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405 NORTHFIELD AVEWEST ORANGE, NJ 07052
CONFIDENTIAL OFFERING MEMORANDUM
2
405 NORTHFIELDAVENUE
OFFICES NATIONWIDE AND THROUGHOUTCANADAWWW.MARCUSMILLICHA P.COM
EXCLUSIVELY LISTED BY:
KIM KRETOWICZVice President Investments
New Jersey Office Phone: (201) 742-6155
FAHRI OZTURKVice President Investments
New Jersey Office Phone: (201) 742-6170
TYLER VAN WAGONERAssociate Investments
New Jersey Office Phone: (201) 742-6169
405 NORTHFIELD AVENUE
Table of Contents
CONFIDENTIAL OFFERING MEMORANDUM
405 Northfield AvenueWest Orange, NJ 07052
www.MarcusMillichap.comOFFICES THROUGHOUT THE U.S. AND CANADA
01 EXECUTIVE SUMMARYOffering Summary Investment Highlights
02 PROPERTY DESCRIPTIONInterior Photos
Floor Plans
Property Survey
Property Outline
03 FINANCIAL ANALYSISRent Roll
Income Statement
Tenant Lease Abstracts
Market Rental Analysis
04 MARKET & LOCATION ANALYSISLocation Overview
Market Rental Analysis
Demographics
Market Overview
EXECUTIVE 1SUMMARY
This information has been secured from sources webelieve to be reliable, but wemake no representationsor warranties,expressed or implied,as to the accuracy of the informa-tion. Referencesto square footage or ageare approximate. Buyer must verify the information andbearsall risk for anyinaccuracies.Anyprojections,opinions, assumptions or
estimates used herein are for example purposes only anddo not represent the current or future performanceof the property. Marcus & Millichap Real Estate Investment Services isa service mark of Marcus & MillichapReal Estate Investment Services, Inc. © 2018 Marcus & Millichap
405 Northfield AvenueEXECUTIVE SUMMARY 7
Marcus & Millichap has been selected to exclusively market for sale 405 Northfield Ave, a 83% leased, 37,533 +/- square
foot medical office building located in West Orange, New Jersey. The three story building is located minutes away from
Route 280, the Garden State Parkway and the NJ Turnpike, 8 miles from Newark International Airport and 15 miles
from both the Lincoln and Holland Tunnels. The accessibility and density of population continually drive office
demand in the neighborhood, which is currently achieving average market rents of $29 per square foot.
VITAL DATAPrice $7,900,000
In Place Cap Rate 6.26%
Pro Forma Cap Rate 7.34%
Effective Gross Income $869,444
Expenses $374,818
Net Operating Income $494,626Price Per Sq. Ft. $210
Real Estate Taxes $169,796
PROPERTYSUMMARYAddress 405 Northfield Avenue, West Orange NJ 07052
BuildingSize 37,533 SF
Stories Three Floors
Yearbuilt 1981
Number of Tenants 18
Occupancy 83%
Parking 156
Acres 2.00 Acres
Offering Summary
405 Northfield AvenueEXECUTIVE SUMMARY 8
T R A I N S T A T I O NLocated approximately two miles from the Highland Ave and Mountain Train Station with direct routes
into Manhattan
SECURE MEDICAL TENANTSPredominate and expanding medical component
which will enhance tenant retention and rental rate growth in the future
I N C O M E S T A B I L I T YThe property is well leased and positioned and is
currently 83% occupied by 18 tenants with an average weighted lease expiration of 4 years
L O C A T I O NLocated minutes away from Route 280, the Garden State Parkway, the NJ Turnpike, and 16 miles from
New York City
Investment Highlights
PROPERTY 2DESCRIPTION
This information has been secured from sources webelieve to be reliable, but wemake no representationsor warranties,expressed or implied,as to the accuracy of the informa-tion. Referencesto square footage or ageare approximate. Buyer must verify the information andbearsall risk for anyinaccuracies.Anyprojections,opinions, assumptions or
