IRR-Northern New Jersey Mid-Year Viewpoint 2015 Local Market Report - Office
The Northern New Jersey office market continues to be a tale of two cities. Certain pockets perform well like the Hudson Riverfront which takes advantage of the higher priced New York City market. Other more suburban markets are plagued with over supply and an aging inventory. Downsizing and relocations have reduced overall office demand. Rent levels have stagnated for the past decade while operating expenses and real estate taxes continue to escalate.
This has driven net income down. A positive element has been decreasing cap rates from investor requirements, but this decrease has not been sufficient to offset increased expenses and vacancy levels. As a result, there are sales of vacant or mostly vacant buildings that are trading at what was previously land value. As a result, the office market is the only real estate segment in the recession cycle.
We appraised an office building in Parsippany for a construction loan in 1990. We recently appraised this building again as it will be demolished and a life style center will be constructed in its place. Don't expect any dramatic improvement in the near term. Build to suit and boutique developments are still being done. Examples are corporate headquarters for Panasonic, Realology, and Prudential. A boutique example is the office component of the redevelopment of the Hahnes building in Newark which is across from Pru’s new headquarters. All these projects were IRR
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.