New Jersey Tightens Up
New Jersey’s market continues to post record gains, with sales pricing, asking rents, and vacancy all at remarkable levels.Start Your Application and Unlock the Power of Choice$5.6M offered by a Bank$1.2M offered by a Bank$2M offered by an Agency$1.4M offered by a Credit UnionClick Here to Get Quotes!
With industrial real estate demand remaining as high as it’s ever been, New Jersey’s industrial market continues to soar in practically every respect. The market’s vacancy hit an all-time low in the first quarter, alongside unparalleled direct asking rent growth. And growing even faster are investment sale prices, particularly among modern distribution facilities, which averaged the highest rate in the market’s history.
Given these across-the-board positive metrics, the future of the market is bright for investors, though pricing could create barriers for those without solid financing options.
Vacancy Drops, Rents Rise
According to JLL’s first-quarter report, New Jersey’s industrial vacancy hit 1.0% — by far the lowest rate ever seen in the market. A Colliers report covering the same period presents a higher figure — 2.9% — though the brokerage also indicated this was the lowest figure seen in its data set, too, even if the calculation basis was different.
Development activity has picked up — also to all-time highs — but it’s still nowhere close to the amount needed by industrial users market wide. The JLL report stated that about a quarter of all leasing activity in the first three months of the year was focused on preleasing speculative developments. The brokerage further estimates the size of tenant requirements in New Jersey at about 26 million square feet — contrasted with the remaining 16.3 million square feet of spec development available.
To be clear, these dynamics aren’t new. The market has had one of the relative lowest amounts of available square feet nationwide for around five years. However, with the recent vacancy compression, rent growth has taken on a new life — especially for Class A space. Those more modern, newer industrial assets remain in severe demand, and the proof is in the growth: Direct asking rents have jumped 38.4% year-over-year., the JLL report said, with landlords pricing in higher rent escalations of more than 3.5% into more than 55% of lease contracts.
Investment Pricing Rises
The Colliers report highlighted $621 million in industrial deals closed in the first quarter. While this is less than half the volume recorded in the fourth quarter, that’s no surprise: Sales in the fourth quarter almost always significantly outstrip the rest of the year. However, deal volume has actually decreased substantially from the first quarter last year, when about $1 billion in industrial real estate transacted.
However, at the same time pricing has risen to an incredible $198 per square foot, gaining ground on — though still a far cry from — traditionally far more expensive Southern California markets like the Inland Empire. The largest deal the Colliers report highlighted involved Cabot Properties’ acquisition of the 511,200-square-foot Phillipsburg Logistics Center at 39-41 Strykers Road in Phillipsburg. PGIM Real Estate and local development partner J.G. Petrucci Co. completed the property in summer last year, according to Lehigh Valley Live. At the time of the sale, the property was leased to Alan Ritchey, a logistics firm based in the Dallas area.
What are the new regulations for commercial real estate financing in New Jersey?
The regulations for commercial real estate financing in New Jersey are determined by the New Jersey Department of Banking and Insurance. The department is responsible for regulating the banking and insurance industries in the state. The department's website provides information on the regulations and requirements for commercial real estate financing in New Jersey, including licensing requirements, loan origination requirements, and other related information. You can find more information on the department's website here.
What are the benefits of obtaining a commercial real estate loan in New Jersey?
The benefits of obtaining a commercial real estate loan in New Jersey include access to a wide variety of loan products, including bank loans starting at $1M, CMBS loans ranging from $2M to upwards of $100M, permanent financing, bridge loans, life company loans, and mezzanine financing. Additionally, Apartment.loans offers apartment loans with terms and amortizations of up to 30 years, with recourse and non-recourse options, and flexibility when it comes to prepayment. New Jersey apartment building loans typically close within 45 days of application.
What are the risks associated with commercial real estate financing in New Jersey?
The risks associated with commercial real estate financing in New Jersey are similar to those associated with any other type of real estate financing. These risks include the potential for default on the loan, the potential for market fluctuations, and the potential for changes in the local economy. Additionally, there is the risk of not being able to secure the necessary financing for the project, as well as the risk of not being able to find a suitable lender.
It is important to understand the risks associated with commercial real estate financing in New Jersey before entering into any loan agreement. It is also important to understand the terms and conditions of the loan, as well as the potential for changes in the local economy. Additionally, it is important to understand the potential for market fluctuations and the potential for default on the loan.
What are the best financing options for commercial real estate in New Jersey?
The best financing options for commercial real estate in New Jersey depend on the type of property and the size of the loan. For larger loans, CMBS loans and life company loans are popular options. For smaller loans, bank loans and permanent financing are good options. For more specialized financing, mezzanine financing and bridge loans are available. For more information, see Commercial Real Estate Loans and New Jersey Apartment Loans.
What are the current interest rates for commercial real estate loans in New Jersey?
The industry median interest rate for most commercial real estate loans usually falls approximately 3% above the effective federal funds rate. That said, different financing options have rates based on different indices. It is important to be aware of where these stand to get a good idea of what you can expect from your commercial property mortgage.
Many loans utilize the secured overnight financing rate, or SOFR, while others tie rates to the relevant Treasury yields. Others, like loans backed by the Small Business Administration, lock rates to the WSJ Prime.
What are the requirements for obtaining a commercial real estate loan in New Jersey?
In order to obtain a commercial real estate loan in New Jersey, you will need to provide a detailed business plan, plans for the property, 3-5 years of financial documents (business and personal), and your personal credit history. Additionally, you may need to provide additional information depending on the type of loan you are applying for. For example, if you are applying for a CMBS loan, you may need to provide additional information such as the property's income and expenses, the borrower's financial statements, and the borrower's credit history. You can find more information about the specific requirements for each type of loan on Commercial Real Estate Loans' website and SBA7A Loans' website.