estimates used herein are for example purposes only anddo not represent the current or future performanceof the property. Marcus & Millichap Real Estate Investment Services isa service mark of Marcus & MillichapReal Estate Investment Services, Inc. © 2018 Marcus & Millichap
Lobby / Entrance
405 Northfield AvenuePROPERT Y DESCRIPTION11
405 Northfield AvenuePROPERT Y DESCRIPTION12
Common Area/Bathrooms
405 Northfield AvenuePROPERT Y DESCRIPTION13
Interior
405 Northfield AvenuePROPERT Y DESCRIPTION14
Pediatric Dentistry and Orthodontist
405 Northfield AvenuePROPERT Y DESCRIPTION15
Additional Tenant Interior Pictures
405 Northfield AvenuePROPERT Y DESCRIPTION15
405 Northfield AvenuePROPERTY DESCRIPTION 16
Floor Plans / Basement
405 Northfield AvenuePROPERTY DESCRIPTION 17
Floor Plans / First Floor
405 Northfield AvenuePROPERTY DESCRIPTION 18
Floor Plans / Second Floor
MERIDIAN CENTER IIPROPERT Y DESCRIPTION405 Northfield AvenuePROPERTY DESCRIPTION19
Property Survey
405 Northfield AvenuePROPERT Y DESCRIPTION 20
FINANCIAL 3ANALYSIS
This information has been secured from sources webelieve to be reliable, but wemake no representationsor warranties,expressed or implied,as to the accuracy of the informa-tion. Referencesto square footage or ageare approximate. Buyer must verify the information andbearsall risk for anyinaccuracies.Anyprojections,opinions, assumptions or
estimates used herein are for example purposes only anddo not represent the current or future performanceof the property. Marcus & Millichap Real Estate Investment Services isa service mark of Marcus & MillichapReal Estate Investment Services, Inc. © 2018 Marcus & Millichap
Unit Tenant Sq. Ft. Lease StartLease
Expiration Rent PSFMonthly
RentAnnual
RentTAX
RecoveryCAM
RecoveryElectric
Recovery(CAM+TAX+
Electric)Total
Annual Rent
108 VACANT 3,646
LL 8 VACANT 2,669
103 Dr. Jhoe & Tong 2,576 2/01/2015 1/31/2025 $21.50 $4,615 $55,380 Inc. in CAM $3,799 $5,152 $8,951 $64,331
104 Posture Perfect Chiropractic 2,547 5/10/2017 5/31/2022 $17.33 $3,679 $44,144 Inc. in CAM $1,505 $5,094 $6,599 $50,743
107 Cross Country Orthopedics 2,977 8/20/2016 8/31/2028 $24.00 $5,955 $71,456 Inc. in CAM $2,118 $7,443 $9,561 $81,017
200 Atlas Physical Therapy 1,521 12/01/2017 1/31/2023 $21.00 $2,662 $31,941 $3,422 $3,422 $35,363
201 Guiding Hands (1) 1,323 12/01/2016 11/30/2021 $22.00 $2,425 $29,095 $2,645 $2,645 $31,740
202 Robert Bagoff, DMD 2,208 11/01/2014 10/31/2024 $25.50 $4,692 $56,304 Inc. in CAM $3,396 $4,416 $7,812 $64,116
203 Progressive Pain Mgmt. 2,300 12/18/2009 1/31/2023 $22.00 $4,217 $50,600 $50,600
204 Associates in Psychiatry 2,221 5/01/2013 4/30/2023 $24.00 $4,441 $53,296 Inc. in CAM $3,648 $5,552 $9,200 $62,496
205 Dr. Paige (Summit Medical) 2,672 10/15/2010 9/14/2022 $23.75 $5,288 $63,460 $5,344 $5,344 $68,804
206 Affiliated Eye Surgeons 1,651 10/01/2014 6/30/2021 $24.50 $3,372 $40,459 $3,716 $3,716 $44,175
LL 1 Accelerated Hand Therapy 1,790 12/18/2009 2/28/2023 $22.00 $3,282 $39,380 $4,475 $4,475 $43,855
LL 2 Deborah A. Coy M.D., LLC 2,578 4/01/2011 3/30/2021 $24.00 $5,157 $61,879 Inc. in CAM $6,508 $6,445 $12,953 $74,832
LL 3 Dr. Robert Eagle 1,317 4/01/2010 3/31/2019 $25.00 $2,744 $32,925 $3,293 $3,293 $36,218
LL 4 Rohini Fernandes, DDS 1,050 04/01/2004 5/31/2021 $20.00 $1,750 $21,000 Inc. in CAM $4,095 $4,095 $25,095
