Dan Kennedy is CEO of NAIOP New Jersey
By Dan Kennedy
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 office 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 film 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 first 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 significant 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 office) 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 Qualified 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 sufficient 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 filled with palace intrigue. Simply put — unknowns and fluctuations in interest rates reduce investor confidence and thus opportunities to fund CRE projects.
Deregulation: The first Trump administration prioritized reducing federal regulations, which had short-term implications for various industries, including real estate. Long-term benefits of these deregulation initiatives did not materialize. In the second term, the new Department of Government Efficiency (DOGE) led by empowered private-sector leaders is said to be the solution for sustained benefits. 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 profitability 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 significantly more support from union labor both in financial 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 field 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 benefit 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 indirectly benefit 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 offices and be available in person for meeting with applicants for permit coordination?
Tax hikes: Will you propose tax hikes or other targeted fiscal policies that could be detrimental to CRE?
Changing demographics and preferences: Do you support the need for mixed-use developments, affordable housing and flexible 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?
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 office, 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.
