The first half of 2011 has seen significant capital allocated to real estate, but the market remains a “tale of two cities”. The absolute right product continues to attract a lot of interest, but if an asset is “slightly off” there is no action for it. That trend spans all four major property types: retail, office, industrial and multi-family.

In fact, there is still a lack of that “absolutely correct product” that hits the market in almost every category. In retail, for example, few grocery-anchored malls are coming to market in our region. Properties that do, in some cases, have cap rates below six. One trend we are seeing is owners clearing out their portfolios of anchored non-food side products.

In the office market, Class A buildings with long-term credit leases in strong locations are pulling in big numbers, with cap rates generally between seven and eight, and in some cases even below seven. For value-added opportunities, the lack of activity a year or two ago has given way to a trend where improving fundamentals are leading some people to look towards the risk curve. We have a major assignment in Stamford for a vacant 560,000 square foot Class A building, a substantial value-added development that is attracting a lot of interest.

To date, in New Jersey, our group has done approximately $500 million in office sales so far this year, and the general market has seen more than $1 billion in total office sales in the state.

The industrial sector, meanwhile, has been very active. Much of that activity is in anticipation of the expansion of the Panama Canal, the construction of the Bayonne Bridge, and the fact that New Jersey is very much a port-oriented industrial state. On the fundamental side, the market is finally seeing excess space in the New Jersey Turnpike Exit 7A and 8A submarkets being absorbed at deeply discounted rental rates. By the end of the year, the industrial sector is projected to stabilize to the extent that the market may be experiencing further speculative development in the second half of 2012.

There is a substantial amount of industrial chasing capital in New Jersey. One surprise has been the execution of deals that are 10% to 15% higher in value than we anticipated, driven by both excess money and anticipation of a market correction. Our group has done over $250 million in this product to date this year, with overall cap rate execution in the range of six to 7.5 and one particular transaction with a cap rate of less than six.

Another trend for both office and industry has been the trading of obsolete properties for land value. For example, vacant office buildings have been trading in the $30-40 per square foot range, and industrial buildings in the $10-20 per square foot range. Basically, those buildings are demolished, usually for an alternative use (health care office, for example) and industrial for retail reuse due to the typically large fields, or older industrial, either for multi-family housing or lofts. in urban environments.

And on the multi-family side, there has been a lot of activity, mostly for Class B products with a shortage of Class A coming to market. There appears to be a focus by the institutions on joint ventures or installment sales with developers, and there also appears to be activity towards future multi-family developments to fill the gap. Rents are going up, concessions are basically gone, and overall it’s a very healthy industry.