LL 5 Glow Fitness (Maverick) 2,137 3/01/2017 2/28/2022 $17.00 $3,027 $36,324 Inc. in CAM $1,505 $4,274 $5,779 $42,103
LL 7 Reliance Diagnostics 350 4/07/2017 4/30/2022 $11.00 $321 $3,850 $350 $350 $4,200
Roof AT&T Antenna 8/30/2004 8/30/2019 N/A $3,606 $43,272 $43,272
Roof T Mobile Antenna 2/08/2007 2/07/2022 N/A $3,674 $44,083 $2,400 $2,400 $46,483
Total 18 Spaces(16 Tenants + 2 Antenna) 37,533 $22.15 $64,904 $778,848 $26,575 $64,020 $90,595 $869,444
405 Northfield AvenueFINANCIAL ANALYSIS
Rent Roll
22(1) Guiding Hands – $2,425 rent will commence on 12/1/18. Current rent is $1,265
Income StatementACTUAL PRO FORMA (1)
INCOME %EGI %EGI
Current Rent Roll $779,848 $779,848
Projected Rent for Vacant Space - $25 PSF $157,875 $157,875
Electric Reimbursement $64,020 $64,020
CAM & TAX Contributions $26,575 $26,575
Vacancy & Collection Loss ($157,875) 16.83% ($70,254) 7.5%
Effective Gross Income $869,444 $957,064
EXPENSES %EGI PER SF % EGI PER SF
Property Taxes (Building & Antenna) $169,796 20% $4.52 $169,796 20% $4.52
Insurance $12,184 1% $0.32 $12,184 1% $0.32
Utilities – PSEG $92,813 11% $2.47 $92,813 11% $2.47
Water & Sewer $11,836 1% $0.32 $11,836 1% $0.32
Cleaning Contract $25,700 3% $0.68 $25,700 3% $0.68
Repairs & Maintenance $10,000 1% $0.27 $10,000 1% $0.27
Supplies $2,000 0% $0.05 $2,000 0% $0.05
Alarm/Safety $2,092 0% $0.06 $2,092 0% $0.06
Landscaping & Trash Removal $10,785 1% $0.29 $10,785 1% $0.29
Snow Removal $5,350 1% $0.14 $5,350 1% $0.14
Elevator $3,180 0% $0.08 $3,180 0% $0.08
HVAC Maintenance $3,000 0% $0.08 $3,000 0% $0.08
Management Fee $26,083 3% $0.69 $28,712 3% $0.76
Total Expenses $374,818 43% $9.99 $377,446 39% $10.06
Net Operating Income $494,626 $579,618
Cap Rate 6.26% 7.34%
(1) Assumes $25 PSF for vacant spaces. 405 Northfield AvenuePROPERTY DESCRIPTION 23
Unit Tenant Sq. Ft. Lease ExpirationRenewal Options Annual Rent
Pro RataShare
Tax/CamReimbursement
CAM Recovery PSF
Total CAM Recovery
Total ElectricRecovery
(CAM+TAX+Electric)
Total Annual (Inc. Rec.)
Increase Schedule
108 VACANT 3,646
LL 8 VACANT 2,669
103 Dr. Jhoe & Tong 2,576 1/31/2025 (2) 5-Year $55,380 7.20% % Share over Base Year 2014 $1.47 $3,799 $5,152 $8,951 $64,331 50 Cents
104 Posture Perfect Chiropractic 2,547 5/31/2022 (2) 5-Year $44,144 6.34% % Share over Base
Year 2015 $0.59 $1,505 $5,094 $6,599 $50,7436/1/19 = $4,6706/1/20 = $4,8826/1/21 = $5,095
107 Cross Country Orthopedics 2,977 8/31/2028 (2) 5-Year $71,456 8.20% % Share over Base
Year 2016 $0.71 $2,118 $7,443 $9,561 $81,01750 Cents
every other year
200 Atlas Physical Therapy 1,521 1/31/2023 (2) 5-Year $31,941 3.78% % Share over Base Year 2016 $0.00 $0 $3,422 $3,422 $35,363 2.75%
201 Guiding Hands (1) 1,323 11/30/2021 (1) 5-Year $29,095 3.64% Gross $0.00 $0 $2,645 $2,645 $31,740 50 Cents
202 Robert Bagoff, DMD 2,208 10/31/2024 (2) 5-Year $56,304 5.97% % Share over Base Year 2014 $1.54 $3,396 $4,416 $7,812 $64,116
50 Cents every other
year
203 Progressive Pain Mgmt. 2,300 1/31/2023 (1) 5-Year $50,600 6.21% Gross $0.00 $0 $0 $0 $50,600 3%
Tenant Lease Abstracts
24405 Northfield AvenueFINANCIAL ANALYSIS
Tenant Lease Abstracts
25405 Northfield AvenueFINANCIAL ANALYSIS
Unit Tenant Sq. Ft.Lease
ExpirationRenewal Options
Annual Rent
Pro RataShare
Tax/CamReimbursement
CAM Recovery PSF
Total CAM Recovery
Total ElectricRecovery
(CAM+TAX+Electric)
Total Annual(Inc. Rec.) Increase Schedule
