By Joshua Burd
As the demand for net-lease properties inches back toward pre-pandemic levels, northern New Jersey remains a top 20 market for investors targeting the office and retail sectors.
That’s according to newly released research by CBRE, which found that the region ranked 18th and 15th in the two asset classes, respectively, among U.S. markets. The placement came as part of an analysis of first-quarter investment activity for net-lease properties, which are characterized by a lease structure in which the tenant agrees to pay a portion or all of the taxes, insurance fees and maintenance costs in addition to rent.
To that end, in Q1, net-lease investment sales in North Jersey totaled $52 million in the office sector and $32 million in the retail sector, CBRE said. Those totals represent year-over-year declines of 78.1 percent and 53.1 percent, respectively, but the firm touted the region’s top 20 ranking as a positive sign as net-lease investor activity rebounds.
“Northern New Jersey continues to attract investors seeking high-growth opportunities, specifically in the office and retail sectors,” said Karly Iacono, a senior vice president for CBRE capital markets, based in Saddle Brook. She noted that the North Jersey office and retail sectors recorded net-lease investment volume of $356 million and $148 million, respectively, for the 12 months ending with the first quarter of 2021.
CBRE also noted that investment volume in net-lease properties nationwide totaled $14.3 billion in the quarter, including industrial assets in addition to office and retail. That amounts to a 2.6 percent decrease from the start of 2020, but a 10 percent uptick from the same period in 2019.
According to the report, net-lease demand is being driven by robust institutional acquisition activity, increased interest in office assets as return-to-the-workplace plans gained momentum and, despite pandemic-related international travel restrictions, resilient foreign investment. The net-lease sector is attractive to investors because the long-term leases and creditworthy tenants are considered safe attributes during an economic downturn, CBRE said, while also noting that the decline for total U.S. commercial real estate volume in Q1 2021 was much deeper at 18.3 percent year-over-year.
Northern New Jersey did not make the top 20 for the industrial sector in net-lease activity, although the firm did highlight some other positive news for the state: In Trenton, net-lease investment activity for the quarter totaled $234 million, representing a jump of more than 600 percent year over year. That was second in growth to only Provo, Utah, as net-lease investors are increasingly attracted to high-growth secondary and tertiary markets.