Commercial real estate continues to move in a positive direction in the third quarter, but more slowly after U.S. job creation stumbled this summer and economic and government uncertainty increased.
Local and national markets face the same challenges.
Lawrence Yun, chief economist of the National Association of Realtors, said in the group's quarterly commercial forecast that small businesses are having trouble getting loans and corporate spending decisions are on hold until the November elections and U.S. fiscal issues are decided.
Richard Baehrle, broker-sales associate and commercial specialist with Prudential Fox & Roach Realtors in Northfield, said activity is still increasing but some deals are being held up by a lack of bank financing.
The uncertainty includes whether or not capital gains taxes will jump to 30 percent or more from the current 15 percent, and whether the federal government will institute a 3.8 percent real estate transfer tax to help pay for health care reform, he said.
Nonetheless, sales and leasing in the region have continued to improve modestly, driven by Atlantic City's tourism industry and looking ahead to aviation research development.
"We're still optimistic about the casino industry, since most of the activity is predicated on that," Baehrle said.
Aviation-related contractors have been looking at locations in the area around the NextGen Aviation Research and Technology Park in Egg Harbor Township, especially ones without the focus on research expected by firms in the park, he said. But they won't make a move until federal funding and development of the park are more certain.
"What has to occur out there is that the first building has to come out of the ground," he said. "People have to see that it's a reality, with the challenges that have occurred."
Nationwide, commercial vacancies remain above historic averages. NAR expects rates this quarter of above 16 percent for office space, 11 percent for retail and nearly 11 percent for industrial properties.
Only the multifamily housing segment - with demand boosted by former homeowners and those delaying purchases - continues to be a landlord's market with vacancies about 4 percent, the Realtors said.
Multifamily will also lead in rents with 4 percent or better average increases expected this year and next.
For other sectors, rents will remain more stable, increasing about 1 percent to 2 percent a year.
Baehrle, 51, of Northfield, said concessions by property owners have become more common, especially leases with lower initial rents partially offset by a quicker return to normal inflation-based increases.
Baehrle said his own portfolio has done well in recent months:
•80,000 square feet of leased or sold space that included 16 offices and four warehouses;
•170,000 square feet under contract, a combination of warehouse, retail and office;
•10 transactions under agreement and awaiting contracts, on a mix of buildings and land.
At the office complex Bayport One in the West Atlantic City section of Egg Harbor Township, he said, he has leased nearly 12,000 square feet to four firms: Bankers Life and Casualty Co., Coastal Agents Alliance, Resort Ownership Resolutions and Tropicana Marketing.
The remaining four available offices at Bayport One range from 900 to 5,000 square feet, he said.
He said the location just outside Atlantic City is as scenic as practical. "You literally see the sunrise and the sunset from there, and at night you see the entire Atlantic City skyline lit up."
Baehrle said medical continues to be a strong segment for office space, although some smaller practices are coming under pressure from the large medical centers as they compete for every niche in medical care.
He said the southern Ocean County area in particular has been strong for medical, with a large year-round population age 50 and up, the prime demographic for medical care.
Adele Ebert, an associate with Prudential Zack Shore Properties in Manahawkin, said a newly built 8,000-square-foot office complex in the area is aimed at that market.
Ebert, 55, of Little Egg Harbor, said the building at 1479 Route 539, Little Egg Harbor Township, includes an elevator large enough to handle medical equipment and special needs, and rental units that will be finished to suit tenants.
She said the owner "is looking for $14.50 a square foot," and $250 a month in common area maintenance charges.
Distressed commercial properties haven't received as much attention as in the housing market, but they continue to restrain growth as well.
Baehrle said he recently represented banks in the sale of five such properties.
"The properties are being sold and cleared, which is good," he said, "but the challenge is that sales become market comparables, so to speak."
And that, as professionals in the housing sector know all too well, weakens the pricing even for properties that aren't distressed at all.
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