1. NJ has the most outdated liquor laws in the country. For the last 10+ years NJ legislators have been fighting to update these archaic laws. However, this is the first year that it has gotten any traction from a Governor. Murphy has been very vocal about “building the ‘Next New Jersey’ by continuing to grow the economy and create more jobs” (NorthJersey.com) through liquor license reform. What does this mean for the NJ restaurant realty scene? Buyers are being very cautious. Why spend $1m for a pocket license in an up-and-coming downtown when later this year or next year the price could drop 95% or more? 
   
2. Buyers are cautious because of liquor licenses but also because of the current market conditions. Today the Federal Prime Rate is at 8%. Most SBA and Commercial loans are typically always 2 points higher than prime. Accordingly, the last two loans DRR helped to acquire for buyers in 2023, reflected a 10.1% and 10.5% interest rate. Buying a restaurant is already innately a risky business decision. Higher interest rates make it even riskier (from a lender’s perspective). This is problematic in a buyer’s market, where there is more inventory than demand. After covid, a lot of owners were looking to sell (see Covid article for Delaney transactions and trends during that time). Normally this would mean listing and sale prices would be lower, but Covid really affected these listing prices. So now, we’re in a position where there is a lot of inventory, but overpriced, in a buyer’s market. Couple this with the threat of liquor license reform, makes it a very difficult climate for restaurant realty in NJ.  

Although the current NJ and National climate are facing challenges, the experts are expecting positive changes in the coming quarters. “The recent uptick in Q1 2023 activity is a first step toward the market adjusting to current economic conditions” (BizBuySell.com). We are slowly seeing this adjustment in NJ among our buyer group. Seller financing has always been around but is more common in transactions when interest rates are high. As Delaney’s number of listings increase, qualified buyers have more options.

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