By Jason Crimmins, CCIM, SIOR, The Blau & Berg Company
2024 is projected to be a year of continued volatility in the real estate industry, as the market capitulates to the expedited changes brought on by Covid and the pandemic:
The industrial market remains solid, albeit a bit more tepid than the explosive period from 2021-2023. There remains considerable demand in the areas surrounding the ports of New Jersey and New York, as companies address solutions to the deficiencies in their critical last-mile e-commerce operations. Vacancy rates have started to rise, rents are stabilizing, while tue absorption rate has turned negative for the third straight quarter. Growth for the majority of the 3PLs and logistics companies has slowed. With all that said, the New Jersey industrial dynamics remain tight. As the new construction pipeline starts to dry up, logistic demand and vacancy rates should gain their balance again.
The office market, still burdened with excess inventory amidst a new world of hybrid work schedules, ended 2023 with a vacancy rate hovering around 25%. Companies are trying to determine how much space they’ll require going forward. Office developers have pivoted to repurposing existing properties into mixed-use. Massive projects, such as the Riverton Development in Sayreville, one of the largest redevelopment projects on the East Coast with more than 2 million square feet of residential and commercial space, are going to become more the norm.
Cannabis has become a timely contributor to the retail & industrial markets. More than 50 dispensaries opened in 2023, bringing the total in state to 79 dispensaries in 18 counties. The Cannabis market brought in more than 800 million dollars in 2023 and is projected to easily surpass 1 billion in 2024, and this is just the beginning. In many small towns, the fight over financial benefits versus perceived community concerns have resulted in contentious town hall discussions and strict zoning restrictions but legal cannabis is here to stay, and real estate will be one of the many beneficiaries.
The overall economy presents the largest unknown to all forms of real estate. Employment cuts are occurring across most business models for efficiency and sustainability purposes. Capital markets continue to struggle to fill the gap between seller’s pricing expectations and buyer’s target values, resulting in longer periods of stagnancy with listings. Borrowing has become increasingly problematic, with interest rates hovering near 15-year highs. The fed fund futures market has effectively priced in multiple rate cuts in 2024, but the Federal Reserve has hesitated to to date as inflation data continues to be mixed.
As always, the real estate market will continue to evolve and reinvent itself.
Jason Crimmins, CCIM, SIOR, is the president and Broker of Record for The Blau & Berg Company, an independent, full-service commercial real estate brokerage firm providing services in the industrial, retail and office spaces.