Sixty-eight years. That’s how long I’ve been a commercial real estate broker in New Jersey. And I’ve operated my own company – Sheldon Gross Realty – for 55 years.
I’ve seen trends come and go; I’ve watched the market rise, tumble, and rise again. Everything I’ve learned is now making me bullish about where industrial real estate is heading – and I’m passing this confidence along to my clients and customers.
Available smaller spaces, increasingly rare
For years, businesses have been reducing their space per employee, as well as their number of employees. Consequently, they now need less space to thrive. Fewer corporations require a multi-acre business campus, and we all know expansive factories have given way to compact, high-tech facilities. The end result of this ongoing trend is smaller spaces being quickly snapped up, to the point that inventory is dramatically low. For prospective buyers and tenants, this means spending more time finding a location, and then paying a premium for it. For sellers and lessors, it’s exceptionally good news. Existing smaller spaces will command top dollar, and if a large space isn’t attracting interest, there’s every reason to reconfigure it into multiple, condensed offerings. These should attract buyers or tenants much more quickly.
More prospects than spaces
We may not be enjoying boom times, but our economy has been slowly growing for years. As a result, more and more individuals and companies are looking for commercial locations. Meanwhile, the cessation of new construction that began with the Great Recession – and continued for several years afterward – has resulted in an imbalance, with demand far outpacing supply. Nationwide, the vacancy rate for industrial properties is below 6 percent. So, anyone with property to sell or lease is in a strong position – and I believe this will continue to be the case for at least several more years. Supply won’t catch up quickly, and until it does, there’s significant opportunity for those willing to invest in the development of new commercial spaces. Buildings that are for sale have disappeared from the market.
Lessors … and buyers, too
The rapid evolution of communication technologies, plus multiple other factors, is spawning new industries at a stunning pace – and so the sheer variety of businesses in New Jersey continues to expand. Given that many of these enterprises can be successful with only a small number of employees and limited square footage, many business owners now are inclined to purchase their own locations. That industrial market rents are at an all-time high is another factor. So while New Jersey’s prices are high, being able to build equity through a purchase looks very attractive on the bottom line. Tenants are still out there in sizeable numbers, but so are buyers – and this reality presents an attractive option for the real estate owner who may have grown tired of the ongoing cycle of seeking new tenants.
Industrial market will be hotter than ever
When you figure in a significantly higher demand than supply, along with the rise of new industries and an economy that continues expanding, it’s clear New Jersey’s commercial real estate market will continue to be hot. There are additional factors, as well, including the dire need for new infrastructure spending. Once this begins, significant opportunities will exist related to warehouse and material processing spaces, and much more. Factor in the e-commerce revolution and the insatiable need for better, faster ways to ship goods, and it’s easy to see that a host of related businesses will benefit, and need more and better real estate solutions.
Buying and selling commercial real estate can be a bruising affair, and no one ever has it entirely figured out. But for those with the strategic foresight to choose a real estate professional with the years of experience necessary to navigate around difficulties, the current New Jersey industrial market has quite a bit to offer.
Sheldon Gross is president and CEO of Sheldon Gross Realty.