Skip to main content
Integra in the News

Integra in the News

Integra experts are well-respected and trusted CRE professionals. They are often featured in local, national, and global news media to provide sought after insights, expertise, and an independent perspective to stories affecting commercial real estate markets worldwide.

Learn More

The New Jersey Real Estate Market Outlook in the Time of COVID-19 May 15, 2020

Arthur A. Linfante
Arthur A. Linfante
CRE, MAI, SCGREA
Board Member for IRR, Integra Realty Resources - Northern New Jersey

Prior to the COVID-19 pandemic, the United States was in one of the longest economic recoveries in history. GDP was anticipated to grow by 2.3%, almost all real estate asset classes were performing well, and New Jersey was seeing many redevelopment projects come to fruition.

By March, we were in the middle of an economic shutdown—the likes of which we have never seen. Financial markets tumbled, non-essential retail establishments closed, restaurants were limited to pick-up and delivery, and non-essential construction was halted. Millions have since been laid off as the unemployment rate continues to escalate to unprecedented levels. As the COVID-19 pandemic continues to affect our communities, especially in the New York/New Jersey market, the full impact has yet to be seen.

While the real, long-term solution rests in the development of a vaccine, as analysts, we are constantly looking at the past for parallels that may help provide a look into future market performance. For example, the most telling, long-term effect following the 9/11 terrorist attack was increased concern for public safety through the implementation of expanded security measures. While much of the overt security measures have subsided, airports, courthouses, some public and private office buildings have maintained a higher level of security. The financial crisis of 2008 demonstrated how an economic downturn could accelerate real estate trends that were already in place. For example, prior to 2008, technological innovation was the leading reason firms began to reduce office space requirements. When the financial crisis hit, there were massive layoffs. As the economy recovered, the re-hire rate for office workers lagged, which accelerated the decline in demand for office space.

With these two past events in mind, the following is our anticipated outlook for the New Jersey real estate market in the time of COVID-19.

Hotels, Travel and Leisure

Safety will be the most significant issue affecting the hotel, travel and leisure market. In this regard, the effects of 9/11 may be a barometer. While it took the travel and hospitality industry time to recover, it eventually returned to normal levels and then continued to grow, exceeding pre-9/11 levels. As the fear of a reoccurring event subsides, the industry will be on track to return to a full recovery, subject to long-term effects and ingrained trends.

Some technological trends that may be accelerated by COVID-19 include:

  • Zoom conferencing instead of travel for in-person meetings
  • Decreased demand for corporate meetings and industry conferences

Long-term operational issues may include:

  • Increased requirements relating to room cleaning, sanitizing and housekeeping
  • Labor safety requirement from Unions, franchisors and operators
  • Customer safety requirement from Unions, franchisors and operators

Multifamily Market

Prior to COVID-19, the apartment market was strong. The sector should not see any long-terms effects from COVID-19. Rent relief, collection issues and rent forgiveness are anticipated to be short-term issues.

The demographic shift from suburban to urban living was beginning reverse back to the suburbs as millennials began to form families. Given the need for social distancing in the time of COVID-19, apartment demand in suburban locations may be accelerated.

From an operational perspective, landlords will need to provide some assurance to tenants that fitness centers, pools, community centers, other amenities and common areas are safe. This may be a difficult and costly endeavor. There will be many possible outcomes, such as an increase in square footage per treadmill, or perhaps a reduction in these types of amenities overall.