204 Associates in Psychiatry 2,221 4/30/2023 (2) 5-Year $53,296 6.36% % Share over Base Year 2013 $1.64 $3,648 $5,552 $9,200 $62,496 50 Cents every
other year
205 Dr. Paige (Summit Medical) 2,672 9/14/2022 None $63,460 7.35% Gross $5,344 $5,344 $68,804 FLAT
206 Affiliated Eye Surgeons 1,651 6/30/2021 (2) 3-Year $40,459 6.36% Gross $3,716 $3,716 $44,175 50 Cents
LL 1 Accelerated Hand Therapy 1,790 2/28/2023 (1) 5-Year $39,380 4.92% Gross $4,475 $4,475 $43,855 3%
LL 2 Deborah A. Coy M.D., LLC 2,578 3/30/2021 (2) 5-Year $61,879 6.97% % Share over Base Year 2011 $2.52 $6,508 $6,445 $12,953 $74,832 $1.00 every three
years
LL 3 Dr. Robert Eagle 1,317 3/31/2019 None $32,925 3.77% Gross $3,293 $3,293 $36,218 FLAT
LL 4 Rohini Fernandes, DDS 1,050 5/31/2021 (2) 2-Year $21,000 3.00% Fixed $3.90 $4,095 $4,095 $25,095 50 Cents
LL 5 Glow Fitness (Maverick) 2,137 2/28/2022 (2) 5-Year $36,324 5.77% % Share over Base Year 2016 $0.70 $1,505 $4,274 $5,779 $42,103 1/1/19 = $3,116
LL 7 Reliance Diagnostics 350 4/30/2022 (1) 5-Year $3,850 0.48% Gross $350 $350 $4,2005/1/19 = $6335/1/20 = $6485/1/21 = $661
Roof AT&T Antenna 8/30/2019 None $43,272 N/A N/A $43,272 3%
Roof T Mobile Antenna 2/07/2022 None $44,083 N/A N/A $2,400 $2,400 $46,483 3%
Total 37,533 $778,848 $26,575 $64,020 $90,595 $869,444
26405 Northfield AvenueFINANCIAL ANALYSIS
ADDRESS SF TYPE PRICE/SF TERMS
405 Northfield Ave, West Orange
159 Main Street, West Orange
54,000 Office/Medical $28
2 769 Northfield Ave, West Orange 75,000 Office/Medical $25
31001 Pleasant Valley Way, West Orange
10,000 Office/Medical $26
4 456 Prospect Ave, West Orange8,800 Office/Medical $35
AVERAGE $29
Rental ComparablesWest Orange, New Jersey
27405 Northfield AvenueFINANCIAL ANALYSIS
Gross Asking Rent Per SF in West Orange
Market Rental AnalysisEssex County, New Jersey
$25.58Gross Rent Per SF
14,657,533Existing SF
33,618Average Building SF
10.3%Vacancy Rate
221,95012 Mo. Absorption SF
450,03012 Mo. Leasing SF
* Data from CoStar
405 Northfield AvenuePROPERT Y DESCRIPTION28
MARKET & LOCATION 4ANALYSIS
This information has been secured from sources webelieve to be reliable, but wemake no representationsor warranties,expressed or implied,as to the accuracy of the informa-tion. Referencesto square footage or ageare approximate. Buyer must verify the information andbearsall risk for anyinaccuracies.Anyprojections,opinions, assumptions or
estimates used herein are for example purposes only anddo not represent the current or future performanceof the property. Marcus & Millichap Real Estate Investment Services isa service mark of Marcus & MillichapReal Estate Investment Services, Inc. © 2018 Marcus & Millichap
30405 Northfield AvenueMARKET & LOCATION ANALYSIS
405 NORTHFIELD AVE
In Close Proximity to:
Interstate 280 1.4 Miles
Route 10 2.2 Miles
Garden State Parkway 3.5 Miles
Interstates 280/287Garden State Parkway
Interstate I-95
Newark Liberty Airport
Manhattan
5-10 Miles 12 Miles 16 Miles
31405 Northfield AvenueMARKET & LOCATION ANALYSIS
405 NORTHFIELD AVE
In Close Proximity to:
East Orange General Hospital 2 Miles
Saint Barnabas Medical Center 3.5 Miles
Englewood Hospital Medical Center 5 Miles
Mountainside Hospital 5 Miles
745 Northfield
94 Old Short hill road
Mountainside Hospital
Saint Barnabas Medical Center
Englewood Hospital and Medical Center
East Orange General Hospital
East Orange General Hospital
M O U T A I N T R A I N S T A T I O N
405 NORTHFIELD AVE
H I G H L A N D A V E T R A I N S T A T I O N
In Close Proximity to:
Highland Ave Train Station 2.3 Miles
