By Joshua Burd
Net-lease investment is on the rise in the U.S., with northern New Jersey remaining a key target for buyers of industrial property and other commercial asset classes.
A new report by CBRE says as much, noting that U.S. net-lease investment in 2019 is on pace to surpass last year’s record level. Northern New Jersey ranked eighth out of the top 20 markets in the nation for net-lease investment in the third quarter, the research found, recording a 44.2 percent increase year over year for a total volume of $607 million.
The largest net-lease transaction in northern New Jersey was the sale of the 270,000-square-foot Summit Medical Group campus in Berkeley Heights, which Welltower acquired for $140 million. The deal, which closed in August, was among the top 15 largest identified by CBRE as part of a nationwide analysis of such transactions.
For the year ending in Q3, investment in the region rose 40.1 percent for a total of $1.96 billion.
“Northern Jersey continues to attract investors looking for high-growth opportunities, specifically in the industrial property segment,” said Jeremy Neuer, an executive vice president with CBRE. “We expect the net-lease sector to maintain its expansion, as more local and foreign investors focus their attention on the region, where cap rates are predicted to remain steady through Q4 2019.”
Southern California’s Inland Empire and Portland topped the ranking for year-over-year investment volume growth in Q3 2019, CBRE said. The firm noted that investors are increasingly focused on net-lease investment opportunities in high-growth secondary markets such as northern New Jersey, which are seeing strong volume growth.
For gateway markets, Los Angeles and Miami had the largest year-over-year gains.
CBRE said that total net-lease investment in the U.S. — comprising office, industrial and retail properties — increased by 30.2 percent year-over-year to $20.9 billion in Q3, accounting for the third-highest quarterly total on record. Investment volume in the quarter was driven by a 48.5 percent year-over-year gain for the industrial sector and a 22.1 percent gain for the office sector, with the retail sector increasing by 8.8 percent.
Meantime, net-lease investment volume year-to-date through Q3 2019 climbed 24 percent from the same period last year, to $55.2 billion, and outpaced the broader commercial real estate market, the research found. The net-lease share of total commercial real estate investment stood at 14.6 percent in Q3 2019, one of the highest quarterly shares of this cycle and higher than the 11 to 13 percent range held since 2012.
According to CBRE, this suggests sustained investor demand for net-lease assets that will see full-year volume surpass 2018’s record total of $69.6 billion.