New Jersey Commercial Real Estate Market Trends Analysis

Industrial buildings are a class of commercial real estate that is used by companies that do business with other companies (B2B tenants). B2B companies either manufacture or deliver goods to other manufacturers or retailers.

Recently another class of industrial tenants has been developed by fulfillment centers that disburse online purchases to retail customers.

The proprietors of industrial assets are also long-term investor-landlords. Their investment projections depend on income from both rent and the planned sale of the property. Rental agreements can be either gross or net.

Annual and 10 Year Population Growth

Population data is important for industrial investment strategies in ways that are different from residential investments. They do not lease to the public, but they have to uncover an expanding number of taxpayers in the market. Adequate tax receipts are required to keep up roads and infrastructure that industrial properties require.

A market that is losing its residents will endure unacceptable commercial property appreciation in addition to residential. The renters for industrial properties need a reliable local employee base. The top industrial renters won’t locate in a market that is dropping possible employees.

Property Tax Rates

As we saw with apartment building investments, tax rates are an accurate indication of the economic strength of a possible market. Volatile tax rates indicate an environment that presumably is not beneficial for your investment’s profitability.

Our blog contains informative guides on commercial property taxation and how to reduce commercial property tax in the U.S. to help you get educated about this topic better.

Accessibility

The users of industrial properties produce or transfer considerable numbers of goods that are big. They utilize large trucks to move their goods. Industrial properties have to be adjacent to highways so that big trucks can get to and from them without difficulty.

Sometimes industrial businesses transfer their goods by planes or trains. Industrial properties that are placed close to an interstate make this more convenient, which makes the property more desirable.

Utilities

Manufacturing companies usually use large levels of power and water. A property not having the ability to furnish suitable utilities will not attract those businesses.

Businesses that are housed in retail spaces sell directly to the people in the trade area. This encompasses single-tenant and multi-tenant real estate. Single-tenant buildings may contain a bank, a drug store, a dining establishment, or an auto repair store.

Multi-tenant buildings can be two or 3 unit properties, modest “strip” shopping centers, big “big box” or grocery store shopping centers with national anchor stores. “Lifestyle” retail centers can combine retail, office, and residential units.

Retail leases are “net” with tenants paying the owner’s property tax, insurance, and maintenance of common areas as additional rent. Net leases also say that the tenant takes care of the upkeep of the property.

Retail tenants have specific site requirements that retail investors use when reviewing demographic data.

Population Growth

Retail investors don’t exclusively consider the total area’s population and growth. They also consider the area’s submarkets. Clients need to be able to find and conveniently reach your retail tenants.

Population growth is significant, but retailers have to have a minimal number of customers at this time. Investors in retail assets will analyze all aspects of populace information including population size, annual and 10 year growth numbers, and how many people work in the trade area.

Median Income

Nationally known stores or “credit tenants” have very specific location criteria that involve wage levels. Expensive goods necessitate customers with high wages while lower end goods require lower wage residents.

Median Age

Age data is more useful to retail investors than alternative investor categories. If a retail asset is situated near the age groups that potential renters require, it is easier to enlist tenants.

Property Tax Rates

The previous description of how property tax rate data is used by industrial and multifamily home owners applies to retail investors as well. Larger taxes equal higher rents which increase vacancy rates, and markets with growing tax rates frequently have shrinking property prices.

You lose even more money if the municipality’s tax assessor’s estimate of your real estate market worth was wrong. Protesting real estate taxes can be delegated to the best commercial real estate lawyers in New Jersey.

Office space is rented to businesses that need a location for their employees to operate. Office space can be big or tiny. Major corporations frequently lease office locations from others instead of using their own cash to acquire or develop space.

The lease agreement used for office renters is a gross lease, occasionally referred to as a “full service” lease. All of the landlord’s costs are added when the rent total is determined. This agreement can be tailored to answer the requirements of the landlord and the renter.

Office space investors own these assets for a long period which provides returns from both ongoing lease income and the growing value of the asset.

Population

The particular demographic data that office landlords utilize illustrates the number of desired office workers in the populace. This includes the population’s size, age, and education level. It is vital for investors to understand what their prospective clients need and to study the region accordingly.

Property Tax Rates

A properly managed city or county that attracts potential office workers to the region will not have high or constantly increasing tax rates. Desirable lessees for your office property will analyze this statistic and so should you.

Incomes/Cost of Living

Office lessees acknowledge current income levels as one indication of the quality of the labor pool. The data also helps the lessees budget for labor costs.

Education

Office owners know that the education level of the labor pool will be vital to their prospective lessees. A call center might not need college graduates, but a law services business might.

BRRRR, which is an abbreviation for “buy, rehab, rent, refinance, repeat”, is an investment strategy to enlarge your portfolio by taking advantage of the appreciated value of the property. It’s a category of Buy and Hold method where an income creating property is held for a significant time. The investor receives lease income during their ownership and a one time payment when the asset’s worth improves, and they sell it.

First the investor purchases a property, then they rehab it and locate a tenant. As soon as they are able, the investor obtains a “cash-out” refinance that enables them to pull equity out of the asset in cash. The cash is used for the down payment for an additional property, and the procedure is duplicated.

You are unlikely to receive the underwriter’s approval for a traditional multifamily mortgage for a building necessitating a serious renovation. Such investments present a high risk for traditional lenders.

Visit our directory of commercial real estate vendors to find the top commercial rehab lending companies in New Jersey and the best New Jersey commercial hard money lenders.

