A Buyer’s Market: Glass Half Empty or Full?

Anne LaBate had the good-news scoop, at a Borden-Perlman conclave on “the real state of commercial real estate” at the Nassau Club this morning. Appliance dealer Mrs. G’s has signed a deal to develop her corner of Route 1 North in Lawrenceville. That’s huge news. Of course now a lengthy approval process begins.

LaBate, a principal with Segal LaBate Commercial Real Estate, was on a panel with Paul McArthur of Trillium Realty Advisors, Jim Silkensen of NJ Bankers Association, and Greg Tesche of Chubb Insurance, which sponsored the event.

It’s a tenant’s and buyer’s market, the panelists told the 70-plus movers and shakers who attended. Silkensen said that appraisers are subtracting 10 percent from a property’ value because of the uncertain economy. Add to that that property values are off 40 percent since 2007.

McArthur’s pessimistic statistics included that half of the $1.4 trillion loans coming due in the next four years are under water, and most are commercial mortgage backed securities.

However, “slow steady growth will start in 2012,” he said. Those who were able to structure long-term deals, 10 years rather than five years, will do well because, says McArthur, “Inflation is coming.” And if you have the cash, “the ability to close a deal will be a great asset.”

Before construction can begin, vacancies now at 25 percent in Mercer County must drop to 10 or 15 percent. Meanwhile nobody knows the real vacancy rate, because downsized companies are still paying rent on empty space.

On the good news side, small businesses are the ones creating jobs, versus what happened nine years ago. Said McArthur: “We need to put packages in place to encourage growth of small businesses.”

LaBate revealed some other potential deals, based on the premise that a buyer’s market offers an opportunity for major chains without a presence in Central New Jersey. She cited Walgreen’s, who cut back 80 percent of its expansion but has said that half of the remaining 20 percent will be in New York or New Jersey. “It is perceived as a rich market that they need to penetrate.”

“But they will pick and choose among municipalities,” she warned. “They are not going to battle for approvals – they will move on.” Obstacles to the expansion plans of Janssen Pharmaceutical, in Hopewell, everyone agreed, were an all-too-frequent example of an inhospitable environment.

Other bright spots: someone plans to build a private boarding school in Ewing, and the addition of two new hospital sites will encourage physicians to relocate and upgrade.

Because of financing challenges, public/private partnerships are where the action will be, she predicted. The College of New Jersey contemplates a “Campus Town” of mixed retail and residence. Rutgers may do a deal in New Brunswick, and Mercer County Community College could develop its Kerney Campus in Trenton.

LaBate was spitting mad about the incentives, created by the state, to keep Blackrock. Blackrock did stay in New Jersey by signing with University Square, but it didn’t even get to use the incentives. Now nobody will, she predicts, because the incentives were so large-company specific.

In general, said Tony LaPlaca, “people are afraid of living in New Jersey. Business people need to encourage government to get positive messages out. Perceptions are led by the media.”

In the photo, from left, Doug Borden of Borden Perlman, Bob Prunetti of the Mercer Chamber, Jeff Hall of Fox Rothschild, Anne LaBate of Segal Commercial, Paul McArthur of Trillium Realty

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