla – Yardi Matrix)
• Demand for office space has gone down significantly, though rents haven’t gone down that much. TIs have gone up dramatically. (Paul Fiorilla – Yardi Matrix)
• While it’s building to building, generally buildings need to be able to provide the types of amenities employees are looking for. (Paul Fiorilla – Yardi Matrix)
• There is a large problem with fraud in rentals, with some tenants taking a unit they never intended to pay rent for. There are also fraudsters pretending to be real estate agents and showing rental properties. (Paul Fiorilla – Yardi Matrix)
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