Page 19 - RE-NJ

What does 2025 have in store for
commercial real estate in New
Jersey? The only projection I will
put my name on is that it will not be
boring.
As 2024 turns the corner into 2025,
we sense an air of optimism that
the offi ce market is turning the
corner. Demand for New Jersey
multifamily housing far outstrips
the ability of developers to deliver
— a trend that will be in place
for many years to come. The net
absorption of industrial real estate
has slowed from record levels in
the wake of the pandemic, but the
sector remains strong and growing
with new niches emerging with
construction proceeding with major
fi lm and media production studios.
Two major high-level shifts are
coming in 2025 that all invested or
engaged in New Jersey CRE should
be paying close attention to. The
fi rst shift is right upon us in January
and the second will dominate the
discussions in and around Trenton
the next 10 months.
The incoming Trump administration
will bring signifi cant changes to the
political and economic landscape
of the United States, impacting
various sectors, including CRE. For
developers and investors in this
space, understanding the upcoming
opportunities and threats will be
crucial for strategic planning.
The second shift will come in
November when New Jersey elects
its next governor and full Assembly.
As the state approaches its elections,
the platforms of candidates will
present both opportunities and
threats for the CRE sector. Wide
open questions remain about how
removing New Jersey’s historic
“party line” approach (grouping
candidates running together on the
ballot rather than grouping them by
offi ce) will impact the race for the
next governor with the full Assembly
up at the same time.
The following items should be “top
of mind” for CRE professionals as
it relates to the incoming Trump
administration:
TAX REFORM: The Tax Cuts
and Jobs Act of 2017 was a
comprehensive reform that reduced
the corporate tax rate from 35
percent to 21 percent and provided
substantial tax savings for real
estate companies. The act included
provisions such as the Qualifi ed
Improvement Property (QIP)
retroactive treatment, allowing
for immediate write-offs of certain
improvement costs. These expiring
tax incentives encouraged CRE
development and renovations,
leading to increased investment
in properties. Congress will be
considering reforms and renewals
of expiring tax code provisions as
early as 2025. Lower capital gains
tax rates and the QIP provision are
critical factors in ensuring suffi cient
investment for long-term, productive
real estate assets.
MARKETS: 2025 will likely be Fed
Chair Jerome Powell’s last full one
at the helm of the Federal Reserve,
with his four-year term due to
expire in May 2026 or earlier. The
impact of any new president’s views
on markets on the Fed is a dance
that is always fi lled with palace
intrigue. Simply put — unknowns
and fl uctuations in interest rates
reduce investor confi dence and thus
opportunities to fund CRE projects.
DEREGULATION: The fi rst
Trump administration prioritized
reducing federal regulations,
which had short-term implications
for various industries, including
real estate. Long-term benefi ts
of these deregulation initiatives
did not materialize. In the second
term, the new Department of
Government Effi ciency (DOGE)
led by empowered private-sector
leaders is said to be the solution
for sustained benefi ts. Let’s be
hopeful that the conditions are
right for sustained change that can
show how to expedite construction
and renovation projects without
excessive regulatory delays for
both private-sector and supporting
infrastructure projects.
INFRASTRUCTURE
INVESTMENT: President Biden
worked with Congress and got
the Infrastructure Investment
and Jobs Act funding bill passed,
which funded critical infrastructure
investments for New Jersey. While
the incoming Trump administration
may make changes to the
implementation of the IIJA, we
hope that this results in continued
substantial investment in roads,
bridges and ports that continues
to enhance commercial properties’
value and accessibility.
TRADE POLICIES AND
TARIFFS: Trump’s aggressive trade
policy rhetoric poses potential
challenges for the construction
industry and the wider logistics
sector. Increased material costs
affected profi tability margins for
CRE developers. Fluctuating costs
due to trade tensions could lead
to project delays or cancellations,
impacting timelines and budgets.
LABOR VOLATILITY: The political
landscape during Trump’s campaign
was marked by signifi cantly more
support from union labor both in
fi nancial contributions and “boots
on the ground.” How this support
translates to actions during Trump’s
second term is an open question,
as is how immigration reform will
impact the labor market.
The following questions are “top of
mind” for NAIOP NJ as we engage
the wide open fi eld of candidates
that have expressed interest in being
our next governor or seated in the
New Jersey Assembly:
ECONOMIC DEVELOPMENT
INITIATIVES: Do you support
robust economic development
initiatives that can pave the way
for incentives that benefi t CRE
developers? Do you support targeted
changes to the Municipal Land Use
Law to minimize arbitrary delays
and fees incurred for development
projects?
INFRASTRUCTURE
INVESTMENTS: Do you support
prioritizing infrastructure
improvements, such as
transportation enhancements
and utility upgrades, that will
™ 17
POLICY
PAGE
OPTIMISM FOR CRE IN THE NEW YEAR
By Dan Kennedy
indirectly benefi t CRE? What are
your throughs on public-private
partnerships for infrastructure
projects and supplementing
design and permitting functions
in state government with outside
professionals to accelerate the
work?
SUSTAINABLE DEVELOPMENT
POLICIES: Do you support
mandating opportunities
for developers focusing on
green building practices and
environmentally friendly projects
or would you promote policies that
incentivize these investments?
REGULATORY BURDENS: Do
you support stricter environmental
regulations or zoning laws that may
pose challenges to developers? Are
you open to improving regulatory
frameworks that have become
unnecessarily complex? Will you
require state workers serving in
regulatory roles to be present in
offi ces and be available in person for
meeting with applicants for permit
coordination?
TAX HIKES: Will you propose
tax hikes or other targeted fi scal
policies that could be detrimental to
CRE?
CHANGING DEMOGRAPHICS
AND PREFERENCES: Do you
support the need for mixed-use
developments, affordable housing
and fl exible workspaces?
The future holds a mixed bag of
opportunities and threats to all in
the CRE industry. All must remain
adaptable and aware of the changing
political landscape to navigate
these dynamics effectively in the
CRE sector. NAIOP NJ helps you
stay informed about the policies
being proposed and can help you be
prepared to adapt to the evolving
political climate. If you are not
already a member, maybe 2025 is a
good year to become one? RE
Dan Kennedy is CEO of the
New Jersey chapter of NAIOP,
the Commercial Real Estate
Development Association, which
is the state’s leading organization
for owners, developers and related
professionals in offi ce, commercial,
industrial and mixed-use real
estate. He is a licensed professional
planner with a MCRP from Rutgers
University’s Edward J. Bloustein
School of Planning & Public Policy
and a B.S. in environmental
science from the University of
Delaware.