Mountain Train Station 2.8 Miles
Both trains are direct to NYC
32405 Northfield AvenueMARKET & LOCATION ANALYSIS
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Location Overview
405 Northfield AvenueMARKET & LOCATION ANALYSIS
West Orange, New Jersey
IncomeAs per the 2010 Census, the current year per capita income in yourarea is $43,368, compare this to the US average, which is $29,638. Thecurrent year average household income in West Orange is $88,917,compare this to the US average which is $77,468. Males had a medianincome of $65,854 versus $43,223 for females.
There is approximately 7.1% of the population living below thepoverty line.
PopulationAs per the 2010 United States Census, the population in West Orangewas 46,207 people. This reflected a near 1% increase in populationsince the previous census conducted in 2000. The population densitywas 3,708.7 persons per square mile.
In the city, 23.7% of the population were under the age of 18, 7.1%from 18 to 24, 23.7% from 25 to 44, 27.6% from 45 to 64, and 15.9% whowere 65 years of age or old
HouseholdsThere are currently 16,790 households in West Orange, New Jersey.This number of households presents a density of 3,836 units per squaremile. The town has an estimated 11,753 families residing within. Thishousehold count has reflected an increase to accommodate for theincreasing population.
Employment• Immediate access to Manhattan provides endless employment
opportunities
• Many industrial and shipping centers provide industrial work flow
• Strong retail markets along the main corridors
Race and EthnicityThe racial makeup of the city is approximately 57.15% white, 26.58%Black or African American, 7.96% Asian, 0.38% Native American, and4.82% from other races.
People of Hispanic origin make up 16.20% of the population in WestOrange. Compare this to the US average of 56.8%.
OverviewWest Orange is the southern tip of New Jersey’s Hudson County.Located beneath Jersey City and across the Upper Bay from Brooklynand Manhattan, West Orange is 11.08 square miles in size. WestOrange is historically a blue-collar neighborhood with generationalfamilies.
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Demographic Highlights
2017 FORECAST JOB GROWTH
* POPULATION AGE 20-34
Metro 20%U.S. Average 21%
**SQ. FT. PER OFFICE WORKER
Metro 268U.S. Average 210
2017 OFFICE-USING JOB GROWTH
POPULATION OF AGE 25+* PERCENT WITH BACHELOR DEGREE+
Metro 38%U.S. Average 29%
27% Urban
73% Suburban
**OFFICE SQUARE FOOTAGE
Rising Demand for Office Buildings Farther Inland Fuels a Rise in Deal Flow
Outlook: Strong demand for offices inproximity to transit and with upgradedamenities will hold deal flow elevated thisyear, driving more investors to acquireproperties in suburban destinations.
VacancyRate
Y-O-YBasisPoint
ChangeSubmarket
AskingRent
Y-O-Y%Change
Union County 12.4% -10 $23.87 0.8%
Hudson County 16.1% 290 $32.93 0.6%
Bergen County 16.5% 40 $25.54 -0.2%
Passaic County 16.6% -90 $21.56 0.8%
Essex County 17.3% -60 $26.72 1.4%
Morris County 25.0% -120 $26.45 3.6%
Overall Metro 18.2% 10 $26.87 1.3%
Submarket Trends
Lowest Vacancy Rates 1Q17
Sales Trends
• Sales activity climbed 21 percent in the last four quarters, led by a robust increase intrades in Essex and Union counties.
• Class C assets traded during the period averaged $123 per square foot while Class Bproperties sold for $131 a square foot on average. Top-tier office buildings averaged$165 per square foot.