Office Market

Prior to COVID-19, new and renovated office assets were seeing record-high values. The office market was still reemerging from the trend away from obsolete office parks, antiquated building designs and buildings that had a limited nexus to support services such as retail, restaurants and hotels. Developers were not only reengineering buildings, but the office park itself.  While we expect this trend to continue, office assets will experience a new set of challenges that may create an entirely new supply and demand paradigm:

  • A reversal of the trend towards more employees per square foot as social distancing may require larger cubicles designed with more and higher partitions between employees.
  • The current trend towards an open floor plan is anticipated to continue with interior individual offices and open offices around the perimeter that allow for natural light to benefit everyone. However, demand for more individual office may increase.
  • Janitorial expenses may escalate as landlords will be required to provide safe amenities and common areas. Fitness centers, cafés and elevators will require an increased level of cleanliness and sanitization. Likewise, tenants will be required to do the same to ensure safe and clean employee work areas.
  • Employee work schedules may be staggered. Employees may alternate their workdays in and out of the office. While one worker is working at the office, the other may work at home.
  • Work-at-home, while viable for some industries, is not viable for others. Decentralization of firms causes reductions in productivity, collaboration, team building and corporate culture.  There has been a significant amount of discussion about this issue prior to COVID-19 and, in fact, the work-at-home trend was accelerated by the 2008 financial crisis. The issue being debated now focuses on the extent to which the work-at-home concept will increase. Time will tell.
  • Office hoteling, another concept that emerged prior to the 2008 financial crisis, may now be an impractical concept since it may be difficult to ensure employees’ safety.
  • Collaborative spaces, another concept that emerged prior to the 2008 financial crisis, may not be as widely utilized for the same reason.
  • The biggest potential challenge facing the office sector may be the reabsorption of space created by failing businesses.

Industrial Market

Industrial space has demonstrated to be the most desired asset class, driven by the significant growth in online spending and New Jersey’s strategic location in the northeast. Industrial assets may also be the biggest benefactor of the current crisis. As online spending continues to increase, the demand for industrial space will increase. Furthermore, industrial employers may need to implement social distancing measures, which may increase the employees-per-square-foot ratio, resulting in a need for more space.

The manufacturing sector may also see a boost in demand as products currently being manufactured in other countries are brought back to the United States for production. This may be more speculative, but national security and safety of the supply chain has become an issue of concern.

Retail Market

Pre-COVID-19, the retail sector exhibited the most transition out of all the asset classes. Online spending, while benefitting the industrial market, was hurting brick-and-mortar stores. Retail properties have similar economic and technological issues that office properties encountered prior to the downturn of2008.  Technology continues to change the way we work, live and shop. The retail real estate sector will see most likely undergo the most dramatic changes due to the COVID-19 pandemic.

  • Many retail properties are susceptible to social distancing challenges, which may cause significant operational changes, such as store layouts and protocol to ensure employee and customer safety. Restaurants, for example, may need to have less seats per square foot, while movie theaters may have occupancy restrictions. In all instances, social distancing measures and new sanitizing requirements will increase occupancy costs and potentially reduce operating margins.
  • Online spending was up 25% in March from the same period last year. While shoppers were mostly quarantined, the trend towards online spending should increase over what was anticipated prior to COVID. This will continue to decrease the demand for brick-and-mortar stores.
  • Department stores and marginal centers will close at a faster rate than originally anticipated.  Highest- and best-use may become the central question in valuation and redevelopment efforts.  Planning initiatives will increase in a similar fashion, as seen with obsolete office parks after 2008.
  • Green Street Advisors predicts 50% of all department stores will close by the end of 2020.  Iconic brands such as JCPenney, Lord & Taylor and Neiman Marcus are on the brink of bankruptcy. Macy's was dropped from the S&P 500 index in March after its market capitalization fell by 75% in one year. Macy’s has also hired advisors to explore ways to recapitalize its finances, according to Reuters.
  • Remaining regional malls will need to create new environments to attract shoppers. The solution may be difficult to ascertain as social distancing creates new challenges. Malls like the American Dream in New Jersey and the Mall of America in Minnesota have been developed to create a unique retail/entertainment environment. While the Mall of America has seen success, the hope was the American Dream would follow suit. Social distancing may make this possibility difficult. Regional malls may become the biggest loser as pre-COVID-19 trends accelerate and new COVID-19 concerns present themselves.

