Hot Summer 2017

New Jersey industrial real estate continues to sizzle along this summer with an unprecedented speculative construction pipeline emerging. E commerce is just 10% of all retail in the USA , so there's room for continued growth through companies like Blue Apron, Amazon /Whole Foods shipping perishables and other food product. The last mile for that choice piece of fresh fish , a just picked fruit and vegetable is the last battleground . Confidence will have to be earned by the provider of this service. If you go the route of Blue Apron, you still have to mix the sauce and do the work to prepare a meal, but at some point you'll will see in NJ fresh meals delivered through Whole Foods. We are also seeing a resurgence in Biotech and Pharma. There is a growing demand for medications to be manufactured in the NJ/NY region. We continue to represent companies who need to establish a presence in NJ and look forward to a 3rd and 4th quarter that will most likely increase the occupancy rate even higher than the 93% that it stands now. Also, Asian-based manufacturing companies are looking to reside in NJ and compete directly with the US-based companies. Christopher Galiano, SIOR cgaliano@naidb.com 732-985-3000

November 2013 Crossroads of Capital and Optimism

Yes, we are at all-time levels in the equity markets and occupancy at the class A industrial parks are at record highs. The last time this happened we had a breakdown and the bubble burst. This time its different. The Federal Reserve still has tools in the toolbox despite what the news reports. The trump card yet to be used would be to not have banks garner interest in overnight deposits which rewarded banks for doing nothing with free money. I don't think they will have to use this weapon but its there and rarely talked about. The rents for flex and industrial are creeping up in lockstep with interest rates. we are a true defining moment, with the healthcare.gov in total chaos at this point, the jacked up health care insurance premiums that are being sent out for 2014 renewal could be the catalyst that sends us back down from multiple years of positive economic movement. A gallon of gas is $2.95, gold is where? what inflation? Office space is changing, class C suburban space has been in deflation for as long as I can remember. Any deal is a good deal for this type. The taxes and cam part of the rent is more than the net rent which isn't the way its supposed to be. Class A at the rail stations is in good shape but not like the industrial market. The recovery may have peaked, we will know in the next 6-9 months after the event. Interest rates will dictate where we go from here. Yes the 1% got richer but the middle class is still struggling and we are going to need more stimulus. Not in the form of Fed action but fiscal action from the folks we elected. The Fed has taken the ball as far down the field as it can. Its time for fiscal NOT monetary policy changes that will induce job creation from the private sector. I am optimistic that we will now go through a flat leveling off period for a number of years just in time for inflation to rear its head in 2016. In the meantime, taxes and cam will rise as net rents stay exactly where they are. Special thanks to the NJ SIOR for electing me their President for 2014, I look forward to serving the finest CRE brokers NJ has to offer. Chris Galiano, SIOR Managing Director-NAI DiLeo-Bram & Co. cgaliano@naidileobram.com 732-985-3000

New Jersey Poised for more Growth

A little eery out there ala 2008, with industrial occupancies in the heart of the Edison, NJ market close to 98%, most folks in the business are watching closely the next few months ,if we are able to sustain the rebound and recovery from the Great Recession. Supply of properties for sale is extremely low and rents are rising in most local markets. Will interest rates remain low? Probably... The Industrial market and the ecommerce transformation of the last 5 years has put product in the warehouse and off the retail shelve. The office markets continue to hobble along with absolutely no catalyst for growth. The dawning of the tele-comute worker and mobile cloud-based sales force has allowed the major companies to downsize their real estate footprint. The trend will continue to be along the lines of less is better as it comes to office space. Companies in search of warehouse are looking 20% more of what they really need today because of the fear of not having enough space.

Politics Are Over, Holidays are Here! Taxes are in Focus

Some Year so far in 2013! Q1 was fast and furious and so far no quarter has been able to match it. Holidays have begun, Election is over. If the CRE is to hold onto and sustain the recovery, it will depend on Congress not just Bernanke and the Fed holding rates down. They have done all the heavy lifting till now. Now all we need is cooperation and avoid the fiscal cliff in order for construction to start to take hold with confidence. Amazon is poised to have a record year. New Jersey will most likely land 1.2 million square feet of distribution space in 2013 in 2 areas of the state, 1 being Newark, the other down near Exit 7A on the Turnpike. We will know more on the results of Black Friday weekend as a barometer for the season next week. Chris