** Trailing 12 months through 1Q17Pricing trend sources: CoStar Group, Inc.; Real Capital Analytics
* 2017-2022**1Q17
U.S. Average 1.4%
Metro 0.8%
Metro 0.6%
U.S. Average 2.2%U.S. Average 32%
U.S. Average 68%
Demographic Highlights
405 Northfield AvenueMARKET & LOCATION ANALYSIS
3535
Demographic Highlights
405 Northfield AvenueMARKET & LOCATION ANALYSIS
POPULATION 1 Miles 3 Miles 5 Miles 2022 Projection
Total Population 10,408 173,380 558,525
2017 Estimate
Total Population 10,388 173,738 558,365
2010 Census
Total Population 10,223 169,194 543,264
2000 Census
Total Population 10,268 174,008 555,912
Current Daytime Population
2017 Estimate 8,948 141,543 480,316
HOUSEHOLDS 1 Miles 3 Miles 5 Miles 2022 Projection
Total Households 3,798 64,307 206,956
2017 Estimate
Total Households 3,748 63,689 204,552
Average (Mean) Household Size 2.76 2.68 2.68
2010 Census
Total Households 3,669 61,699 198,034
2000 Census
Total Households 3,617 62,267 199,889
HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles 2017 Estimate
$200,000 or More 25.73% 12.21% 10.32%
$150,000 - $199,999 15.80% 7.28% 6.30%
$100,000 - $149,000 22.57% 13.52% 12.84%
$75,000 - $99,999 12.79% 10.57% 10.83%
$50,000 - $74,999 8.25% 14.92% 15.76%
$35,000 - $49,999 4.45% 9.81% 10.84%
$25,000 - $34,999 2.51% 9.50% 9.14%
$15,000 - $24,999 3.96% 9.87% 9.95%
Under $15,000 4.56% 11.72% 13.10%
Average Household Income $175,056 $107,682 $99,133
Median Household Income $127,936 $63,692 $58,967
Per Capita Income $63,407 $39,711 $36,597
POPULATION PROFILE 1 Miles 3 Miles 5 Miles Population By Age
2017 Estimate Total Population 10,388 173,738 558,365
Under 20 25.82% 26.85% 27.35%
20 to 34 Years 11.86% 18.53% 19.53%
35 to 49 Years 22.11% 20.89% 21.02%
50 to 59 Years 15.91% 14.33% 14.00%
60 to 64 Years 7.01% 5.73% 5.45%
65 to 69 Years 5.35% 4.47% 4.21%
70 to 74 Years 3.49% 2.98% 2.93%
Age 75+ 8.43% 6.22% 5.51%
Median Age 43.91 38.51 37.34
Population by Gender
2017 Estimate Total Population 10,388 173,738 558,365
Male Population 48.37% 46.96% 47.03%
Female Population 51.63% 53.04% 52.97%
AVERAGE HEALTH CARE EXPENDITURE
1 Miles 3 Miles 5 Miles
2017 Estimate Total Expenditure
Percent of Total 9.71% 11.26% 11.62%
Health Care Insurance $4,506 $3,298 $3,143
Percent of Total 73.16% 73.78% 73.87%
Medical Services $949 $656 $617
Percent of Total 15.41% 14.67% 14.51%
Medical Supplies $230 $149 $139
Percent of Total 3.74% 3.34% 3.27%
Percentage Change 2017-
Health Care Insurance 6.36% 11.67% 12.56%
Medical Services 11.00% 14.95% 15.63%
Medical Supplies 17.05% 22.41% 23.45%
MONMOUTH COUNTY
37 405 Northfield AvenueMARKET & LOCATION ANALYSIS
NORTHERN NEW JERSEYOVERVIEW
Northern New Jersey consists of Bergen, Hudson, Passaic, Essex, Morris and Union counties. The region contains roughly 4 millionresidents in more than 200 municipalities. Bergen county is home to roughly 1 million people, while Essex County, which includes thecity of Newark, is at approximately 800,000 citizens. The region is bordered to the east by the Hudson River and New York City, to thesouth by Middlesex and Somerset counties, to the west by Warren and Sussex counties, and to the north by New York state. A largeportion of the area is almost fully developed and densely populated. The region is a part of the New York metro and is linked to the cityby the George Washington Bridge, the Lincoln Tunnel, the Holland Tunnel, several ferries and commuter rail tunnels.