From one of the best commercial real estate brokers in New Jersey, get an expert opinion about the benefits and drawbacks of the location for your business. Keep reading to understand what factors it’s best to discuss with them.

Median Gross Rents

This data informs the investor whether they could realize their primary and projected profit targets. Rent levels are a critical factor in an investor’s choices.

Property Value Growth

Buy and hold investments obviously need properties that are supposed to increase in value.

Population

The rate of the population’s increase is an indispensable figure to BRRRR investors. Absent an increasing populace, rental units will be unoccupied and depreciate.

Income

To buy the right investment real estate, investors should be aware of their target tenants’ amount of income. If you are satisfied owning mid-priced properties, you don’t have to see high incomes.

Property Tax Rates

Increasing taxes can cut into your profitability. Stable tax rates are a sign of a strong, improving economy.

Note that the Government’s assessments of property market worth are frequently inaccurate, which makes you pay unfair tax amounts without knowing. To conduct a tax protest procedure, consult with the best commercial property tax consultants in New Jersey as well as best New Jersey commercial real estate appraisers.

The real estate industry understanding of development usually means entire residential neighborhoods or commercial projects of virtually any size. Developers purchase land that permits the development of homesites sold to homebuilders or commercial buildings that are leased.

This requires acceptable zoning, land use design by civil engineers, construction plans for improvements, and the okay from the local government. Once approvals are received, the land is developed, and the final product is marketed to the targeted audience.

It can take a year or more from the start to completion of a development project. The economic picture or local regulations can shift in a negative way before the project is done. For this reason, development is considered the riskiest category of real estate investing.

Risks can force a development company to conserve the construction for an undefined period of time. When the builders are absent on the site, the property can get damaged. The best commercial real estate insurance firms in New Jersey help professional investors avoid financial damage caused by this.

Insurance is a vehicle you are likely to need to present to lenders while submitting documents for financing. The best commercial construction lenders in New Jersey may suggest a list of insurers they deem worthy.

Population

Property developers utilize the same demographic indicators that their possible purchasers and renters assess to locate neighborhoods with acceptable levels of population size and growth, economic strength, and educational achievement.

Income

Retail facility developers utilize salary statistics to locate their development where it can draw the customers that their targeted tenants need. A site that doesn’t draw a high-end retailer might be just what a low priced company is searching for.

Office and industrial tenants will need to see the wage rates that their possible labor pool will expect. Income levels help developers see if a place is suitable for industrial or office spaces.

Education

Industrial and office property tenants need distinct achievements of education in the area’s populace. The majority of office renters require college graduates for their workforce. Mid level companies are fine with high school grads.

Age

Developers hunt for a median age that shows residents who are active workers and taxpayers. Industrial and office developers require an employable age population. Citizens who are still working normally shop and dine out repeatedly at retail businesses.

Growing households become homebuyers being the foundation of a growing residential market.

To invest in real estate notes, the investor pays a smaller sum than the remaining balance for loans currently in effect, and takes the place of the original lender. Lenders are typically willing to sell loans so they can increase their cash, however they often sell because the loan is “non-performing”.

One mortgage note investment strategy is to set up a revised loan payment program that is easier for the borrower to meet, and preserve the investment in place long-term. They realize that if the borrower discontinues making payments, they can take back the asset and liquidate it, which is a portion of the strategy.

Population

One of the most fundamental factors in real estate investing of all categories is the size of the market’s population and if it’s growing. This data is a fast test of the anticipated economic strength of the area.

Property Values

Rising real property values are the most important indicator when promissory note investors assess an area. The rising worth of the asset mitigates the exposure of the investment.

Property Tax Rates

If property taxes rise regularly, borrowers who have trouble paying their debt payments will find it difficult to keep up. This is bad for long-term investors, but good for those who want to turn their investment around without delay through a sale of the asset.

Real estate investment trusts (abbreviated as REITs) are investment entities that acquire and supervise revenue producing real properties. Their income is derived from rents and the occasional sale of properties.

REITs are obligated to distribute ninety percent of their profits in dividends which is attractive to a lot of investors. The capability to place and take out your money as your needs dictate make REITs a valuable method for an average person to invest in real property.

Such investors are passive investors who have nothing to do with the selection or oversight of the assets.

Investors, when they plan to quit active investing but opt to stay in real estate, will want to learn more about REITs. When you dispose of real property, you can use the proceeds to buy REIT shares.

There exists a very convenient legal procedure allowing you to defer taxes on property sale in this case. Study our articles to understand how to take advantage of it: What Is a 721 Tax Deferred Exchange? and A-to-Z Guide to Delaware Statutory Trust (DST) 1031 Exchange.

The law requires that you request assistance from a 1031 exchange accommodator to consider the exchange lawful. Our directory lists the best 1031 exchange Qualified Intermediaries in New Jersey to assist you in your search.

Real estate investment funds are an interesting venture that gathers capital to invest in real estate. These entities possess interest in organizations that invest in real property, including REITs.

Investment funds aren’t obliged to disburse their income to shareholders. The shareholder’s profit is generated by the value of the fund’s stock.

A real estate fund could be a mutual fund, a private equity fund for high net worth investors, or exchange-traded funds (ETFs). Shareholders are permitted to liquidate their shares if they need cash, similar to REITs.

Fund investors don’t have anything to do with deciding on assets or locations, as they are passive investors.