We assembled a panel of industry experts to tackle this month’s question.
Here’s what they had to say.
David Brogan, executive director, New Jersey Apartment Association (Monroe)
- Create jobs. When government incentivizes job creation, that has a ripple effect on all real estate. Office space gets leased and employees find places to live. We’ve seen the benefit New York City’s job market has had on the multifamily market in areas like Jersey City.
- Understand that mandates have costs. We constantly educate key decision makers on the impact mandates have on the cost of housing. New Jersey is one of the highest cost of living states. We don’t need any help in making things more expensive. Legislators must consider the overall cost of compliance when imposing new mandates on the commercial real estate industry.
- Maintain tax policies that work. Preserve like-kind exchanges, full deductibility of business interest, low-income housing tax credits. Changes in tax policy can be helpful or devastating. The tax reforms being considered in Washington could have a major impact on the multifamily sector, driving up housing prices and grinding affordable housing production to a halt.
Alan Hammer, member, Brach Eichler LLC (Roseland)
The reality in New Jersey is that many commercial properties are significantly over-assessed and often traded at prices well below the values indicated by the assessments. The only remedy for the property owner to correct this problem is to file a tax appeal. Unfortunately, the Tax Court has a backlog of cases going back four to five years. Consequently, municipalities typically show little interest in resolving such appeals until appropriate pressure is applied by the Tax Court, often several years after the initial filing.
Meanwhile, the years under appeal add up and the overpayment of taxes continues.
Municipalities should be encouraged to take these appeals seriously and be ready to negotiate as soon as possible. Such actions should stem the tide of large multiyear refund payments. Perhaps more importantly, it benefits the local economy by cutting operating costs for a property owner, resulting in funds needed to make necessary improvements and reduce vacancies.
Clark Machemer, senior vice president, Rockefeller Group (Morristown)
As a developer, we are constantly thinking about how we can actively encourage corporations to relocate to or expand their presence in New Jersey. While Grow New Jersey incentives are a clear driver of economic growth in New Jersey, a company’s priority when selecting office space will always be location. The key is to have ready-to-go office sites approved within the dynamic, lifestyle-oriented markets in the state where companies and their employees truly want to be, and, obviously, government entities play the primary role in ensuring the necessary approvals. I believe that if the government and the commercial real estate community in New Jersey focus on enhancing the ways in which we work together to facilitate, as well as accelerate, site approvals, we will experience substantial corporate growth and economic development in New Jersey.
Jennifer Mazawey, partner, Genova Burns LLC (Newark)
When a government views itself as a partner to commercial real estate development in the community, the result is a win-win. Governments that are forward-thinking regarding infrastructure improvement and strategic use of tax and other financial incentives can help transform their communities. Further, governments that partner with the developers to remove impediments and encourage smart planning create better development that is more closely aligned with their community’s objectives. Governments that are able to articulate their development vision — whether it is to be a high-tech entrepreneurial innovation hub, a welcoming home for the “maker” movement, a center of historic tourism, a “green” housing community or an arts district — are more likely to attract commercial development that enhances that vision. Our firm has had the privilege to work firsthand with developers and government to create these successful public-private collaborations.
Jonathan Schwartz, partner, BNE Real Estate Group (Livingston)
Across New Jersey, we’re seeing suburban communities begin to capitalize on the overwhelming demand for luxury multifamily housing. Many of these areas have traditionally been averse to multifamily housing, but are beginning to see the potential of this kind of product to improve their downtowns — as value-priced, high-quality housing is often followed by the restaurants, shops and cafés that lead to a full-blown revitalization.
In order to achieve this objective, it’s important that local governments continue to pave the way for these changes through inclusive zoning, tax incentives and other measures. Meanwhile, the state can help do its part by continuing to encourage transit-oriented development and investing in public transportation, which often serves as the linchpin for this new wave of commercial development.
Ted Zangari, co-chair, real estate law department, Sills Cummis & Gross PC (Newark)
At the federal level, Congress should:
(1) exclude real estate investments from any changes in the tax treatment of carried interest; (2) halt any attempts to eliminate the Section 1031 deferral of taxes on like-kind exchanges or the mortgage interest deduction; (3) enact the Marketplace Fairness Act that would enable state governments to collect sales and use taxes from e-commerce companies with no physical presence in their state; and (4) in the anticipated public infrastructure spending plan, expand the notion of “public infrastructure” to include workforce housing, structured parking and brownfield cleanup at transit-friendly nodes across America.
In Trenton, the state Legislature should: (1) expand the Licensed Site Remediation Professional program, where feasible, to other DEP functions and permit other state agencies as well as municipalities to likewise outsource appropriate inspection and permitting functions to licensed professionals; (2) break the protected egg of home rule and allow large-scale development projects to be reviewed by a regional land use board comprised of representatives of the various towns that would be impacted by and benefit from the proposed project; (3) reform municipal land use laws to reflect modern society, such as parking requirements in the wake of ridesharing services, and to encourage smart growth development through bonus densities and more workable transfer development rights; and (4) begin to scale back business incentive award amounts in submarkets where commercial occupancy rates have substantially recovered.
