Morris, Middlesex counties shine in subdued capital markets environment – Real Estate NJ

By Joshua Burd

In a somewhat muted environment for commercial real estate investment, Morris and Middlesex counties were two bright spots in New Jersey in the second half of 2023.

A report by NAI DiLeo-Bram & Co. said as much, noting that Middlesex had the highest sales volume overall among seven counties tracked by the real estate services firm. Much of that came in the form of industrial trades, which totaled more than $386 million in value, accounting for some 85 percent of the county’s investment sales volume in the final six months of the year.

NAIDB also found that Morris was the only county to surpass its five-year average in total sales of industrial, office and retail property, according to the firm’s 2023 Winter Capital Markets Snapshot. The county, meantime, held the distinction of leading in office sales for the second half of 2023 with transactions nearing $100 million.

All told, industrial trades made up 74 percent of all transaction activity during the six-month period, while office and retail remained in a virtual tie at 13 percent each.

“The increase in interest rates during 2023 disrupted the markets we track within the industrial, office and retail sectors,” said David A. Simon, NAIDB’s chief operating officer. “The sales volume was about 32 percent lower in H2 2023 compared with the same time period in 2022. However, the long stretch of interest rate hikes appears to have finished, which will free up capital that has been sidelined during this adjustment period.”

NAIDB’s Market Snapshot focuses on northern and central New Jersey across the seven counties in which the firm is most active — Morris, Essex, Union, Middlesex, Somerset, Mercer and Hunterdon. The largest deal identified in the report is Blackstone’s $166 million purchase of a 514,400-square-foot distribution center at 39 Edgeboro Road in East Brunswick from Oxford Properties Group and Ivanhoe Cambridge.

Other findings include:

Industrial

• While prices for industrial trades have dropped to an average $239 per square foot, a decrease from $265 in the first half of 2023, the warehouse and logistics sector remains impressive as compared to 2019’s pre-pandemic pricing of $122 per square foot.
• For industrial buildings over 100,000 square feet, the average price is $207 per square foot, equating to a doubling of pre-pandemic price levels for space of this size.
• Industrial deals accounted for an aggregate volume of 46 trades with a combined $116 million in transactions during the back half of 2023.

Office

• NAIDB tracked 18 office trades for a combined $208 million during the second half of 2023, marking a year-over-year decline in aggregate value and price per square foot.
• Morris County recorded two of the top three sales transactions in this category — Morristown Professional Plaza and The Offices at Fox Hill — totaling nearly $100 million. The third was Federal Business Centers’ acquisition of 1090 King Georges Post Road in Edison.

Retail

• The seven-county region saw 19 retail sales in the second half of 2023, marking a year-over-year decline of more than 50 percent. Overall transaction value also fell from $225 million to $198 million.