Cushman & Wakefield of New Jersey, Inc.
One Meadowlands Plaza
East Rutherford, New Jersey 07073
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N.Y./N.J./Conn. Suburban Capital Markets Reawaken with Force
2010 Sales Volume Could Double 2009; Multifamily, Core Assets Lead Activity
By Andrew Merin, vice chairman
Cushman & Wakefield, Inc.’s Metropolitan Area Capital Markets Group
East Rutherford, N.J.
Dec. 1, 2010 – Capital markets investment sales have reawakened with force in the New York metropolitan area suburbs. In fact, our team had completed 17 transactions through September 2010, versus 20 transactions for all of 2009. We also have 18 transactions under contract or letter of intent. Years-end volume could reach $1.2 billion, which would allow us to almost double last year's production. This level of acceleration is reflected in the larger market as well.
Several factors are contributing to this improvement. Principal among them is the need for alternative investments. People are leery of equity markets and feel that real estate is a sound alternative – provided that it is well leased and located, and ideally if the acquisition can be made at or below replacement cost. Additionally, interest rates remain at historic lows, which is further fueling the market.
In short, real estate is ringing a bell. We are seeing broker-dealers raising $2 million to $3 million per day for some REITs. Pension funds also are looking to put out money, which is a complete – and welcome – reversal. Foreign buyers also have again become more active.
To meet demand, an increasing amount of product is coming online. And, for the most part, it is the “right” kind of product.
Multifamily is the only asset type that truly has turned the corner statistically, and investors continue to show their enthusiasm for quality properties. Ironically, we may be in a position where we soon have too much multifamily on the market – a dark cloud in what is a generally upbeat outlook for that sector.
A number of significant multi-family deals have closed recently. Among them, our team orchestrated the sale of Willow Grove Apartments, 48 Brian Ridge Road in Danbury, Conn. A pension fund advisor sold this 135-unit, Class A luxury rental community to TMG for $24.5 million.
While the office and industrial markets have yet to regain significant statistical momentum, core properties with leases are trading well. On the office side, in northern New Jersey alone, sales (including deals under contract) total 28 transactions with a cumulative value of $1.5 billion. This could more than double 2009 sales volume by year end.
Among the highlights, our team handled the $40.6 million sale of 225 Summit Ave. in Montvale, a 142,500-square-foot, Class A asset. CB Richard Ellis Realty Trust acquired the property from a partnership comprised of a fund managed by Urdang Capital Management Inc., Ivy Equities and Paragon Realty. Formerly the headquarters of Toys 'R' Us, 225 Summit Ave. is leased through 2020 by Barr Pharmaceuticals. It currently is fully occupied by sublessor Medco Health Services, Inc.
Demand for industrial product is improving as well. Again using New Jersey as an example, sales activity is on pace to surpass the 2009 total, with nearly 4.1 million square feet of transactions recorded through the third quarter.
The $22.5 million sale of 130 Interstate Blvd., a 413,092-square-foot bulk warehouse/distribution facility in South Brunswick, reinforces the appeal of stabilized properties. Our team represented the seller, a joint venture between IDI and institutional investors advised by J.P. Morgan Asset Management, and procured the buyer, Terreno Realty Corporation of San Francisco, in the sale. 130 Interstate Blvd. is fully leased to Home Depot.
On the other hand, we are seeing fewer retail trades than other asset types. From a real estate perspective, retail was the first sector to take it on the chin during the recession. Some local and regional retailers are filling some of the vacant spaces, but there still seems to be reluctance for expansion on part of national chains. The limited offerings this year have been in either B-quality assets or probably located in secondary markets.
Within this context, very little quality retail is on the market for sale. The deals that are trading largely involve a rare confluence of a solid neighborhood center with a good grocery anchor. REITs and overseas investors have a huge appetite for these types of properties. The sale of the 184,528-square-foot Copps Hill Plaza, 125 Danbury Road in Ridgefield, Conn. is a great example. Our team arranged this $33.4 million trade from Samuels & Company to Equity One.
We expect these investment trends to remain steady through the end of the year. As we begin to define the new “normal,” we likely will expect sales levels more in tune with 2002 to 2004, rather than the boom of 2007. That will be a welcome return to vitality following two very challenging years.
About the Metropolitan Area Capital Markets Group:
The Metropolitan Area Capital Markets Group specializes exclusively in investment sales of office, industrial, multifamily and retail properties throughout New Jersey, New York, Fairfield County, Conn., and Pennsylvania. The team has completed more than $13.8 billion worth of transactions since 2000. Andrew Merin and David Bernhaut, who co-founded and head the Metropolitan Area Capital Markets Group, also oversee eastern regional activities for a new Cushman & Wakefield group that advises clients on corporate property dispositions throughout the United States.