I’m not sure whether it’s amusing or puzzling. Maybe it’s a bit of both. But, for a while, the tone of most media coverage regarding commercial real estate has been decidedly gloomy. Quite literally, it’s consistently bad news.
The reality, though — at least, in New Jersey — is entirely different. During this spring of 2023, our agency has never been busier. We’re scrambling to meet our clients’ needs, and that includes quite a few individuals and companies we’ve just started working with.
What’s tremendously hot right now — whether it’s buying, selling or leasing — is the industrial market. The uninformed seem to assume that office space entirely defines commercial real estate. But, that’s a fallacy. And, right now, industrial spaces can command prices that are actually very near what you’d expect for offices. It’s amazing, and there’s insufficient inventory to address demand.
In fact, I’m regularly asked about the possibility of repurposing office property for industrial use. And, when land is available, developers are increasingly inclined toward development of industrial structures. They want to do this quickly, either to sell at top dollar or lock in favorable pricing by leasing long-term. Of course, tenants prefer shorter-term deals, but because industrial space is in such high demand, owners are definitely in the driver’s seat.
Regarding the office sector, there’s no doubt there are challenges as companies assess whether staff will recommit to working in-person. The pandemic undoubtedly altered the way many employees envision the nature of work environments, and companies are facing the question of whether staff will recommit to working in person.
That said, we are seeing some businesses — law firms come immediately to mind — with their offices back at or near full capacity. In addition, some of our higher-end office buildings have vacancy rates that are decidedly lower than the average, and that’s been true for several years now. In short, what I’m saying is that, when a news report shows office buildings with multiple empty floors and weeds growing up through the parking lot pavement, it’s not an accurate portrayal of all New Jersey’s office locations.
Looking ahead, I anticipate strong demand for industrial properties will continue for the foreseeable future. As for office space, it’ll take time — maybe quite a bit of it. But, when it comes to conducting business, I’m a firm believer in a collaborative, team approach, so I think employees will eventually want to return to in-person environments. And that’s when we should see an upturn in the office sector.
One aspect of the commercial real estate business that gets little media attention compared to selling and leasing — but, which is nonetheless tremendously significant —- is property management. As we’ve moved away from the pandemic during the past several years, our property management business has picked up significantly. This began when the pandemic started pushing owners out of state — and it suddenly made sense to just hire someone to take care of properties, with emphasis on scheduling inspections, handling maintenance, interacting with tenants and just generally serving as on-site eyes and ears. Even vacant properties require this level of service — they still have plumbing, electricity and other systems that need attention, as well as grass that requires mowing and snow that must be plowed. In short, even if a building isn’t currently in use, its owner doesn’t want it to look vacant.
I’m growing increasingly weary of all this buzz about empty buildings and owners going into default. But, I’m not losing any sleep over it … after all, my agency has buildings to sell, purchases to be made, leases to get signed and properties of all sorts to maintain. We’re much, much too busy to deal with so much false negativity.
Marcy Gross is president of Sheldon Gross Realty.
