According to the N.J.-based Star-Ledger, economists gauging the recovery in New Jersey can look to commercial real estate as an indicator. What they’ll find is a market that has been stagnant and struggling to get traction since the mid-2000s. And until jobs return, most sectors of commercial real estate remain on hold.
“Commercial real estate is in lockstep with jobs,” said Matt McDonough, managing director at Transwestern, a company specializing in commercial real estate services with offices in Parsippany, N.J. “When you see 20% office vacancy rates, you know jobs are down.”
He described a healthy office rental market as having about 10% vacancy. Since 2002, though, the vacancy rate has floated between 17% and 19% in Central and North Jersey. Some counties have done better. According to data from Cushman & Wakefield, vacancy rates in Hudson County are at 12%, but Morris County is at 26% and Monmouth County at 29%.
“Real estate grows based on the expansion of the economy,” said Paul Profeta, president and owner of Paul V. Profeta and Associates and a member of Rutgers Business School’s Board of Advisers. “When you have 3%, 4%, 5% GDP growth you have expansion. Companies are taking more space; they’re hiring more people. We don’t have that today. We’re really muddling along at 1.5%-2.0% growth. We’re basically treading water.”
Asked how long will it take New Jersey to recover, he said, “We seem to be muddling along. I don’t see anything on the horizon that is going to shake us out of that rut in the near future.”