Last Friday, I attended the Commercial Real Estate Leadership Conference in New Jersey and was taken back by one of the speakers’ grasp on commercial real estate’s movement in our region. I’ve been to quite a few of these types of events this year, but this one stood out completely. The speaker, Ryan Severino of JLL, was tasked with sharing his thoughts on the state of New Jersey’s CRE market and how real estate decision making is influenced in all property sectors.
An important reality that Severino emphasized is how we are far removed from isolation. Global economic performance deeply affects our local economies. Since commercial real estate correlates with the health of the economy, future development is often tied to factors far beyond a project’s immediate region. It was nice during this portion of the discussion that Ryan remained apolitical and spoke from purely data-driven statistics.
Demographics are Destiny
We’ve reached a time in the US when the baby boom generation is at the precipice of leaving the work force. Each day 10,000 baby boomers retire. These vacancies are hard to fill, as many retirees were once board member/experienced parties that are critical to the economy and the health of large corporations driving commerce. Millennials will attempt to fill this void, however geographically a goal will be to attract these generations. Our current real estate goals need to integrate and attract this generation to stimulate the economy and real estate demand.
At this time, it’s more palatable to live, work, and seek entertainment in New Jersey. Much of this presence is dictated by education and availability of schooling geographically. To recognize economic growth in an area, we need to think critically about demographics and employment to improve vacancy rate trends.
Industrial Supply and Demand
Even with construction ramping up, there is no shortage of demand, however there is a shortage of open land parcels. This lends itself to a boom in industrial (with the rise in e-commerce requiring large warehouse fulfillment centers that are no longer in operation). New Jersey has a great location for industrial. Rents are at an all-time high with vacancies declining, and whichever side you are on, this is a strong sign of health.
Retail Space Excess
On average, there is 55 sq ft of retail space per person in the US currently. The closest country behind us is Canada with 25 sq ft/person. After being built up in the 90s/00s, retail is evolving into new unique usages. With property value hikes as a goal, we must do our best to focus on demographics and adding convenience from an in-store experience.
Just as the children’s story accentuates, our current state is somewhat of a “Goldilocks Economy” – not too hot, not too cold, but just right. Severino viewed this as a probable course that will be continued, depending on potential policy shifts. Overall, New Jersey CRE is in a favorable spot. Recession risk is fairly low, however based on historical patterns, 2019 may bring a challenge.
Eventually, the conversation grew to have each panelist share the “up and coming” projects they’re covering, and how their strategic vision shows the New Jersey marketplace will benefit from the additions. As a general contractor specializing in commercial construction in New Jersey, the future looks bright.