Fall Back to Spring Ahead

OK, as indicated in previous comments , we are going to need to fall back in order to spring ahead. Lower rates going lower to paper over the Fed's wrong moves of earlier years.
Bargains are perceived when they fall 30% + off previous highs. Volume on the sales side is absolutely pathetic. Blame the banks, who blame the gov't and the new regs. Everyone is afraid of their shadow. No body wants to dive in the pool until other folks do. Confidence is the key ingredient lacking in the recipe for economic growth. Healthcare costs unknown, implied tax rates unknown, LT that is. Companies don't hire for short term, they temp it out. Bldg. lease prices are falling in concert with sales comps. The towns are getting flooded with tax appeal requests and the engines that drive retired pension benefits etc., are from real estate taxes. We are all working 2x as hard for 1/2 as much since the regular deal volume has slowed. America is learning to live with less as evidenced by all the furniture companies sales being hit super hard. Prices must reflect the real economy, denial phase of the cycle is probably where we are at. People will work for less. The education, healthcare costs must be driven down. I think the jobs our kids will have in 20 years from now don't exist today. Preparing students for 2032 world is going to involve speaking at least 1 or 2 foreign languages. BRIC nations (Brazil, Russia, India and China )and Korea as well
will be dominant real estate forces as their engines only get stronger and their middle class grows. Eyes are on Europe this September, when Greek 1 year bonds pay 60%, default is a matter of weeks. Stay tuned. Germany has probably realized they have to carry Greece on its back in order to protect their country's currency.

2011 Q1 Summary

Bid and ask of commercial real estate coming in. Sellers are getting more in tune to the changing
playing conditions. Its not enough to have 2 parties agree to a sales contract. Sellers and Buyers better 1st check with the bank to see what their position is before the fees start coming on the due diligence. Absorption among some of the better geographically positioned properties are being leased all be it at 20% discounts. Many , many things must happen in order for this recovery to maintain an upward bias. Interest rates, oil prices, unemployment, political unrest and I mean London yesterday not the Middle East could derail the positive outlook. If any one of these issues gets more negative , all bets are off. Lets not forget inflation. Right NOW, things we NEED are inflating, ie.. food and energy and things we WANT are deflating. I think the gold/silver metal inflation edge is a combination of Asian countries looking to diversify out of the dollar into hard metal assets and ETF speculators have pushed up these prices 10-15% more than normal. Meaning that margin calls could wipe out a year to date gain in a matter of days. Watching the stock value of Prologis and First Industrial to get a read on how the debt will be managed as it matures. Follow the institutional money into these if you see highers highs and lower lows but be cautious if these can't hold. They both are at a crossroads of indecision as far the markets preceiving their value. It may be better to own the stock equity of real estate investment trusts vs. the actual real estate in the short to medium term. Resaon being , they are more liquid in a time of any crisis.

August , NJ Commercial Real Estate Mkt. Bring it On !

Starting out the month with companies looking long and hard at their current lease and seeking remedies to cut overhead. Real Estate Taxes have quietly edged up to levels whereby most tenants are asking, "how did they the taxes rise so fast". 3% per year on average has been the norm over the past five years. Biggest indecision is because of the lack of clarity of the tax code upon us. Companies hoarding cash in anticipation of getting hit hard in 2011. Price reductions will accelerate as the askers try to meet the bidders to make a meeting of the minds by year end.
Chris Galiano-SIOR , NAI DiLeoBram & Co.
cgaliano@naidileobram.com

Mid-Summer and its Heating Up!

Whenever one thinks of commercial real estate these days, you have to wonder about the
slowdown in retail, the unemployed and lack of demand for more office space (hitting a 17.5% vacancy this week, a high) and the seriousness of the "extend and pretend" loans on the books.
What the banks are doing is basically putting off a problem and hoping time heals it. A rolling loan gathers no moss. Many properties have 120% LTV or better but so long as the interest is paid, who cares. The banks don't want to show the loss, the borrower doesn't want to lose the property and the debt is getting serviced. We are in a new norm and THIS is what is propping up the entire economy. If the banks called in all these loans, look out 30% decrease in values would occur in just 1 year from the oversupply. Low interest rates are here to stay until we see unemployment ever break through 9%. There's a lot of pent up demand to purchase property, its starting to kick in and since we have a mid-term election in 6 months this should help maintain the level of activity.

Leasing/Buying/Renewing

New Jersey Commercial real Estate

The last 6-12 months has been a very activewith our office helping existing customers recognize the value in saving money in the market by negotiating existing leases. Very , very few buyers of property over $5,000,0000. We have had a recent flock of leasing on some of our vacant spaces, notably the 150,000 sf across from Walmart in Edison.