Overall, real estate development has been experiencing some very interesting trends since 2008. The average size of a single-family home has decreased, apartment living is in higher demand, and the now obsolete, traditional office park is giving way to more mixed-use projects that are dependent on high-density housing. Projects intend to capitalize on proximity, socialization and experiential retail users. During the 2009 recession, redevelopment planning did not take a step back. The simple fact that “even bad times end,” encourages developers to take time and reevaluate plans to accommodate new market demands or move forward with development projects. This is occurring in many municipalities in New Jersey including Sayreville, Orange, East Brunswick, and others.

It will be interesting to see how current mixed-use projects reengineer themselves to accommodate the lasting impact of COVID-19.

About the Author:

Arthur A. Linfante is Managing Director of the Northern New Jersey office of Integra Realty Resources (IRR). He has extensive experience in asset valuation and advisory functions. Current projects include redevelopment planning and feasibility, municipal impacts, affordable housing studies and estate and property tax planning. As the Northeast practice leader in the Hotel and Litigation Specialty Practice Groups, Linfante is actively involved in real estate matters directly affected by COVID-19. Working closely with Integra’s COVID-19 National Response Team, the IRR-Northern New Jersey is conducting daily research on the current pandemic and economic impacts to provide timely information to clients that enables them to make informed decisions for their real estate assets.

 

