Jones Lang LaSalle

Developers: We're Optimistic, But We Need Change
By Eric Peterson
Last updated: January 27, 2006 10:59am

EAST RUTHERFORD, NJ-A trio of top developers was mixed on the state's real estate prospects, while the recent numbers indicate continued momentum, but no breakout surge. That was the general message conveyed last night at the annual forecast event of Grubb & Ellis' New Jersey office.

Steven Jenco, director of client services for G&E in Fairfield, NJ, termed momentum as "a trot, not a gallop." Office vacancy rates are down in North and Central Jersey, but only from 21% to 19.6% year-to-year. One trend: "Companies are taking advantage of competitive leasing rates, which is an encouraging sign."

One "speed bump," however: The economy in the state isn't creating enough jobs to fill the available space, and what job growth there is, is mostly in lower paying, non-office jobs. Jenco also revealed statistics that indicate "pockets of growth" in the industrial sector. As far as retail, and citing New Jersey's high-income, high-density demographics, "that sector remained on solid footing last year." And while retail growth is constricted by the lack of available land, the redevelopment of industrial sites is providing an alternative.

In the follow-up developers' panel, moderated by Richard Marchisio, G&E's executive managing director for New Jersey, Peter Cocoziello of Advance Realty Group, Bedminster, NJ, cited technology's impact on real estate requirements. For one thing, he pointed out, more technology means more productivity, which means smaller support staffs and lesser personnel requirements.

"Technology is changing everything," he related. "Fewer employees are getting more done in less space."

Mitchell E. Hersh, president/CEO of Mack-Cali Realty, Cranford, NJ, agreed, but countered that, "even more important, our economy has become part of the global economy. The economy in New Jersey will continue to grow because of that. The intellectual capital is here to sustain us."

Richard FX Johnson, SVP of Matrix Development Group, Cranbury, NJ, was "troubled by the fact that we're not creating enough jobs, especially high-end jobs." And while agreeing that the state has a solid base of intellectual capital, "I would like to see more of an effort to keep college graduates in the state as the new intellectual capital."

Cocoziello shifted the subject to the state's cities: "Kids like to be in the cities, not the suburbs. We need to work on a long-term basis on rebuilding our cities as a way of keeping the intellectual capital here."

Johnson pointed out that "there is a substantial stock of vacant buildings that can be rebuilt to accommodate that. But we have to change a tax assessment policy that encourages keeping space vacant in order to accomplish that."

Marchisio said, and panelists agreed, that they're optimistic with the new administration of Gov. John Corzine in place in Trenton. In any event, "New Jersey needs a strategic plan going forward.”