As we get through 2010, everyone is eager to see what the FED and the banks due about this extend and pretend situation. From what we know, there are billions of dollars in commercial loans upside down and due to mature over the next 24 months. Note sales are just starting to creep into the fold, we will have a very interesting year like we have never seen before, due to the continuance of a frozen credit market.
Christopher Galiano, SIOR
NAI DiLeoBram & Co.
cgaliano@naidileobram.com

February 21, 2010-Activity Picking UP!!

OK, I think what we are seeing in the last few weeks is activity picking up by at least 20%, with quality space moving because the landlords have waited long enough and finally lowered rates to meet the bid. Industrial space centered around the Exits on the NJ Turnpike north of 8A are experiencing much more activity than January, chalk it up to many things but first and foremost is the deals are out there, the offers are made , it is now up to the landlords to realize that deflation has taken hold. Deflation of assets means much lower rentals, rental prices we haven't seen in 15 years. Empty space is no way to prosperity, therefor, better to have it occupied to find the path to a better rental market in the future. 2 Major woodworking shops in Middlesex County, NJ shut down, the business is not profitable with the lack of volume of orders. Steel fabrication is still doing good. Plastics will always be with us as well. Food and beverage continues to be steady as always. Arizona Ice Tea's purchase of the nearly 500,000 sf box in Edison (formerly Bradlees a long time ago)will be great for the Raritan Center market, now next up is the Fuji bldg. and the nearly 700,000 sf at the NY Times bldg.
I will not be surprised with a major deal being announced by April 1st on either one of these bldgs. Great landlords make deals and both bldgs. have both. We will have significant vacancy throughout 2010 but this will be the year that tenant's can step and grab a bldg. they never would have looked at before because of price and make a 5 year fixed rental deal at numbers not seen before.
As far as sales, banks are still extending and pretending, previous posts explained this procedure whereby the banks refuse to proceed with going after non-performing loans.
Stay tuned, watch for the REIT Index over the next few weeks as a cue to see if can break through and make new highs, LXP, Lexington Property trust I have my eye on as a litmus test, as well as watching to see how the Simon property/General Growth shakeout. Oh, and by the way, prediction, BLACKSTONE moves the market bigtime with M and A and the Graham packaging IPO start the ball rolling.
Christoper Galiano, Managing Director, SIOR
NAI DiLeo-Bram & Co.
cgaliano@naidileobram.com
732-985-3000

February Snow and Markets Fall Too!

Looks like we are going to reach lower lows in rental prices in 2010, the monster 1,300,000 sf box at Exit 8A leased to Williams Sonoma , the 500,000 sf to GIII took a small chunk out of the empty space but at 40% discounts to the 2007 mkt. ie: returns of cash on cash below 5%, not what investors were looking for went construction started. Nowadays 5% is better than -30%.

There will be slightly more sales in 2010, with gov't increasing cap. gains causing some sellers to sell vs. fish. The only problem is ALL this can't happen fast enough as the spiral of descending rents continue.

Increase in commission rates and incentives JUST for showing space will continue to be the norm in 2010, where almost any credible deal is a good deal vs. the pick and choose your deal of 2007. If I hear about one more group that has or is putting together a distressed asset fund then I reckon we will have One heck of a frenzied auction for these CMBS assets as they unwind, and the price of settlement will be lower than most folks realize.

Happy Holidays!

Getting to be Christmas time!
New Gov. coming to Trenton, looking to get development going again, cause gang without real estate construction and the jobs it creates, NJ will have a 3-5 year period of stagnant doldrums. Commercial real estate nowadays is a tenant/landlord renegotiation. If you have a lease coming up for renewal, its probably a good bet you'll pay less next year. As far as sales, the volume is the lowest it has been in memory. Deals just can't get financed even IF the parties agree on price. There will be a major shift in volume if the US decides to increase the cap. gains rate which will spur a rush to exit the commercial investor property market and save sellers the increased tax for holding on. Besides rental rates on some bldgs. in Piscataway NJ are the same as they were 20 years ago.

