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Regional Commercial Real Estate Predictions Do Not Require a Crystal Ball
Watching Healthcare, Office, Multi-family and BTS Shifts…and Tiger Woods

By Eugene Diaz, principal partner
Prism Capital Partners
Bloomfield, N.J.

April 1, 2015 – If commercial real estate practitioners had crystal balls, would that be a good thing? We might know the future, but the jury is out on whether being able to better anticipate shifts in our cyclical industry would make a difference – or just cause more gray hair.

That said, being able to "see" where things are headed does not always require clairvoyance – just experience and observation. Following are a few New Jersey/New York regional market predictions for the coming months and years. And with the first quarter of 2015 coming to a close, several are already ringing true.

1. As hospitals, managed care companies and pharmaceutical firms all continue to adjust to the rapidly changing healthcare landscape, the market will be punctuated with multiple, large healthcare-related transactions. Already this year, the HUMC/Seton Hall medical school announcement and Cigna's acquisition of QualCare have made headlines. Additionally, merger discussions are underway between the Barnabas and Robert Wood Johnson health systems.

2. Office investment will accelerate, and office values will rise as the improving job market and the hunt for higher yields brings increased demand for this asset class. In February, Morris Corporate Center IV, a nearly vacant, 350,000-square-foot property in Parsippany, traded to an Intercontinental/Ivy joint venture partnership. The sale price, which was not disclosed, is rumored to be double that which the market would have supported one year ago. Looking ahead, a return of structured finance transactions will help to bridge the bid/ask between buyers and sellers.

3. Multi-family warning shots will be fired when interest rate and supply-side increases combine to scare weaker participants into lower effective rents as absorption returns to normalcy. This will back-up CAP rates, providing opportunities for smarter folks to buy toward the end of the year and into 2016. While we are still waiting for this predication to show some legs, we are looking past it to forecast the resilience of the market proving out, buoyed by the improving jobs market, rising incomes and continued demand shifts from for-sale to rental.

4. We will see a tremendous rush toward build-to-suit transactions as companies and developers attempt to cash in on the NJ Economic Growth Grant program. In January and February alone, 10 projects were approved for $84.6 million in Grow NJ funding.

5. Last, but certainly not least, my crystal ball tells me that Tiger Woods finally wins his 15th major (most likely the British Open). And, feeling like his life is back on track, he will propose to girlfriend Lindsay Vonn. I choose to have faith in this prediction, despite Tiger shooting an 82 – the worst score of his professional career – just weeks ago in Scottsdale, Arizona.

Media Contact: Evelyn Weiss Francisco / (201) 796-7788 / evelyn@caryl.com