Experts Offer Their Takes on NJCREA
By Mel Fabrikant Thursday, September 02, 2010, 02:11 PM EDT
Members of the New Jersey Commercial Real Estate Alliance (www.njcrea.com) have had a relatively active 2010, full of new projects, adapting business strategies and plenty of observations on the Northern New Jersey commercial real estate market's climb out of the hole dug that was by this devastating recession. Below are comments from the members themselves, who would be happy to speak with you further about this new, one-of-a-kind alliance.
Provident Bank commercial loan officer George Novak remarks that the New Jersey and federal capital markets harbor plenty of regulation right now and that it's increasing. "These additional layers mean it takes longer to get deals done," he states. Additionally, "there's a frost on the investor side. Cash is out there--it just doesn't know where to place it." He notes that construction is yielding better returns. Rates however, have lowered for the first time in six to seven months, he says, adding that some banks have gotten more aggressive, offering non-recourse, 15-year money with low loan-to-value ratios.
The summer has similarly been a busy time for CPA Kevin Hansen, a director for accounting firm Hunter Group CPA, LLC, but not in the real property arena. New business is coming from closely held companies and nonprofits anxious to cut costs while finding a more responsive service team. Meanwhile, if there is a boom, it is in fraud and forensic accounting. Unfortunately, according to Kevin, commercial real estate clients that have money are reluctant to buy or even shop for new properties. "With the exception of the medical community, clients are focused on keeping what they have," Hansen notes.
Darren M. Lizzack, MSRE, vice president for NAI James E. Hanson, notes that inventory continues to rise and is still troubled by the substantial disconnect between sellers' expectation of value in comparison to what buyers want to pay for commercial property in this environment. "If a property gets priced at a steep enough bargain, it will sell very quickly, as there is a plethora of capital on the sidelines waiting to be put to work," he said. The problem is that it takes months of educating clients to come to terms with this reality and at the same time educating buyers that the market is not going to continue to fall. And from a leasing perspective, he adds, "if you are working with the right firm, there are many attractive deals to be had. It's great to be a prospective tenant today, provided you are working with the right realtor to help assist you along the way. This will ensure your ability to secure very attractive leasing rates if you are in the market."
According to Jeffrey M. Riedl, president and senior title officer of Midland Abstract, Inc., "The commercial title business is the slowest I've ever witnessed." He is simply not seeing a steady flow of closings, except for those refinancing and purchasing deals that are absolutely necessary. Some title agencies are closing their doors. However, there are opportunities for anyone with cash, he states.
In the legal world, Winne, Banta, Hetherington, Basralian & Kahn, PC partner Michael Stingone has witnessed a shift in just what constitutes his traditional transaction load. Foreclosures have slowed a bit, he says, though they never grew that much to begin with. Most of the Winne Banta staff is focusing on institutional lender clients, who "did some real stupid stuff" and thus require dedicated, attentive legal representation. Retail activity is picking up, and Stingone has participated in some hotel workout deals, he says. He is also out and about to meet new lenders for industrial properties and gas stations. Commercial real estate pricing is coming down to reality, he notes. "The disconnect is just beginning to narrow."
Jim Heuer, president of general contracting firm Heuer & Company, observes, "The speculative commercial construction market hasn't gotten up off the floor yet." Though he is beginning to sense greater optimism, he sees very few new buildings in the pipeline. He believes that many building owners are finally coming to the realization that their investments require repositioning to improve marketability. "We see a lot of our work coming from landlords trying to attract or keep tenants with upgraded facilities." Despite the difficult economic conditions, though, healthcare remains a strong sector of the commercial market for the Waldwick, N.J.-based firm. "Whether it's a renovation or a new buildout, most of our interior work today is healthcare based" Heuer reports.
A recent public/private partnership construction project with Montclair State University is Langan Engineering & Environmental Services senior associate Richard Steiner's largest project since November 2009. The Stimulus Act of 2009 may yet lead to more such projects, as could legislation sponsored by New Jersey Senator Raymond Lesniac to abolish the New Jersey Council on Affordable Housing, which would allow private capital to enter the arena. Steiner is also working on a 1,500-bed student housing project for Rutgers. Overall, he, too, is still waiting for the recovery to kick in, as "no capital means no confidence and thus no action," he says. In the meantime, the environmental side of his practice, concentrating on energy, gas piping and wind, for example, is the most active. He is building a foundation in biotech projects, though work in that area is sporadic for now.
Brian Chester, a principal in appraisal firm Welsh Chester, Galiney Matone, Inc., recently updated a 10-year-old appraisal for 500-plus-unit apartment project in Warren County's Mansfield. Ten years ago, the vacancy sat at only 0 percent to 2 percent, and vacancy now lies at 22 percent. The market vacancy for its competitors is somewhere between 1 percent and 8 percent. Marketwise, he says cap rates are down while typical concessions for a two-bedroom apartment still run at two months of free rent.
