Commercial real estate activity in this region is increasing modestly, consistent with the latest forecast for the sector to stabilize nationwide and improve slightly in 2011.
Small numbers of new developments are starting or being acquired, while the main target for investors remains existing, revenue-producing businesses.
“I’m starting to see some movement, nothing major because we’re still dealing with the condition of the casino industry,” said Richard Baehrle, a commercial real estate specialist with Prudential Fox & Roach of Northfield. “Construction remains slow, but we’re starting to see signs of new businesses coming in.”
Examples include the new 16,000-square-foot office building on Shore Road in Somers Point where the China Outlet used to be, just purchased by a developer who already has a tenant, Baehrle said, and an interior design business from Brick Township in Ocean County, which is taking a space on New Road in Somers Point.
On the Black Horse Pike at Fernwood Avenue in Egg Harbor Township, the former Volvo Rents property has sold and a new shop from Rio Grande Auto Body Inc., of Middle Township, will open there.
Baehrle said he recently signed three commercial leases each in Linwood and Galloway Township, and has three offers for a Somers Point restaurant.
The market is good for anything producing a stable income, said Richard Murray, a sales agent with business broker Murray & Associates of Atlantic City.
“Businesses with cash flow are still in very high demand. There are people out there with cash but looking to replace cash flow,” he said.
Among them are developers venturing into the existing-business market because of record low activity in their segment.
“People are coming out of the development world. We’ve sold liquor stores to developers who didn’t get stuck and had cash,” Murray said. “We’re seeing buyers we don’t usually see.”
Business brokerage, in fact, has rebounded strongly after a weak 2008 that resulted from credit drying up, he said.
Last year was Murray’s best ever, as banks started lending again and “we saw a rebound from people who had money to invest in 2008 but couldn’t get financing,” he said.
Conversely, businesses with a lot of real estate value but little cash flow are tough to move, he said.
New construction is showing some signs of life.
Big Sky Enterprises of Voorhees, Camden County, has started work on a 14,000 square foot facility for Tuckerton Medical Group in that Ocean County town.
Messick Group of Yardley, Pa., is about to break ground on two 20,000 square foot professional office buildings in Linwood for Rose Commercial Real Estate in Northfield. That complex’s suites of 2,000 or more square feet on New Road will be available for purchase at $260 a square foot or lease at $23 a square foot.
This level of stirring activity is consistent with the National Association of Realtors commercial real estate forecast released the past week.
NAR chief economist Lawrence Yun said Monday that commercial vacancy rates have already peaked or will peak soon, and will decline slightly during 2011, mainly in the second half of the year.
The Realtors’ Commercial Real Estate Index, based on a survey of 400 local market experts nationwide, rose 1.6 percentage points in the third quarter. That only took the index to 43, well below the 100 that represents a balanced commercial market and a level not seen since right before the recession began in 2007.
NAR expects the vacancy rate for office space, currently 16.7 percent, to edge down only to 16.4 percent by the end of next year. Industrial space, likewise, will see modest improvement from its current 13.9 percent vacancy rate.
Essentially no change is forecast in the 13 percent retail vacancy rate next year, and rents are expected to stabilize after dropping 3.4 percent this year. Slow growth next year should absorb about 5 million square feet of vacant retail space.
Perhaps the most interesting thing about the national commercial outlook is that the one sector that has done relatively well — multifamily housing — might start contributing to inflation.
After falling in 2009 and stabilizing in 2010, apartment rents could rise 2 percent next year, Yun said.
Since the cost of housing as measured by primary rents makes up 32 percent of the federal Consumer Price Index, such an increase could start to push inflation up after having been flat for two years.
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