Andrew Nelson, chief economist with Colliers International
By Joshua Burd
The U.S. economy is nearing the end of its current expansion cycle, but there are still reasons for optimism about the commercial real estate market in New Jersey and nationally.
That was the message from Colliers International’s chief economist, Andrew Nelson, who spoke Thursday night to a crowd of owners and industry professionals. Presenting at NAIOP New Jersey’s annual meeting, he said the economy is coming off another year of moderate and rather steady growth — a pace that he expects to continue for at least another year or two.
For many types of real estate, that could mean the continuation of a winning formula.
“My perspective on this is, even though it’s not a perfect economy, it’s good enough —especially for those of us in real estate, the people in this room,” Nelson said during the event in Short Hills. “It’s been strong enough to largely fill up our space and encourage investor demand for our products, but not so strong as to overheat markets and encourage a lot of speculative construction that would ultimately undermine the recovery and returns.”
Nelson was among the presenters at the annual meeting and commercial real estate outlook, where NAIOP New Jersey elected its 2017 officers and trustees. They include Dave Gibbons of Elberon Development Group, who assumed the role of chapter president from Clark Machemer and will serve a two-year term.
With some real estate professionals now bracing for the end of a cycle, Nelson said the expansion could be lengthened by the incoming Donald Trump administration. There is “potential with a new administration to get on a new track, although with some definite risks,” he said, citing Trump’s proposed stimulus package of tax cuts and infrastructure spending.
And while Nelson said the economy and commercial real estate could be hindered by policies that threaten free trade, there are positive signs elsewhere.
“The other thing, the broader thing that is being proposed, both by Trump and by Congress, is a more business-friendly tax and regulatory environment,” he said. “And there’s definitely potential there for increasing economic growth and job growth over the next few years.”
For New Jersey, that could mean a major boost for both Big Pharma and the financial services sector, he said. The latter category has not expanded as quickly in the New York metropolitan area and the Northeast, but a rollback of the 2010 Dodd-Frank Act should benefit the industry.
That could ultimately help the state’s office market, where job growth has lagged in recent years. He noted that other sectors in New Jersey, such as industrial, are outperforming the U.S., but said the economic expansion as a whole has not kept pace with the rest of the nation.
“Going forward, I think we can expect a little bit better,” Nelson said. “But, still, it’s been a story of moderate growth.”
It’s likely that the New Jersey chapter leaders heard the message loud and clear and will continue raise their voice on policy issues that could help improve the commercial real estate market. Gibbons, who was formally elected chapter president prior to Nelson’s presentation, noted that NAIOP’s role as an advocacy organization is as critical as ever.
“The efforts that get put forth on advocacy are very, very important for everyone in this room,” Gibbons said. “Some more directly than others, but they make a big difference.”