Page 20 - RE-NJ

18 OCTOBER 2022
The rapid rise in interest rates has caused a sudden slowdown and growing uncertainty in New Jersey’s investment sales market, leading buyers to reassess their plans in the near term, while placing newfound pressure on even the strongest asset classes.
According to market experts, one immediate challenge is the need for clarity.
“The lack of data points is what’s hurting people right now in terms of being able to make a decision,” said Jose Cruz, a senior managing director with JLL, who leads the firm’s New Jersey-based investment sales team. Buyers are grappling with changes in borrowing costs, debt yields and other factors, he
said, “but I do think the market is resetting in terms of pricing.”
Cruz expects deal activity to resume at a higher clip,
through year-end as it looks to tame inflation.
“We’re both (a buyer and seller), so we are continuing to be active, we have things out on the market and we are testing the market,” said PGIM Real Estate’s Anthony
event, Pennimpede said buyers’ expectations had become less consistent from one deal to the next. That has raised the question of whether a company such as PGIM is better served as a lender than as an equity partner on certain projects, given its vast portfolio in both areas.
The market reset is several months in the making. Cruz, referring to deals valued at more than $10 million, said his team closed 11 investment sales in June and another 13 in July. Those numbers fell to one each in August and September, he said, although transaction volume is likely to rebound as buyers and sellers adapt.
Cruz noted that there are still buyers in the market, with different
SEEKING CLARITY
Investors take pause, reassess as interest rates shock commercial real estate market
By Joshua Burd
Jose Cruz
but likely after an adjustment period and after buyers adapt
to the new interest rate environment. He and other panelists said
Pennimpede, executive director for debt financing. “But what I would say today is that
I don’t feel that it’s a truly functioning
as much during a recent program hosted by NAIOP New Jersey, in late September, as the Federal Reserve had raised its benchmark interest rates five times year to date, including three hikes of 75 basis points, with more expected
Anthony Pennimpede
market — and without any type of conviction or prediction.”
At the time of the Sept. 22