Trends Remained Positive, But Interest Rate Volatility Signals Possible Shift Ahead
July 1, 2013 – Voorhees, NJ – In yet another sign that the Southern New Jersey CRE market is emerging from the havoc caused by the Great Recession, Wolf Commercial Real Estate reports in its latest quarterly analysis that there were approximately 540,000 sf of new lease deals and renewals executed during the second quarter. About 35 percent, or some 185,000 sf of the total, comprised new deals. The jump in deal activity was one of several positive developments noted in WCRE’s quarterly Southern New Jersey Office and Retail Market Update, which is now in its second year.
“Several of the fundamentals needed for a sustained return to growth are either steadily gaining strength or are already in place,” said Jason Wolf, founder and principal of WCRE. “However, this market still must absorb much more of its vacant space.” The report notes that the stock market closed Q2 up 12 percent on the year – its best first half of a year since 1999 – and that unemployment rates both in New Jersey and nationwide continue to fall, while office space rental rates have stabilized and continue to rise, and retail space rental rates were rising for the first time in five years. Still, according to WCRE vacancy rates in the office market for Class A and B product remain in the range of 18-19 percent.
Amid all the good news, the report finds a possible indicator that inflation may be on the horizon, noting the sharp rise in the 10-Year Treasury yield through May and June and the effect that could have on interest rates. “If interest rates go up, our borrowing costs go up, which will have an effect on pricing and cap rates,” the report says.
WCRE’s research includes snapshots of the office and retail markets and details on the major deals being consummated or planned.
Office market highlights from the report:
- Positive absorption for the second quarter was in the range of 185,000+/-sf of new deals and/or expansions. This is a 20 percent increase over the second quarter of 2012, and an astonishing 80 percent gain over the first quarter of this year.
- Average rents for Class A & B product remained at or above the improved level they reached last year, continuing to show strong support in the range of $10-$14.00/sf NNN with an overall market average of $11.00/sf NNN for the deals completed during the quarter.
- Healthcare, computer services, insurance, defense contracting, consulting, engineering, and finance companies all were very active in Southern New Jersey during the second quarter.
Retail market highlights from the report include:
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Retail landlords are experiencing increased rental rates for the first time since 2008.
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Overall retail space vacancy has fallen to 15% and the market has stabilized. Community and lifestyle shopping centers have much less vacancy than neighborhood and strip shopping centers.
- Average rents for upscale lifestyle centers continue to show strong support in the range of $30-$40.00/sf NNN, and average rents for neighborhood and strip shopping centers remian in the range of $15-$23.00/sf NNN.
The full report, including details about several key deals, is available upon request.
About WCRE
WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long term growth and success.
Learn more about WCRE online at www.wolfcre.com, on Twitter @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC. Visit our blog pages at www.southjerseyofficespace.com and www.southjerseyretailspace.com.
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