Connectivity is Key: Three Trends That Will Power Commercial Real Estate in New Jersey in 2018 By: William C. Hanson, SIOR, President of NAI James E. Hanson

Jan 26, 2018

This article originally appeared in the January 12th edition of Mid-Atlantic Real Estate Journal

Often, when I am asked to make a year-end prediction, I must break the prediction down into individual asset classes to offer a comprehensive look at the next 12 months. Often these predictions tend to operate somewhat independently of the others. This year, however, I see a broad overarching unifying theme running throughout New Jersey – Connectivity.

  1. City Connectivity

The continued evolution of the residential and office asset classes has led to a new synergy where the line between a purely residential or a purely office project has been blurred. Over the past several years we have seen an erosion of the idea of a dedicated office park, instead replacing it with the mixed-use or metroburb concept. There are less young people driving than ever before, as ridesharing and mass transit take over as the primary modes of transportation. This trend is quite literally driving how development takes place and will continue to do so for the immediate future. Connected cities and towns, those that are connected to mass transit networks, friendly to ridesharing and connected to their residents’ wishes are going to be the ones that can attract the investment money looking for viable projects. Those cities and towns that eschew connectivity to hold out hope for a return to the past are going to struggle to attract any level of meaningful development.

  1. Retail Connectivity

New Jersey boasts some of the highest per capita rates of retail square footage in the world. With strip malls, big box stores and malls dotting towns throughout our state, the much-discussed “Retail Apocalypse” had many sounding alarm bells. Looking at the underlying numbers though, the retail apocalypse is increasingly looking like a retail shift. The impact of e-commerce is no doubt the genesis of this shift but its profoundly devastating impact on brick and mortar retail has been overstated. 2018 will see a shift towards more connected retail with a focus on experiences and the repurposing of obsolete or redundant retail assets to better fit within omnichannel corporate retail businesses. Retail operators might convert a store into a showroom where customers can try out new products before purchasing them online to have them delivered directly to the store for easy pickup. Retailers will look to a further enhance their synergistic customer experience across their enterprise and develop a truly connected retail business model merging the best of online and physical retail with an optimized supply chain.

  1. Supply Chain and Logistics Connectivity

Both trends mentioned above are only possible if goods can be delivered to consumers quickly and efficiently. Positioning of warehouses and fulfillment hubs will be vital as online order delivery windows continue to shrink and e-commerce sales eat up more and more of consumer spending. Although operators want to be located nearby the costly New York City metro markets, New Jersey benefits from a dense network of highways and interstates that enable developers to balance affordability with connectivity. We will continue to see developers looking for opportunities to meet e-commerce’s insatiable demand for industrial space further to the western and southern portions of the states that are tapped into the regional transportation network but boast lower barriers to entry.

It is clear that 2018 will be the year of connectivity in commercial real estate. Whether it is building more connected towns or more optimized connected logistics networks, this core concept will drive the direction of our field in the new year. Brokerage firms, like NAI James E, Hanson, that are connected to the latest macroeconomic trends and consumer demands will be the ones who are able to make the most of what will surely be an exciting upcoming year in commercial real estate.