South Jersey’s vacant commercial property pool is drying up five years after the recession.
And while the area is seeing little new construction, the market for retail, manufacturing, office and industrial space in Atlantic, Cape May and Cumberland counties is much improved over just a couple years ago, developers and real estate experts said.
The Vineland Industrial Park, which has north and south campuses, has been a bright spot in the commercial landscape, with few vacancies and the promise of growth in 2014, said Frank DiGiorgio, the city’s assistant director of economic development.
“We have a better outlook this year than the last couple years, absolutely,” he said.
On a recent weekday, traffic at the park was busy, with heavy trucks and contractor vehicles coming and going.
With one notable exception — Siemens moved some of its water-products operations from the Vineland park to Colorado Springs, Colo. — the park’s tenants seem to have weathered the worst of the recession, he said.
“Our parks are pretty much filled. The old Siemens building is for sale. But the scientific-glass manufacturers are doing OK and the cold-storage companies are expanding,” DiGiorgio said.
The park contains food-processing companies, building-supply warehouses and contractors.
“Obviously, every company is impacted by the recession. But companies in our industrial park made it through the recession in pretty good shape,” he said.
Vineland offers several advantages to companies looking to relocate in Philadelphia or its suburbs, DiGiorgio said.
It has easy access to a major highway, lower land and utility costs than Philadelphia or central New Jersey, a ready labor force and public incentives such as the Urban Enterprise Zone, which offers low-cost capital loans from $15,000 to $8 million, among other benefits.
“The cost of doing business is better here. If you can make everything else work, it provides an opportunity for a company to operate at a lower cost,” he said.
The National Board of Realtors is projecting only a modest increase in inventory for commercial space as long-neglected leases gets absorbed into the market.
New Jersey still has 159 million square feet of available commercial space, which represents a 25 percent overall vacancy rate. Average monthly rent in New Jersey is $25.13 per square foot, with 1.6 million square feet of new space under construction statewide in the first quarter, according to analyst Jones Lang LaSalle Research.
By comparison, Philadelphia has a vacancy rate of 16 percent and an average rent of $24.92 per square foot, with 1 million square feet of new space under construction.
“I don’t use statewide statistics. It’s like comparing Pittsburgh to Philadelphia. It doesn’t tell you much,” said Frank J. Sortino, of ForeSite Commercial Realty in Northfield.
Cape May County has comparatively little industrial or commercial space, Sortino said.
“The problem down here is we don’t get looked at unless the buyers have an immediate requirement down here,” Sortino said.
One exception was the development last year of a new office park on Bayberry Drive in Cape May Court House. Property Manager Tina Casey, of Upper Township, is helping businesses find appropriate space among its 12 units, with interiors built to specification. So far, a law office and surveying company have taken up five of the units, she said.
“It’s mixed use. The location is good for medical offices because it’s near the hospital,” she said of nearby Cape Regional Medical Center.
The county seat makes the office a good draw for builders, planners and other businesses that work with local government, she said.
“It’s in a nice, parklike setting with a pond across the street,” she said.
After the one-two punch of the 2007-09 recession and the 2008 home-mortgage crisis, lenders held their collective breath over the fate of many commercial loans.
Joshua Levin, broker-owner of Levin Commercial Real Estate in Atlantic City, said far fewer of these borrowers walked away from this debt compared to the housing foreclosure crisis.
“People with commercial loans run it like a business. You’re dealing with a whole different type of end user,” he said.
With few exceptions, most commercial borrowers have more equity in these properties with more at stake if they default on a loan, he said.
“A typical commercial loan is 30 percent down. There’s more protection there for the lender,” he said.
“Not as many commercial properties are going through foreclosure,” he said. “I think the reason is the banks are getting better at working out the loans with property owners instead of forcing a foreclosure and taking possession of the property.”
Levin said Atlantic County developers will take their cues from Atlantic City.
“The biggest economic generator is Atlantic City. If Atlantic City doesn’t do well, the rest of the county doesn’t do well,” he said.
Atlantic County still has a large commercial inventory, said Tony DiDio, of Voorhees, vice president of Colliers International based in Mount Laurel.
Colliers is overseeing development of the Hamilton Business Park on Route 40 in Hamilton Township.
“Inventory is being absorbed slowly. Atlantic County still has a few large buildings that are still vacant with no activity,” he said.
That makes the county a buyer’s market for tenants who want to negotiate a better leasing deal, he said.
“There are some advantages. There are some aggressive bid deals being quoted and negotiated in the market because of the amount of inventory,” he said.
But DiDio said he expects to see growing interest in the Hamilton Township development, a 690-acre property that includes more than 400 acres of development potential.
“We have some developers who have expressed interest in master planning it,” he said. “It’s a mixed-use park with industrial and office space — not much retail.”
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