Stay tuned for more inventory to hit the market BIG in 2010. Telling investors to BE PATIENT.
Happy Holidays!,
Chris Galiano, SIOR
Managing Director
NAI DiLeo-Bram & Co.
cgaliano@naidileobram.com

OK Now its Fall and Look out Below

With all the data for the year in for 3 quarters., looks like we are in for a serious reset of asset values, all across the board. The offers being presented by tenants are chock full of free-rent and 20-40% off peak prices. On the actual demand for bldgs. below 50,000 sf , demand is strong, tenant's who missed the 1st wave and were out there paddling , found a new set of waves coming through with sellers who want out. There are few and far sellers who want out but that number is increasing. Listing volume is way up. LOTS of space, not enough demand. The way to look at this whole thing, the Commercial Real Estate sector is there are no buyers for investments without good credit tenants or else a 50% off the price. There are pockets of leasing activity dominated by credit tenants looking to capitalize on the price reduction. The SBA programs whereby the US gov't guarantees a significant portion of a bank's loan to a borrower of commercial real estate with only 10% is the only area that has some volume. Conventional lending is as dry as the desert. The banks just do not want to make any mistakes and loaning money without being able to see over the horizon is a risk. Its a fun time to be advising businesses right now because you can draw on 1991 experiences and explain how difficult it could get yet remaining optimistic to be nimble and ready for the right deal. As always cash is king in most any market. as for now a lot of that cash is stuck at <1% treasury yields, it won't stay there for long.
Chris Galiano
Managing Director
NAI DiLeoBram & Co.
1315 Stelton Rd.
Piscataway, NJ 08854
cgaliano@naidileobram.com

No Summer Heat in Commercial RE

Looks like no 90 degree days for NJ, that also bodes for the real estate activity for sales of Office and Industrial property. The spread on the bid/ask is still far apart and the two sides are getting closer on deciding on what a property is worth. Looked at a property today that had an apprisal done recently and used comps from 2006-8 and is THAT the market to judge value? I think not,
over-levered, plentiful loans available created the bubble. Now its time to see what's left of the balloon. Our office banged out nice number of deals the past weeks, more than earlier this year, which we feel is a good sign of decisions starting to get made vs. a fire drill of touring bldgs., only to have corporate reevaluate and sit on the sidelines.

Rates are going down which should help. Forget all that nonsense of inflation, hyper-inflation for now, if Everyone is singing the same song, I want to be on the other side of that trade. There will be a time and place for a re-inflate taking place BUT NOT ANYTIME SOON. Until then deals will get done that HAVE to get done. Buyers who have missed the 1st train in 2006-7 are now stepping up. Let's just see if we have willing sellers.
Chris Galiano, SIOR
NAI DiLeo-Bram & Co.
1315 Stelton Rd.
Pisccataway, NJ 08854
cgaliano@naidileobram.com

Chris Galiano-2009 NJ Commercial RE Advisor

The role of commercial real estate brokers has changed from performing duties as a transactional type of service provider to more of a business advisor. We are now looking at how to prepare for excess space, renegotiating rental terms, viewing the market and reporting back to clients more frequently so not to miss an early trend. So far the trend has been to buckle-up and use your space as efficiently as possible and stay put unless there is a great deal and there are.

Central New Jersey is a hotbed of activity as it relates to distribution of consumer products.
1/3 of the USA lives within 5 hrs. of NY City, so we need places to store all that product that we love to buy.Whether it be soap and paper towels, olive oil or clothes.,the "big boxes" that line the NJ Turnpike are the marquis names of consumer staples alike. The real whispers out there lately are ,"how low you think they'll go". I showed property last week and the customer within 30 seconds of inspecting a mid-size warehouse in Central NJ said, "This will work but I am shopping the cheapest deal" , so its off to the races to see which of the owners wants to fill the space and discount the rent to do it.
Got to go, the market forces are at work and when the dust settles the well-located properties will rent and the other ones not may be sold or leased CHEAP.
Chris Galiano, SIOR
NAI DiLeoBram & Co,
cgaliano@naidileobram.com
732-985-3000

July 10,2009 More of The Same

Looks like July will be a repeat of June, the way this is starting out. Deals are getting done at the 10-40,000 sf mark at a somewhat decent pace all be it at least at 50% volume levels of 2008.
Rates are are still lowering as we see CPI in a NEGATIVE situation for the northeast. Much like the hotels throwing in a free massage with their room but maintaining the room rate. Owners are throwing in free rent , more of it and maintaining the face rate of late 1st quarter 2009.

THE WEIRD PART IS: You are more likely to SELL a bldg at current market for sizes 25-50,000 sf then lease it. What economy? Now there won't be $100 psf on the contract but maybe a surprising number despite the market conditions. What about AIG's bldg in NYC at $100 psf for 1,000,000 sf , NOW that's deflation! That bargain is being SCOOPED up by the foreign investors quicker they can write their check.

Many, many I mean many strip centers will soon feel the wrath of the refi illness. If you have problems on the refi , then we'll soon see supply hit the market in a big way, at decent prices..
Stay tuned for more Summer News...
Chris Galiano, SIOR
Managing Director
NAI DiLeo-Bram & Co.
cgaliano@naidileobram.com
732-985-3000

Well June and the Summer of 2009 is heating Up!