Locate an office

Locate an office

Each IRR office is led by an MAI-designated Senior Managing Director, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets.
Integra Offices Map Denver, CO Denver, CO 575 Union Blvd.
Suite 209
Lakewood, CO 80228
Phone: 720-833-5930
Fax: 303-951-1924
Boston, MA Boston, MA 303 Congress Street
4th Floor
Boston, MA 02210
Phone: 617-457-3300
Fax: 617-457-3267
Seattle, WA Seattle, WA 600 University Street
Suite 310
Seattle, WA 98101
Phone: 206-436-1179
Fax: 206-623-5731
Portland, OR Portland, OR IRR-Corporate
Portland, OR 97205
Phone: 212-575-2935
Fax: 646-424-1869
Boise, ID Boise, ID RiverWalk Center
1661 W. Shoreline Dr. Suite 200
Boise, ID 83702
Phone: 208-342-2500
Fax: 208-342-2220
Salt Lake City, UT Salt Lake City, UT 5107 South 900 East
Suite 200
Salt Lake City, UT 84117
Phone: 801-263-9700
Fax: 801-263-9709
Las Vegas, NV Las Vegas, NV 8367 West Flamingo Road
Suite 200
Las Vegas, NV 89147
Phone: 702-869-0442
Fax: 702-869-0955
Phoenix, AZ Phoenix, AZ 2999 N. 44th Street
Suite 512
Phoenix, AZ 85018
Phone: 602-266-5599
Fax: 602-266-1515
Sacramento, CA Sacramento, CA 3825 Atherton Road
Suite 500
Rocklin, CA 95765
Phone: 916-435-3883
Fax: 916-435-4774
San Francisco, CA San Francisco, CA 555 Meridian Avenue
Suite C
San Jose, CA 95126
Phone: 408-299-0444
Fax: 408-299-0449
Los Angeles, CA Los Angeles, CA 16030 Ventura Boulevard
Suite 620
Encino, CA 91436-4473
Phone: 818-290-5400
Fax: 818-290-5401
Orange County, CA Orange County, CA 2151 Michelson Drive
Suite 205
Irvine, CA 92612
Phone: 949-591-8150
San Diego, CA San Diego, CA Cornerstone Professional Center
2775 Via De La Valle, Suite 206
Del Mar, CA 92014
Phone: 858-259-4900
Fax: 858-259-4910
Miami, FL Miami, FL 9155 S. Dadeland Boulevard
Suite 1208
Miami, FL 33156
Phone: 305-670-0001
Fax: 305-670-2276
Naples, FL Naples, FL 2770 Horseshoe Drive S
Suite 3
Naples, FL 34104
Phone: 239-643-6888
Fax: 239-643-6871
Tampa, FL Tampa, FL 550 North Reo Street
Suite 220
Tampa, FL 33609
Phone: 813-287-1000
Fax: 813-281-0681
Orlando, FL Orlando, FL 326 North Magnolia Avenue
Orlando, FL 32801-2431
Phone: 407-843-3377
Fax: 407-841-3823
Jacksonville, FL Jacksonville, FL IRR-Corporate
Jacksonville, FL 32217
Phone: 212-575-2935
Fax: 646-424-1869
Charleston, SC Charleston, SC 11-C Isabella Street
Charleston, SC 29403
Phone: 843-718-2125
Fax: 843-718-2058
Atlanta, GA Atlanta, GA 5256 Peachtree Road
Suite 115
Atlanta, GA 30341
Phone: 404-924-6247
Fax: 404-418-4357
Birmingham, AL Birmingham, AL 880 Montclair Road
Suite 275
Birmingham, AL 35213
Phone: 205-949-5995
Fax: 205-271-2389
Jackson, MS Jackson, MS 617 Renaissance Way
Suite 100
Ridgeland, MS 39157
Phone: 601-714-1665
Fax: 601-500-5314
Dallas, TX Dallas, TX 1100 Mira Vista Blvd.
Suite 300
Plano, TX 75093
Phone: 972-881-7191
Fax: 972-733-1403
Fort Worth, TX Fort Worth, TX 7080 Camp Bowie Boulevard
Fort Worth, TX 76116
Phone: 817-763-8000
Fax: 817-763-8017
Austin, TX Austin, TX 401 Congress Avenue
Suite 1540
Austin, TX 78701
Phone: 512-924-1345
Memphis, TN Memphis, TN 1661 International Drive
Suite 330
Memphis, TN 38120
Phone: 901-322-1701
Fax: 901-767-4918
Kansas City, MO Kansas City, MO 1100 Main Street
Suite 400
Kansas City, MO 64105
Phone: 816-652-0222
Fax: 636-530-0046
Providence, RI Providence, RI 2 Charles Street
Suite B1
Providence, RI 02904
Phone: 401-273-7710
Fax: 401-273-7410
Syracuse, NY Syracuse, NY 120 East Washington Street
Suite 525
Syracuse, NY 13202
Phone: 315-422-5577
Fax: 315-422-5295
Hartford, CT Hartford, CT 97 Broad Street
Middletown, CT 06457
Phone: 860-291-8997
Fax: 401-273-7410
New York, NY New York, NY IRR-Corporate
New York, NY 10036
Phone: 212-575-2935
Fax: 646-424-1869
