MARLTON, NJ—On the heels ofits South New Jersey officereport,Jason Wolf, principal of Wolf CommercialReal Estate (WCRE), based in Marlton, NJ, tellsGlobeSt.com in an exclusive interview that the market is gettingstronger and showing signs of growth, but it's not too crazy yet.Wolf spoke to his about his thoughts on Southern Jersey andPhiladelphia.

|

GlobeSt.com: We just wroteabout 6.8% cap rate deal in Atoona. Isthat a sign the market is overheating?

|

Jason Wolf:The investment market is active and showing signs ofoverheating. When you can go borrow money and leverage that deal at3.5% interest rates, it will appear as a much more attractive deal,so your cash return might be a little bit higher. But you can'twrite about many good credit tenanted 8.6% retail deals in thePhiladelphia region. They don't exist. There are multiple partiesnow also bidding on owner occupied assets and we are seeing manyuser sale deals in bidding wars, especially locallyhere.

|

GlobeSt.com: But the marketthere is pretty solid because of medical and education,right?

|

Wolf:Medical and education has without a doubt kept this SouthernNew Jersey market from crashing. We also don't have an overbuilt market or amarket with functionally obsolete buildings like you may see inNorthern NJ. If the Eds &Meds occupants were to pull out of the market like the financialsector did 4-5 years ago, forget it. They have a huge presence herealong with the financial, mortgage and government servicesectors.

|

GlobSt.com: What about theimpact of people moving to Downtown Philadelphia? Is that helpingthe office market?

|

Wolf:Center City Philadelphia is getting a lot of positive pressrecently. And a lot of the major REITs, particularlyBrandywine Realty Trust taking control of thePhiladelphia CBD. They're seeing something. Landlords are seeingcorporate America, like Comcast and others show significant growthand expansion interest. You see significant incentives and you'reseeing a younger population move into Philly. It's hard to locatean apartment complex for less than a 5-6% cap rate, at best.There's a demand for the younger generation working and moving intourban areas, which is what we're seeing.

|

GlobeSt.com: Would you callthis over exuberance with commercial real estate in the area ingeneral? Or is this a natural progression?

|

Wolf:In the almost 20 years I've been involved in thisbusiness, commercial realestate as a whole is supposed to be a long-term investment. Ifyou're able to ride out these waves, the opportunities in thismarketplace right now are incredible. Investors that have cash andaccess to equity/debt are capitalizing on these opportunities.We're seeing bankowned/distressed assets inSouthern NJ trade at $40-$50 a foot and replacement cost can beover $200 a foot to build. The investors with cash that were ableto whether that downturn, they're going to be the ones that comeout even stronger. We always take a more optimistic tone at WCRE.There are always opportunities out in the market, you just have toknow how to find or create them.

|

GlobeSt.com So it's a prettystable commercial real estate market?

|

Wolf:We're in a stable place. If you look back three to five yearsago, all tenants were doing was restructuring their leases. Theleases that were executed at the top of the market with high rents,most of these tenants went back and renegotiated andrestructured (they did a blendand extend transaction with their Landlord). We are seeing less blend and extends now. Helpingclients realize the potential to reduce overhead costs was a winwin for Landlords as well. They were able to secure tenancy,obtain an extension and help promote tenant retention as well. Weare seeing less of this now and more expansion and growth. Thesmaller businesses are once again showing signs of optimism, banksare providing credit again and the tone is more bullish.

|

GlobeSt.com: So we're in alandlord's market?

|

Wolf:It's still a tenant market, but you're seeing real signs ofexpansion for the first time in the last five years and landlordsare providing less concessions and rents have shownstability.

|

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.