REPORT: NEITHER HURRICANE, NOR ELECTION, NOR FISCAL CLIFF CAN STAY THE SOUTH JERSEY COMMERCIAL REAL ESTATE MARKET FROM ITS SLOW, STEADY CLIMB
Uncertainty Caused by Natural Disaster and the News Led to Overall Cautiousness, but There are Some Reasons for Optimism, WCRE Finds
January 7, 2012 – Voorhees, NJ – Despite the headlines, the local commercial real estate market exceeded several of its third quarter benchmarks, WCRE said in its latest quarterly analysis. While the third quarter was marked by caution, the report found that in the fourth quarter the market proved its resiliency.
“Though Hurricane Sandy, the election, and the threat of the temporarily-resolved fiscal cliff exerted pressure on businesses, investors, and consumers, there were signs of accelerated growth and reasons for optimism amid the overall climate of cautiousness,” said Jason Wolf, founder and principal of WCRE.
According to WCRE, the fourth quarter showed a significant uptick in both new deal activity and expansion. Several deals of significant size were completed, and properties in prime locations performed better than the overall market vacancy rate. There were approximately 389,000 sf of notable deals executed in the market, a nearly 25% increase over the third quarter. This includes new lease and expansion transactions of approximately 235,000 sf. Notably, expansions and new deals outpaced lease renewals this quarter.
The report also noted that New Jersey’s unemployment rate improved to 9.6% – coming down from a 35- year-high notched during the previous quarter – and that there are many new real estate deals nearing completion. Other office market highlights from the report:
- Average rents for Class A & B product remained at the improved level they reached earlier this year, continuing to show strong support in the range of $11-$14.00/sf NNN with an overall market average of $11.00/sf NNN for the deals completed during the fourth quarter.
- New deals and expansion transactions of 235,000 sf for the fourth quarter was more than double the third quarter mark of 106,000 sf.
- Moorestown, Marlton and Mount Laurel (3M) continue to show strength, while a large share of the region’s vacancies remain in Voorhees, Pennsauken, and the west side of Cherry Hill. Burlington County continued to maintain a significantly lower vacancy rate than Camden County.
- Tenants continue to take advantage of low rental rates and are securing long-term lease commitments. The pattern of this flight to quality – upgrading to better locations and spaces – is expected to continue, especially among larger firms.
- All of the new major owners and REITS are showing a significant increase in deal activity and occupancy – both renewals and new deals – and are all cautiously optimistic.
Retail market highlights from the report include:
- Moorestown has issued its first ever liquor licenses, and PREIT acquired them in order to bring four new high end restaurants to the Moorestown Mall.
- Overall retail space vacancy is still hovering in the 17-18% range, but the market has stabilized, and prime retail locations have very little vacancy.
- Average rents for Class A retail product continue to show strong support in the range of $30- $40.00/sf NNN. Class B product shows support in the range of $15-$23/sf NNN.
- The Haddonfield Road corridor, Route 70, and Route 73 are the prime destinations for retailers.
The report also anticipated challenges in 2013, with at least 250,000 sf of additional vacancy expected to return to the market as Lockheed-Martin, Catalent Pharma, and others follow through on plans to downsize. But Wolf said that even this development could be positive, because large blocks of quality space in excess of 30,000 sf have become scarce.
The full report is available upon request.
WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, industrial and investment properties. 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.