Slow-but-steady improvement continues to characterize the commercial real estate market locally and nationally.
The National Association of Realtors expects small increases in inventory and modest declines in vacancy rates across the office, industrial, retail and multifamily segments.
But the gains are building from depressed levels, so a surge in new construction isn’t expected anytime soon.
There is a silver lining to a commercial market that’s not far off the bottom, said Joshua Levin, broker-owner of Levin Commercial Real Estate in Atlantic City.
“This may not be a good time to be a seller, but it’s a great time for a business owner looking to lease or purchase a property for their business,” he said.
Levin said business property costs — either leasing or purchasing — remain at unprecedented lows, and deals abound that could not exist in a strong market.
One example is a mixed office and industrial use property at 833 Mill Road in Pleasantville, where a business owner will upgrade and expand at a lower cost than at its existing property in the area, he said. The property is under agreement and the business can’t be named until the deal closes, which is expected in a couple of weeks.
A property at 622 New York Ave. in Galloway Township was bought by a physicians group last year and one of the doctors has opened a pain-management center there, Levin said.
“Potentially, they might not have done that if the market were stronger. It cost them a fraction of what it would have if they built from the ground up,” he said.
A third example has recently gone on the market, a 16,000-square-foot office building at 2819 Fire Road in Egg Harbor Township.
Levin said the introductory lease price on the building is $17 per square foot all-inclusive — utilities, taxes, insurance and maintenance.
“Probably to build that, the cost would be in the low 30s per square foot for new construction,” he said.
He said such deals have drawn tenants and buyers who have flexibility on where they can locate.
Gerald LaHay, a Somers Point resident and representative for Levin Commercial, said he expects New Jersey’s legalization of online gambling to draw ancillary services to the Atlantic City area, taking up some of the industrial, warehouse and retail space available.
A quarterly analysis of the Atlantic County office market by Jones Lang LaSalle Research found the market relatively strong.
“Of the four (South Jersey) markets we track, Atlantic County is the healthiest market with an overall vacancy rate of 11.7 percent,” said Rick Widerman, executive vice president for Jones Lang LaSalle Americas Inc. at its Cherry Hill office. The other three markets tracked are the Cherry Hill area; Moorestown-Mount Laurel-Marlton; and Voorhees-Gibbsboro.
Widerman said his company contacts every building larger than 25,000 square feet to produce its quarterly market surveys.
“The real story in Atlantic County is that the vacancy rate in the true Class A office buildings is less than 3 percent,” said Widerman, whose vacation home is in Brigantine.
The survey estimated 20,900 square feet of Atlantic County office space was absorbed in the fourth quarter, bringing absorption in 2012 to 84,758 square feet.
Rents in 2012 increased nearly 3 percent, the survey said, and Atlantic County asking rents for Class A space were steady at $30.50 per square foot and for Class B higher at $21.88.
Office vacancies nationwide are expected to decline this year by less than a half-percentage point to about 16 percent, the National Association of Realtors said in its recent commercial forecast. New York and Washington, D.C., have the lowest office vacancy rates in the nation, at less than 10 percent.
Even smaller vacancy declines are expected for industrial space (to 9 percent), retail (between 10 percent and 11 percent), and multifamily housing (down to less than 4 percent).
Lawrence Yun, NAR chief economist, said continuing strong demand for multifamily housing, often outstripping existing supply or potential to build, is “allowing landlords to raise rents at faster rates.”
NAR expects apartment rents to increase more than 1 percent per quarter through 2014.
A prominent multifamily property in Atlantic City changed hands recently.
Jason Starkman, managing member of Starkman Realty Group in Cherry Hill, said the Vermont Plaza apartment complex was acquired, mainly for debt assumed, by Radiant Property Management of Newark, Essex County.
The approximately 200-unit, 14-story property had been owned by Sencit Properties, of Harrisburg, Pa., and Edison Investment Advisors, of Livingston, Essex County, he said.
“I think it’s important for people to know that Atlantic City was not nearly as damaged as some people think in Hurricane Sandy,” Starkman said. “From a multifamily perspective, investors are still flocking to Atlantic City.”
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