The state’s industrial and office sectors both faced headwinds in 2023, but the year ahead for each asset class may be decidedly different.
That was a key takeaway last week from panelists at NAIOP New Jersey’s Annual Meeting and Commercial Real Estate Outlook, who noted that demand for warehouse and logistics space has normalized after a record-breaking run during the pandemic. Office landlords, meantime, are still grappling with shrinking corporate footprints and remote work policies, further straining submarkets that are both aging and oversupplied.
Rutgers professor Will Irving was less sanguine about the office market and the state’s economy. With respect to a hard or soft landing, he said, “it’s still a landing, and the landing that we’re seeing in New Jersey is a little ahead and a little harder than we’re seeing elsewhere.” The unemployment rate in the state is up by 1.8 percentage points since it bottomed in August 2022, he said, while noting that “pretty much all employment growth” in the private sector is in health care and leisure and hospitality — as opposed to traditional office-using industries such as finance and business services.
Meantime, Rutgers’ most recent R/ECON’s economic forecast for New Jersey shows slow or stagnant growth over the next five to six quarters, he said.
“So while Morris is probably right that there could be some retrenchment — some of that office activity moving back to New Jersey from New York — the internal trends within New Jersey are not great for the office market right now,” said Irving, an associate professor of practice at Rutgers’ Edward J. Bloustein School of Planning and Public Policy.
