Northern New Jersey: Where
The Boom Has a Foundation

The New Jersey Turnpike -- which funnels millions of travelers through industrialized swampland between Newark Airport and the gleaming towers of Manhattan -- has earned the state more than its fair share of exit jokes.

But beyond those green off-ramp signs is an area with the two prerequisites for a strong real-estate market -- a limited supply of land and healthy demand.

Last year, the region's median income hit $73,973, the highest of any state, according to the U.S. Census Bureau, making the area "one of the most potent consumer markets in the country," says James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.

The centrally located shipping terminals in Newark, N.J., are part of the Port Authority of New York and New Jersey, where increased Asian imports are increasing demand for warehouses in the region.

Northern New Jersey's economy, which is driven by its proximity to New York City as well as the financial, pharmaceutical and telecommunications industries, is rebounding from job losses, particularly in the telecom sector where companies such as Lucent Technologies Inc. slashed their payrolls during the tech bust.

While malls and homes get more attention, the solid if dull warehouse sector is a driver of the area's commercial real estate. Though warehouse vacancy rates of 10.2% were slightly above the 9.7% national average in the second quarter, the region's rents were also above average and expected to rise through 2009, according to Property & Portfolio Research Inc.

New Jersey's central location on the eastern seaboard along with its excellent highway, air, rail and seaport access make it a hub of choice. Record international cargo volume boosted by rising Asian imports has prompted developers to build more space.

About 6.1 million square feet of warehouse space is slated for completion this year, up 64% from 2004, and construction is projected to continue at an annual rate of about 3.4 million square feet through 2009, PPR said. That makes the northern New Jersey region one of the top warehouse builders in the country, according to PPR.

The office sector is less robust. Though office vacancy rates are still above the national average at 19.6%, they have fallen from their recent high of 20.7% in the third quarter of 2003. Still, investors are snapping up office buildings. So far this year, 56 deals valued at a total of $2.7 billion have closed, up from 45 transactions valued at $2 billion for all of 2004, according to Andy Merin, an investment sales broker with Cushman & Wakefield.

The scarcity of land is pushing developers to reconsider Newark, which is now undergoing a building boom. About $1 billion in new construction is expected to be under way in the next 12 months, according to Richard Monteilh, Newark's business administrator.

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