New York Firms, Foreign Capital Have Supercharged New Jersey Investment Sales
New Jersey’s office market had a banner year in 2016, with $2.7B in assets trading hands, a 50% increase over 2015, according to CBRE research. The number of investment sales increased 70% year-over-year, and overall office sales exceeded post-recession highs at $2.4B.
Although 2017 volume is unlikely to exceed last year’s, CBRE vice chairman Jeff Dunne expects a healthy pace of activity to continue, particularly as more institutional sellers continue to divest of suburban assets in favor of more transit-centric locations like Metropark and the Waterfront. The latter attracted five of the top eight trades last year, comprising approximately $1B.
The attraction to these submarkets is due to the shifting consumer preference toward live/work/play environments and increased competition for top talent. Grow NJ incentives accounted for 10 of the top 16 transactions in 2016, up from just two in 2015, CBRE research shows, and tenants seek to take advantage of these incentives before the program is set to expire in 2019.
The most significant demand driver is tenants relocating to the Waterfront from New York City, like EY's move to Hoboken.
“From a broker’s point of view, it’s a beautiful thing that people are trading,” Dunne said. “You have certain groups buying more suburban office than in the past, like Orthodox investors, and we’re also seeing first-time buyers in the market. There’s more product to choose from and more opportunity — and, from a per-foot basis, prices are more attractive.”
Dunne and colleagues Kevin Welsh, Brian Schulz and Jeremy Neuer represented Mack-Cali in the $87M sale of an eight-building office portfolio in Cranford and Clark in January, procuring buyer Signature Properties, which had also recently purchased the suburban assets of 121 Chanlon in New Providence, 1655 Valley Road in Wayne, and 1055 Parsippany Blvd. in Parsippany.
Mack-Cali announced last month that it had disposed of 36 non-strategic and underperforming commercial properties for gross proceeds of $745M and is exploring an additional $450M in sales.
Some of these groups buying into New Jersey include foreign investors that have not traditionally explored the Garden State, like the Kuwaiti group that purchased Newark's Two Riverfront Plaza from SJP Properties and Matrix Development in December. Dunne, Welsh and Schulz, along with colleagues Darcy Stacom, Brian Scott and Dudley Ryan, represented the sellers.
Novo Norodisk’s 762K SF headquarters at 800 Scudders Mill Road in Plainsboro also sold to Hana Investment Management Co., a Korean investment group, for $305M over the summer.
“When did you ever hear of them buying in the suburbs?” Dunne asked. “We’re also seeing a lot of family offices buying and expect a lot of interesting trades this year.”
Suburban trends to watch out for this year include corporate headquarter tenants seeking high-quality, customizable space nearby instead of uprooting their employee bases, as well as an increased focus on workplace strategy as tenants seek greater space efficiency, flexibility, sustainability and connectivity as Millennials further influence the workplace.
Jeff Dunne is speaking at Bisnow’s New Jersey State of the Market event March 30.