Ron Diskin, owner of insurance firm Ronald Diskin Associates Corp. (RDA), has been able to help building owners get through these tough times with lower insurance costs, which contribute to the bottom line, whether for apartment/mixed-use buildings, warehouses or shopping center owners. "The quote process is easy," he states. "Comprehensive coverage at aggressive pricing is our mission for the insured."
Provident Bank commercial loan officer George Novak remarks that the New Jersey and federal capital markets harbor plenty of regulation right now and that it's increasing. "These additional layers mean it takes longer to get deals done," he states. Additionally, "there's a frost on the investor side. Cash is out there--it just doesn't know where to place it." He notes that construction is yielding better returns. Rates however, have lowered for the first time in six to seven months, he says, adding that some banks have gotten more aggressive, offering non-recourse, 15-year money with low loan-to-value ratios.
The summer has similarly been a busy time for CPA Kevin Hansen, a director for accounting firm Hunter Group CPA, LLC, but not in the real property arena. New business is coming from closely held companies and nonprofits anxious to cut costs while finding a more responsive service team. Meanwhile, if there is a boom, it is in fraud and forensic accounting. Unfortunately, according to Kevin, commercial real estate clients that have money are reluctant to buy or even shop for new properties. "With the exception of the medical community, clients are focused on keeping what they have," Hansen notes.
Darren M. Lizzack, MSRE, vice president for NAI James E. Hanson, notes that inventory continues to rise and is still troubled by the substantial disconnect between sellers' expectation of value in comparison to what buyers want to pay for commercial property in this environment. "If a property gets priced at a steep enough bargain, it will sell very quickly, as there is a plethora of capital on the sidelines waiting to be put to work," he said. The problem is that it takes months of educating clients to come to terms with this reality and at the same time educating buyers that the market is not going to continue to fall. And from a leasing perspective, he adds, "if you are working with the right firm, there are many attractive deals to be had. It's great to be a prospective tenant today, provided you are working with the right realtor to help assist you along the way. This will ensure your ability to secure very attractive leasing rates if you are in the market."
According to Jeffrey M. Riedl, president and senior title officer of Midland Abstract, Inc., "The commercial title business is the slowest I've ever witnessed." He is simply not seeing a steady flow of closings, except for those refinancing and purchasing deals that are absolutely necessary. Some title agencies are closing their doors. However, there are opportunities for anyone with cash, he states.
In the legal world, Winne, Banta, Hetherington, Basralian & Kahn, PC partner Michael Stingone has witnessed a shift in just what constitutes his traditional transaction load. Foreclosures have slowed a bit, he says, though they never grew that much to begin with. Most of the Winne Banta staff is focusing on institutional lender clients, who "did some real stupid stuff" and thus require dedicated, attentive legal representation. Retail activity is picking up, and Stingone has participated in some hotel workout deals, he says. He is also out and about to meet new lenders for industrial properties and gas stations. Commercial real estate pricing is coming down to reality, he notes. "The disconnect is just beginning to narrow."
Jim Heuer, president of general contracting firm Heuer & Company, observes, "The speculative commercial construction market hasn't gotten up off the floor yet." Though he is beginning to sense greater optimism, he sees very few new buildings in the pipeline. He believes that many building owners are finally coming to the realization that their investments require repositioning to improve marketability. "We see a lot of our work coming from landlords trying to attract or keep tenants with upgraded facilities." Despite the difficult economic conditions, though, healthcare remains a strong sector of the commercial market for the Waldwick, N.J.-based firm. "Whether it's a renovation or a new buildout, most of our interior work today is healthcare based" Heuer reports.
A recent public/private partnership construction project with Montclair State University is Langan Engineering & Environmental Services senior associate Richard Steiner's largest project since November 2009. The Stimulus Act of 2009 may yet lead to more such projects, as could legislation sponsored by New Jersey Senator Raymond Lesniac to abolish the New Jersey Council on Affordable Housing, which would allow private capital to enter the arena. Steiner is also working on a 1,500-bed student housing project for Rutgers. Overall, he, too, is still waiting for the recovery to kick in, as "no capital means no confidence and thus no action," he says. In the meantime, the environmental side of his practice, concentrating on energy, gas piping and wind, for example, is the most active. He is building a foundation in biotech projects, though work in that area is sporadic for now.
Brian Chester, a principal in appraisal firm Welsh Chester, Galiney Matone, Inc., recently updated a 10-year-old appraisal for 500-plus-unit apartment project in Warren County's Mansfield. Ten years ago, the vacancy sat at only 0 percent to 2 percent, and vacancy now lies at 22 percent. The market vacancy for its competitors is somewhere between 1 percent and 8 percent. Marketwise, he says cap rates are down while typical concessions for a two-bedroom apartment still run at two months of free rent.
Ron Diskin, owner of insurance firm Ronald Diskin Associates Corp. (RDA), has been able to help building owners get through these tough times with lower insurance costs, which contribute to the bottom line, whether for apartment/mixed-use buildings, warehouses or shopping center owners. "The quote process is easy," he states. "Comprehensive coverage at aggressive pricing is our mission for the insured."