METRO HIGHLIGHTS
DIVERSE INDUSTRIESPharmaceuticals, healthcare and finance are a few of the segments that contribute to the metro’s economic base.
LARGE LABOR POOLThe region’s diverse and highly skilled labor pool, as well as access to workers in other nearby metros, draws businesses.
UNIQUE ECONOMYNorthern New Jersey has its own economic drivers and is connected to New York City’s robust economy.
Market Overview
38
Northern New Jersey is home to numerous Fortune 500 companies including Prudential Financial, Merck, PBF Energy and Honeywell International. The airline industry accounts for a significant share of jobs in the region. United Airlines has a major presence at Newark Liberty International Airport. Trade is a key employment sector, at Port Newark-Elizabeth Marine Terminal with vehicle imports accounting for a substantial amount of the port’s
business. Spillover from Wall Street bolsters finance jobs in Essex, Hudson and Bergen counties.
MAJOR AREA EMPLOYERS
Prudential
UAL (United Continental Holdings)
University of Medicine and Dentistry of NJ
Hackensack Medical Center
New Jersey Transit
Englewood Hospital Association
Novartis Pharmaceuticals Corp.
St. Joseph’s Hospital and Medical Center
Valley Health Systems
ISO Services Inc.* Forecast
SHARE OF 2016 TOTAL EMPLOYMENT
MANUFACTURING6%
GOVERNMENT
HEALTH SERVICESEDUCATION AND
+OTHER SERVICES
4%
LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES
22%AND UTILITIES
TRADE, TRANSPORTATION CONSTRUCTION
PROFESSIONAL ANDBUSINESS SERVICES
2%INFORMATION
ECONOMY
Market Overview
405 Northfield AvenueMARKET & LOCATION ANALYSIS
3939
Landlords boost amenities to differentiate properties from stockpile of olderinventory. As more companies move to urban settings to attract young talent,suburban locations in Northern New Jersey remain in demand as amenity upgradesand transit proximity meet tenants’ needs. However, aging campuses and corporateconsolidations, particularly between pharmaceutical companies, have weighed onproperty performance, resulting in a high vacancy rate. To combat the stagnation,landlords are investing in substantial upgrades and large redevelopments, spurringgreater leasing activity as these properties increase in quality.
Development led by suburban projects. Construction will inch up slightly from 2016with a strong push by developers to suburban destinations in Essex and Morriscounties, accounting for the bulk of this year’s deliveries. Office properties openingthis year are largely pre-leased, supporting a modest drop in the vacancy rate toreach the tightest level of the current cycle at year-end. Medical office completionsmark a substantial increase this year as 121,000 square feet are anticipated fordelivery, the largest being the 86,000-square-foot Clara Maass Medical Center inBelleville. As more top-quality space is added to the region, asking rents are set toclimb for the fourth straight year.
Investors Met With Opportunity In Transit-Oriented Areas of the Region
* Trailing 12 months through 1Q17Sources: CoStar Group, Inc.; Real Capital Analytics
Investment Trends
Office 2017 Outlook
517,000 sq. ft. will be
completed
3.1% increase in
asking rents
20 basis point
decrease in vacancy
Construction:
Rents:
Vacancy:
Completions climb past the 322,000 squarefeet completed last year, with the largestdelivery being a 200,000-square-foot officefor UPS in Parsippany.
The average asking rent is anticipated toclimb to $27.59 per square foot this year,outpacing the 2 percent rise in office rentsposted in 2016.
More than 765,000 square feet will beabsorbed to drop the vacancy rate to 18percent, falling at a greater pace than lastyear’s 10-basis-point compression.
• Led primarily by local and New York buyers, investors broadened acquisitioncriteria in the last 12 months ending in March, placing greater focus onassets that could be upgraded or repurposed. A larger number of propertieschanged hands in the suburban areas of Essex and Union counties andpushed overall deal flow higher compared with the previous time period.
• Marketwide, going-in cap rates edged 10 basis points higher to the low-7percent band. Some of the best properties in the urban areas of Jersey Cityand Hoboken traded with an initial yield in the mid-5 to mid-6 percentterritory. Assets farther inland commonly sold with a cap rate in the mid-7 toupper-8 percent range.
• The revitalization of downtown Jersey City will spur greater investor interestwhile intense competition for properties in some of the best locations willdrive investors to areas of more affordability in Morristown, Parsippany andNewark.
Market Overview
405 Northfield AvenueMARKET & LOCATION ANALYSIS
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