Northern New Jersey Northern New Jersey 301 South Livingston Avenue
Suite 104
Livingston, NJ 07039
Phone: 973-422-9800
Fax: 973-422-9797
Coastal New Jersey Coastal New Jersey 1415 Hooper Ave.
Suite 306
Toms River, NJ 08753
Phone: 732-244-7000
Fax: 732-505-9498
Philadelphia, PA Philadelphia, PA 995 Old Eagle School Road
Suite 307
Wayne, PA 19087
Phone: 610-238-0238
Wilmington, DE Wilmington, DE IRR-Corporate
Wilmington, DE 19805
Phone: 212-575-2935
Fax: 646-424-1869
Baltimore, MD Baltimore, MD The Yards
700 Pennsylvania Ave, SE, Suite 200
Washington, DC 20003
Phone: 202-601-4146
Washington, DC Washington, DC The Yards
700 Pennsylvania Ave, SE, Suite 200
Washington, DC 20003
Phone: 202-601-4146
Fax: 646-424-1869
Pittsburgh, PA Pittsburgh, PA 3535 Boulevard of the Allies
Pittsburgh, PA 15213
Phone: 412-683-2211
Fax: 412-683-2220
Cleveland, OH Cleveland, OH 850 Euclid Ave.
Suite 952
Cleveland, OH 44114
Phone: 330-659-3640
Fax: 330-659-3640
Columbus, OH Columbus, OH 6233 Riverside Drive
Suite 2N
Dublin, OH 43017
Phone: 614-764-8040
Fax: 614-764-8050
Saint Louis, MO Saint Louis, MO 16759 Main Street
Suite 209
St. Louis, MO 63040
Phone: 636-898-6533
Fax: 636-530-0046
Chicago, IL Chicago, IL 400 E Randolph St.
Suite 715
Chicago, IL 60601
Phone: 312-565-0977
Fax: 312-565-3436
Minneapolis, MN Minneapolis, MN 8012 Old Cedar Avenue South
Minneapolis, MN 55425
Phone: 612-339-7700
Fax: 612-339-7937
Nashville, TN Nashville, TN 1894 General George Patton Drive
Suite 300
Franklin, TN 37067
Phone: 615-628-8275
Fax: 615-628-8286
Richmond, VA Richmond, VA 7110 Forest Avenue
Suite 202
Richmond, VA 23226
Phone: 804-346-2600
Fax: 804-747-9140
Greensboro, NC Greensboro, NC 5411-A Friendly Avenue
Greensboro, NC 27410
Phone: 336-676-6033
Fax: 336-676-6025
Raleigh, NC Raleigh, NC 8382 Six Forks Road
Suite 200
Raleigh, NC 27615
Phone: 919-847-1717
Fax: 919-847-1714
Charlotte, NC Charlotte, NC 214 W. Tremont Ave.
Suite 200
Charlotte, NC 28203
Phone: 704-376-0295
Fax: 704-342-3704
Columbia, SC Columbia, SC 141 Riverchase Way
Lexington, SC 29072
Phone: 803-772-8282
Fax: 803-772-0087
Cincinnati/Dayton, OH Cincinnati/Dayton, OH 8241 Cornell Road
Suite 210
Cincinnati, OH 45249
Phone: 513-561-2305
Fax: 513-561-2881
Detroit, MI Detroit, MI 400 W. Maple Road
Suite 100
Birmingham, MI 48009
Phone: 248-540-0040
Fax: 248-540-8239
Indianapolis, IN Indianapolis, IN 4981 North Franklin Road
Indianapolis, IN 46226
Phone: 317-546-4720
Fax: 317-546-1407
Louisville, KY Louisville, KY 13000 Equity Place
Suite 105
Louisville, KY 40223-3976
Phone: 502-452-1543
Fax: 502-451-3657
Caribbean Caribbean Cayman Business Park #A5, P.O. Box 751
Grand Cayman, Cayman islands
Camana Bay, KY KY1-9006
Phone: 844-952-7304
Houston, TX Houston, TX 9225 Katy Freeway
Suite 206
Houston, TX 77024
Phone: 713-973-0212
Fax: 713-973-2028
San Antonio, TX San Antonio, TX 10010 San Pedro Avenue
Suite 220
San Antonio, TX 78216
Phone: 210-446-4444
Puerto Rico Puerto Rico Vig Tower 1225 Ave Ponce De Leon
Suite MZ-4
San Juan, PR 00907-3907
Phone: 844-952-7304
New Orleans, LA New Orleans, LA 643 Magazine Street
Suite 301
New Orleans, LA 70130
Phone: 504-291-9019
Little Rock, AR Little Rock, AR 8201 Ranch Boulevard
Building B1, Office 6
Little Rock, AR 72223
Phone: 501-476-5561
Grand Rapids, MI Grand Rapids, MI 1009 44th Street, SW
Suite 107
Grand Rapids, MI 49509
Phone: 616-261-5000
Fax: 616-261-5045
Lubbock, TX Lubbock, TX 6309 Indiana Avenue
Suite D
Lubbock, TX 79413
Phone: 806-368-8063
Rio Grande Valley Rio Grande Valley 1601 West Trenton
Suite L108
Edinburg, TX 78539
Phone: 956-878-3577
Northwest Arkansas Northwest Arkansas 200 W. Center Street
Suite #4
Fayetteville, AR 72701
Phone: 479-326-8066