The buyers are looking, I know I had a few out today inspecting property. With few properties properly priced and a bunch of qualified buyers, we should she price action which will level off in Q3 and a surge may occur in Q4 if rates remain unchanged and there is at least somewhat of an effort to relax these suffocating credit standards for real buyers. Yes, these buyers may not be GM, did I say GM, oops I meant GE, did I say GE oops I meant Exxon, but buyers out looking, that have capital and there are tenants tired of paying , "the man" the dreaded RENT. Being cautious is rewarding the astute buyer who sits and waits and waits and waits but at some point, your lease comes up for renewal and up its either rent payments or debt payments.

Shaping up as a busy summer as everyone is TIRED of the same tired cocktail party rhetoric and complaints of a @##$ frozen market.
Prologis , AMB , Mack Cali, First Industrial, keep up the good work, these guys KNOW dealmaking!!! Also, the private equity guys are holding their own.

Enough said, there's work to do, ...
Developing..........

April-More of the Same Stagnation

Well folks, sales of industrial and office property in Central NJ of any consequence are off 80% year over year. So what is happening? The #1 question at functions and from owners and tenants, what trends do you see developing?, where are the rental rates going? What's my bldg. worth? What can I buy? See any 10% cap deals?

Let's tell the April story this way......great bldgs. are having problems, good bldgs. are surviving and 3rd tier bldgs. are doing ok just that their rental rates get hit the hardest on the downdraft. %wise, the rates being cut 20-35% are not uncommon, with some rent concessions upfront.

It will be interesting to see if the trend will continue through 2009 all the way till 2010. The bet is yes it will.... With lenders requiring 50% more equity on sales, it could actually help the rental market by forcing tenants to stay tenants. You can count on one hand deals north of $5,000,000 in the 1st quarter.
You have to admire Prologis, they are aggressively doing deals, I like that!
First Industrial, ditto! Not to mention AMB, doing their fair share....
The private local owners know the drill, retain the good tenants and listen to their story. They saw this in '91, it was actually more ugly then, but who knows if this is the 3rd inning of 9 here in 2009 Q2.

That's April, I'll have much more in the following months.
Chris Galiano
Managing Director
NAI DiLeo-Bram & Co.
(732)985-3000
cgaliano@naidileobram.com

Pivot Point before the Summer

Looks like the commercial real estate sector will solely be dependent on REFI's able to be accomplished with some sort of gov't help. If you look at the value of property and the ltv, the refi candidate doesn't have a chance. Take a look at all the debt maturing over the next 36 months, it is absolutely staggering the reit debt spread out among office, retail, office and industrial.
Some of these loans have no takers, GGP is still looking for major help, MGM is on life support and although there is cash flow among the NY REIT giants there still is a declining rental market and severe asset deflation taking place. The resetting of values will take us back 10-20 years. TIME has always been the ally of deep commercial re holdings, time is running out and patience is wearing thin with holders of massive debt as prices and rates fall. Goldman says we need 10 Trillion of spending to stop the deflationary forces, they are right and gold hangs tight to a trading range of $900-$1,000, you will start to see gold and the bond market be the barometer over the next three months as we look to these experts on the forecast of the economy. Do not look at equity pushers, they are not the analysts , the debt underwriters are. They have to know the sustainability of progress going forward. Equity pushers are just that, you heard it all already, dollar cost average, buy when there is fear, market has a bottom, all great lines but no substance like the group writing debt.

As far as the Central NJ market, a lot of inventory hit the street this week, on the office and industrial side. Oh yea, that Prologis deal is finally inked for the +/- 192,000 sf, yes the numbers are crazy but its better than VACANCY. Boy times have changed!

Christopher Galiano- Managing Director, SIOR
NAI DiLeoBram & Co.
cgaliano@naidileobram.com

March and Sales are still Frozen

We will have to wait a few more months for the banks to get their act together before the spring thaw arrives for lending to resume. Sales prices on all commercial property are slowly declining and rental rates are following. We are a reset stage in the economy. We are at point where if owners haven't reset yet they will be. Sellers are already calling their brokers and reducing prices quickly to get the sale done.

A lot of empty space at Exit 7, 7A,
8A has its canyons too
9 has some health and Exit 10 is doing relatively fine
Office sublet space is rapidly unfolding
So it looks like a little more concessions for the tenant looking to sign a 5 year deal.

Chris Galiano, SIOR
NAI DiLeo Bram & Co.
732-985-3000