Over the course of the pandemic, commercial real estate has experienced notable highs and lows. The current market has rebounded vigorously and now exceeds pre-pandemic levels. To learn what’s in store in 2022, we sat down with Cushman & Wakefield’s powerhouse New Jersey Capital Markets team. Founded by Andy Merin in 1987, the team has been involved in more than $34 billion in property sales throughout its tenure.
Andy, tell us about your team and how the composition of it has resulted in so much success.
Generational, collaborative and broad-based are three words to describe our team. Mentorship and training are the priority for us and a large reason we have remained successful over the years. With six partners ranging from 70 to 30 years old, focusing on every asset class, our team works together to provide best-in-market services to a full range of clients. We excel because we use our individual expertise and relationships while also utilizing the global platform at Cushman & Wakefield. I am proud to work alongside my partners David Bernhaut, Gary Gabriel, Brian Whitmer, Frank DiTommaso, Kyle Schmidt and our seasoned associates that allow us to thrive, even in the toughest environments.
Brian: Interest in the multifamily asset class seemed to skyrocket throughout the pandemic. Tell us about it.
Multifamily volumes hit a record in 2021. Market conditions were ideal, with low interest rates and high property values that were attractive to investors. Throughout the pandemic, we saw a resurgence in the suburbs which led to increased demand for residential properties, especially newly constructed assets with updated amenities near public transit options. Investor demand was intense, with most properties not even hitting the market before transactions closed because there was such extreme competition and interest.
This year, the conversation is all about interest rates. Early in the year, people were making decisions based on expectations that interest rates were going to rise and, when they did, people decided to sell. Because of this, we are seeing a lot of properties being put on the market. Despite the rise in interest rates, we believe this “second wave” of capital from all the upcoming summer closings will create more price stability and visibility for the balance of 2022.
David and Frank: In light of the pandemic and the rise of remote work, what have you been seeing in the office market?
We saw incredible activity in 2021 with a significant flight to quality. Investors focused on top-tier spaces and amenities, resulting in strong transaction activity for Class A buildings, and rents remained firm for best-in-market product. With the residential market changing virtually overnight due to the pandemic, investors started paying more attention to properties in the suburbs due to this demographic shift. We saw a lot of movement with Class A assets near residential communities, especially in affluent markets, as corporations recognized that employees would be more likely to go into the office if it’s near their homes.
In 2021, our team handled all three office sales over $200 million in New Jersey and handled four out of the five over $100 million sales. So far in 2022, between what’s under contract and what has closed in New Jersey, we are already at $2.4 billion and should end the year between $3.5 to 4 billion, which would shatter previous records.
Gary and Kyle: The industrial market is white-hot. Will this continue?
Industrial market fundamentals throughout the tri-state area have surged over the past several years. Since the onset of the pandemic, rents have risen quickly as remaining available space dwindled. This tight market gave sellers and investors conviction to lean in on pricing and any property with vacancy or near-term lease rollover has been actively sought after.
2022 has had a strong start, despite rising interest rates. Investors remain confident that continued tenant demand will drive rents and offset any impact of higher rates. With less than a 2 percent vacancy rate, we are expecting to see continued rent growth as a wide spectrum of occupiers expand. The tri-state region’s population density, and limited opportunities to add inventory, is expected to keep our market as a top pick for industrial investment in the country.
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