Much of Cali's success can be attributed to its foresight in selectively expanding into markets it has judged to have strong growth potential. Starting with its initial core portfolio of central New Jersey properties, Cali has made timely acquisitions in markets and submarkets that have proven beneficial to the Company. Cali strategically increased its dominance in New Jersey, and established a strong presence in suburban Philadelphia and then in Westchester/Fairfield Counties. Each of these markets has tightened, positioning Cali for better returns on its investments and strong earnings growth in the future.New Jersey -Positive economic trends in New Jersey have translated into an improving real estate market evidenced by lower vacancy rates and, more recently, improving rental rates. At year-end, the northern and central New Jersey Class A vacancy rate had dipped to 12.4%, its lowest level in over a decade, down from 15.4% in 1995. Positive market trends should continue, since little new speculative office construction is expected in the near future.
Suburban Philadelphia -The suburban Philadelphia market, which Cali entered in July with its purchase of Rose Tree Corporate Center, is also strong. This 34 million square-foot market had a fourth quarter Class A vacancy rate of only 7.7%, down from almost 15% just a year ago.
Westchester and Fairfield Counties -The Robert Martin Company has dominated the Westchester and Fairfield markets for almost 40 years, and Cali will continue to operate the properties and acquire new ones in the Robert Martin tradition. Westchester County's improving vacancy rate of 16.9% is viewed by Cali to be approximately 18 months behind New Jersey's market trends. Class A vacancy rates in this 32 million square-foot office market are expected to decline as absorption and leasing activity increase.
Fairfield County, with 37 million square feet of office space, has a Class A vacancy rate of only 11.6%, which has dropped from a 24% vacancy rate four years ago.
Expanding Markets -Cali Realty Corporation now operates in four strong suburban office markets: Northern and Central New Jersey, Suburban Philadelphia/Southern New Jersey, Westchester County and Fairfield County. Entering 1997, the total markets in which Cali operates add up to a contiguous area containing over 250 million square feet of office space, and over one billion square feet of industrial space.
These new and promising markets should provide Cali with abundant acquisition opportunities for continued future growth.
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