Property Watch

Sign-up or Login to your account

Call Us Now or Contact Us

  • Robert Doliszny: (609) 513-1126
  • Kristina Doliszny: (609) 412-5547

Glut of commercial properties helps turn renters into owners

Prices entice businesses to buy instead of leasing

 By KEVIN POST, Business Editor, Press of Atlantic City   

While a national report finds commercial real estate is gradually improving across all major sectors, local experts see specific kinds of gains and differences in particular local markets.

In its second-quarter commercial report, the National Association of Realtors forecasts modest drops in vacancy rates and increases in rents for industrial, office and retail properties. The multifamily sector has fully recovered and high rents are pushing tenants to become homebuyers, said Lawrence Yun, chief economist.

A similar situation exists in the Atlantic County commercial market, said Joshua Levin, broker-owner of Levin Commercial Real Estate in Atlantic City.

“We’re seeing a lot of renters becoming buyers because of the prices of properties right now,” Levin said. “A lot are stepping up to the plate and negotiating favorable terms on purchasing instead of signing a new lease for three to five years.”

The purchases are absorbing below-market inventory, which will lift prices, he said. Investment-grade properties, however, are still selling at a premium.

“They’re very hard to find, very much sought after now because of the stability you get with an investment-grade tenant,” Levin said.

That leaves the bulk of market activity in REOs, properties repossessed by financial institutions, usually after foreclosure.

Levin said such properties currently account for about three-quarters of his firm’s sales.

“That is still setting the baseline for today’s market. The non-REO properties still need to compete with the available REO inventory, which at this point has not diminished,” he said. “As I sell them, I get more to replace them.”

An example is an industrial flex building on Mill Road in Pleasantville, now owned by Cape Bank.

“It’s a prime 18,000-square-foot property that’s been correctly price-repositioned for sale. They’re asking $959,000, about half of what the prior property owner was asking,” Levin said.

The supply of distressed commercial properties is assured for a while by a backlog in foreclosures – not due to a court-ordered moratorium, as is the case with housing, but simply because of the slow judicial process, he said.

“New Jersey is so backed up that it takes 18 to 36 months to get full possession of a property,” he said.

Rich Baehrle, a broker-salesman with Prudential Fox & Roach in Northfield, said the office and warehouse sectors have turned positive.

“I have written more than a dozen leases in the past two months and have six pending sale transactions,” Baehrle said. “We are getting some retail activity, but most of the action seems to be in the office and warehouse segments.”

Conditions are varied across individual micro-markets, with some signs of improvement and others of a possible bottoming.

Levin said the Atlantic City market has “a tremendous number of similar properties available,” which has resulted in a current average time on the market for commercial properties of 265 days – compared with 28 days for Atlantic County as a whole in the Multiple Listing Service.

But a new city ordinance that prevents owners from leaving a building vacant is having a strong and positive effect, he said, resulting in sales to those willing to improve buildings and get them occupied. Citations are being issued and then owners are negotiating remedies.

“The city will approve a schedule to bring the building up to code and get it occupied, or else it goes back on the demolition schedule,” Levin said. “It’s an example of the aggressive techniques the Tourism District is implementing to make this a friendly, exciting place to visit.”

In Galloway Township, a building boom in the area around AtlantiCare Regional Medical Center has resulted in a substantial amount of vacant medical space and landlords competing to offer the best deals, he said.

“These are the all-time-lowest leasing costs that I’ve ever seen for construction less than 5 years old, for quality A space,” Levin said.

Whereas such properties were leasing for $18 to $20 a square foot plus expenses, “now there is ample inventory at $13 a square foot,” he said.

In Ocean City, a large Boardwalk store is on the market as the summer season begins.


Owners Charlie and Rosemarie Caucci are asking $3.8 million for the land and building only currently occupied by their Mia’s Christmas Gallery at 11th Street.


Kristina Doliszny, the listing agent with Prudential Fox & Roach Ocean City Real Estate Group, said Boardwalk properties rarely come onto the market because most are owned by family trusts and handed down from generation to generation.


“It’s kind of like the Monopoly game board, where the Boardwalk is the most expensive and rarest real estate you can buy,” Doliszny said.


The Cauccis bought the three 20-foot retail condos 15 years ago and combined them to host their longtime Christmas store they moved to the city, she said. After 41 years in business, they are retiring.


Interest has been strong.


“In four months, about 25 people have made offers to purchase the real estate,” she said.


The business is also available for sale, and the property can be broken up into the three units again, so there are a lot of possibilities.


All of the individual market variations add up to a nationwide commercial real estate industry that is growing slowly and steadily now.


The national Realtors’ Yun said small businesses are finding it difficult to arrange the financing to purchase properties under $2.5 million, but larger properties and their buyers are less restricted.

George Ratiu, manager of quantitative and commercial research for the Realtors, said the recovery in part is being driven by very low levels of new construction in recent years.

“Amid a backdrop of moderate-but-positive economic growth, demand for commercial space is rising and availability is declining across all property types,” Ratiu said in a statement accompanying the second-quarter commercial real estate outlook.

Published by the Atlantic City Press:  Posted: Sunday, June 10, 2012 12:45 am | Updated: 7:57 am, Sun Jun 10, 2012. Written by KEVIN POST Business Editor | Atlantic City Press