The industrial sector rated highest among all property types in the East region of the U.S. for its return vs. risk and value vs. price. The hotel sector fared the worst for risk-adjusted returns while retail was rated as the most overpriced among the property types. That’s according to a survey of regional respondents conducted for the May 2019 Situs RERC Real Estate Report, “Defensive Positioning.”
Similar to all other US regions, the growing consumer preference for online shopping is supporting high rent growth in the industrial sector and increased vacancy rates in the retail sector. The East region, in particular, is suffering from over-retailed markets, and with concerns about continuing tenant bankruptcies and lack of demand, the retail sector remains overpriced.
Here’s a closer look at some of the major metro areas in the East:
Boston’s employment grew 0.5% over the last 12 months through 1Q 2019, adding 12,800 jobs. At 2.7%, unemployment is below the national average of 3.8%.
With premier schools like MIT and Harvard in its backyard, Boston is a leader in technology and innovation. Kendall Square is Greater Boston’s life science hub. In addition, the submarkets of Seaport, West Cambridge, Watertown and Allston/Brighton have attracted investments in life science assets from companies like Vertex Pharmaceuticals, Alexion Pharmaceuticals and Foundation Medicine.
NORTHERN NEW JERSEY
Northern New Jersey added 43,281 jobs with employment growth of 1.0% over the last 12 months through 1Q 2019. At 4.1%, unemployment is above the national average of 3.8%.
The Northern New Jersey commercial real estate (CRE) market benefits from its proximity to New York City – distribution centers and apartments with quick and convenient access to the big city are attracting investors. There is, however, an excess of office and retail assets.
The nation’s capital added 29,500 jobs with employment growth of 0.9% over the last 12 months through 1Q 2019. At 3.3%, unemployment is below the national average of 3.8%.
According to the Newmark Knight Frank’s Grocery Store Effect report, apartments closer to new grocery stores yielded over 5% higher rents than the submarket average at the time of the stores’ openings across the Washington, D.C., metro area. This finding may be an important consideration for multifamily investors in the region.
The Situs RERC Real Estate Report is the commercial real estate industry’s most respected and relied-upon survey-based resource of CRE investment criteria for risk analysis for over 45 years. This quarterly report is packed with a variety of valuation metrics, including cap rates, pre-tax yield/discount rates, and investor insights on the institutional, regional, and 47 major markets. To subscribe to the report, go to store.rerc.com. or call 319.352.1500.