RUTHERFORD, NJ — The New Jersey office market is relatively upbeat, despite challenges facing properties further removed from the more desirable urban and waterfront settings, but the white-hot growth market for New Jersey still appears to be industrial, according to members of the “Garden State Deal Execution” panel at the RealShare New Jersey conference held yesterday in Rutherford, NJ. About 300 market participants attended the half-day conference sponsored by ALM Real Estate Media, Globe Street.com's parent company.

Industrial vacancy is in the 7.8 percent range, which is very healthy, says Brian Hosey, regional manager, Marcus & Millichap, even though more than 1 million feet of capacity will come online over the next year. Much of the demand for industrial property is being driven by dramatic changes in the supply chain for traditional retailers, the panelists say.

Many retailers are using large distribution centers as their stock rooms, providing customers with rapid, sometimes same-day delivery, while limiting the inventory actually on display in stores, they say.

“Manufacturers are coming back to the Northeast, because it is actually becoming very expensive to manufacture in China and ship it back here,” Hosey says.

More than 10 million square feet of office leasing was completed in central and northern New Jersey last year, says David Simon, executive managing director and New Jersey market leader, Colliers international. “So far this year, seven million square feet have been leased and it is expected that the year will outpace last year,” says Simon.

Class A buildings within a three-mile radius of rail stations are seeing rent premiums of about 30 percent above the average asking rent of $24 per square foot in the market, says Simon.

More office and residential tenants are migrating to Jersey City, and Newark to escape rising rents in Brooklyn and Queens, says Brian Hosey, regional manager, Marcus & Millichap.

“Well-leased, well-located class a properties are where investor interest is focused, with rents north of $400 per square foot and a cap rate of six were slightly lower,” says José Cruz, senior managing director of HFF. “At the other end of the spectrum, pricing is reasonable for vacant underutilized office space, with rental rates below $100 per square foot.”

The panel also sees especially strong multifamily demand continuing on the waterfront. Cruz noted that multifamily properties in Manhattan are selling in the range of $1.2 million and up per unit, and prices of $800,000 are typical in Brooklyn and Queens. “Given that, is $600,000 really too high for Hoboken?” he asked.

Panelists see an increasing trend for medical office tenants to seek space in traditional retail shopping centers, especially those anchored by grocery stores and big-box retailers, to make routine healthcare more accessible to patients.

Timothy J. Touhey, senior vice president, Investors Bank, says his bank is competing aggressively with insurance company and institutional investor money. The bank will finance up to a level of 70 percent loan to value, he says. More than 60 percent of his current financing is in the multifamily space, where he says has closed about $2 billion in financing so far this year.

The panel was moderated by Nicholas Racioppi Jr., a partner with Riker Danzig Scherer Hyland & Perretti.