I recently had the opportunity to sit down with Ms. Anne Klein, Senior Vice President of the Office Services Group of Grubb & Ellis’ Southern New Jersey Office, where she serves as a senior broker. With 26 years of experience in the industry, Ms. Klein’s successes include leasing over 6,500,000 square feet of build-to-suit space, and she has completed investment sales of over 1.5 million square feet of office space. During her 13 years with Grubb & Ellis, she has been retained as leasing agent for over 4,000,000 square feet including Teacher’s Insurance Annuity Association’s premier Class A, 170,000 square foot office building and Goldman Sachs real estate arm’s one-story office complex comprised of over 500,000 square feet, both of which she subsequently sold. Ms. Klein’s tenant representation extends across the country, working with local brokers in each market, while exclusively representing each tenant’s specific office leasing and sale requirements.
Most recently lecturing to real estate, construction, and design professionals from throughout the Mid-Atlantic region at a Commercial Real Estate Women (CREW), Philadelphia Chapter event, I asked Ms. Klein to summarize her commercial real estate industry predictions for the remainder of 2011, and in 2012 for New Jersey and beyond:
Jennifer Horn: What is the current state of the real estate industry today?
Anne Klein: I think we have hit close to bottom. Although vacancy increased last year, we are starting to see increased leasing activity, successful subleasing, and even building sales as lenders loosen requirements a bit.
Horn: In terms of economic recovery for the real estate market, what positive indicators are you seeing in the construction industry for the remainder of 2011 and into 2012?
Klein: We need residential sales to stabilize before residential construction will increase. As for commercial construction, architects are getting busier, which should trickle down to contractors later this year.
Horn: What challenges does your industry still face?
Klein: Rents and rent concessions; these are all over the board right now. This, in turn, affects the building values for future sales. Once landlords get more confidence in the increased activity, things should settle down and price wars should temper.
Horn: Is the residential and commercial real estate foreclosure crisis over?
Klein: No. Residential foreclosure is still climbing at alarming rates, and the stories are so sad. Commercial lenders with buildings underwater are selling notes or taking back the deeds. For the market, it’s still marketable space and the buildings will either be filled and sold, or just sold at discounted rates to buyers who might reposition the buildings and then fill them up in time.
Horn: What advice do you have for clients frustrated by tight restrictions on financing?
Klein: Hang in there. As we are seeing recovery, banks are slowly but surely going to get back into the lending game. Hopefully at responsible levels!
Horn: How has New Jersey fared as a whole compared with the rest of the nation?
Klein: New Jersey is having a tough time encouraging new businesses to join the state. Governor Christie seems to understand that and is trying to make New Jersey a much friendlier state to do business in, which should only help our ability to draw new companies, resulting in a stronger real estate market.
Horn: Where is the work now?
Klein: It has been a year of renewals for tenants who want to stay put until they know what their longer term space needs will be. With little or no tenant improvements, landlords are happy to offer better rent deals for tenants to stay put. As for the companies that know their future needs, they are taking advantage of the market and we are seeing a flight to quality with those companies.
Horn: What continued economic precautions should the industry be taking in the current environment?
Klein: Don’t build any speculative construction!
Horn: Do you see green building playing a large role in the remainder of 2011/beginning of 2012?
Klein: Not like you might think in today’s day and age. Thanks to the current administration, there are more incentives than ever, so hopefully that will help encourage more green initiatives by both developers and users.
Horn: What two pieces of advice would you give to the average real estate investor struggling to survive and, in the current environment, may not believe pundits who contend that the recession is over?
Klein: Do every deal you can, within reason, and retain every tenant until we see the light!
Horn: Why should the industry be optimistic about the remainder of 2011 and beyond?
Klein: We ARE in the beginning of a slow recovery. As long as we work hard and smart and have patience, we will be able to head back up the bell curve.