2B — April 12 - 25, 2019 — New Jersey — M id A tlantic
Real Estate Journal
www.marejournal.com
N ew J ersey
designated.
a section of the MARE Journal 350 Lincoln Street, Suite 1105 Hingham, MA 02043 P: 781-740-2900 Fax: 781-740-2929 www.marejournal.com Section Publisher Kim Brunet kbrunet@marejournal.com Section Editor Karen Vachon editor@marejournal.com have seen a surge in new devel- opment as a result. Demand seems to be keeping up with supply, however, because New York City is making only small increases to rent, NJ cities that are lower cost alternatives to NYC (Jersey City, Hoboken, etc.) are feeling the pressure to stop increasing rent as well to stay competitive. Challenges Facing NJ New Jersey has not made the state very friendly for taxpay- ers of any kind. In 2018, New Jersey instituted its million- aires’ tax which taxes income over $5 million at 10.75 per- cent. The state also raised the corporate business tax to 11.5% which is the second highest corporate business tax in the country. Some recent statistics also indicate that over 3 billion dollars in tax is paid annually from NJ residents to NY be- cause they work in NY. While this benefits New York greatly, it continues to be a challenge for New Jersey as it tries to raise more tax revenue through means like legalizing sports betting and pending legislation to legalize cannabis. While there are many fac- tors impacting real estate and the NJ economy in general, the ability to grow job oppor- tunities in the state may have the greatest impact. Gov. Phil Murphy recently signed a bill that pushed a historic increase to the state’s minimum hourly wage. New Jersey will now see a $1.15 increase this July, which will increase each year until 2024 when the hourly minimum wage will hit $15. Opposers of the law argue this mandate will put stress on small businesses already struggling to make ends meet, while labor advocates argue the current minimum wage of $8.85 it too little to afford even basic needs. Looking ahead in 2019, New Jersey needs to focus on controlling the cost of doing continued on page 3B New Jersey
Current Trends & Expectations
The retail landscape contin- ues to be a challenge as con- sumers are turning more and more to online shopping than physical stores. The number of retailers filing for bankruptcy continues to rise and the result of these bankruptcies is not just reorganization, but total liquidation. Combining enter- tainment and food with retail continues to be a way to draw consumers. Industrial space demand and pricing continue to be strong. We are experiencing a shortage of available space because of demand generated by e-commerce and the need for warehouse and shipping facili- ties. 2019 will show no sign of softness in this area and the legalization of cannabis will only increase demand. In the resale market, in- ventory remains low because of many factors. While the demand for product for emp- ty nesters (individuals mov- ing after their children have moved out) remains high, new products are limited by NJ’s difficult entitlement process and the high cost of acquiring land. This coupled with the continued increase in mate- rial costs and shortage of labor has driven up asking prices for this type of product and many empty nesters have decided to stay put and renovate their existing homes – leading to a boom for those in the home remodeling arena. We have seen the millennial generation delay the move to suburbia and have stayed in cities and in rental spaces. Tru- lia, a site for buyers and renters across the country, conducted a survey in 2018 and predicts that millennials will enter the home buying market place at increasing rates in 2019. This acceleration is believed to be because older millenni- als have now grown in their careers, paid off student debt and are now starting families. Certainly, mortgage rates will impact how quickly this cycle ramps up. Due to high costs of construction, acquisition and entitlement, most developers have been hard pressed to pro- duce economical products for these first-time home buyers and have been focused on the luxury move upmarket. On the local level, many com- munities continue to embrace multifamily development to both increase their tax base and meet the ever-growing need for affordable housing. Over 60% of the building per- mits in NJ continue to be allo- cated to multifamily units, and many of the aging communities
AllendaleTown Center, Allendale, NJ
Walgreens Shopping Center, Fairreld, NJ
The Shoppes at North Brunswick, North Brunswick, NJ
Neptune Plaza Shopping Center, Neptune, NJ
2019 Real Estate Industry Forecast & Trends for New Jersey A Stuart Berger s we enter 2019, the nation’s economy ap- pears to have its ups and downs due to many mov- ing parts. With regards to the Real Estate industry in particular, there are many variables that have shaken things up, and I believe we will not understand the full impact of change until the dust has settled. I am neither an economist nor fortune teller, but with more than 30 years of ex- perience in the Real Estate industry and as an advisor to clients in the market, it is my duty and passion to have my finger on the pulse of trends and forecast the com- ing future. The Impact of TCJA on Real Estate It has now been over a year since our industries saw sweeping tax changes enacted by the Tax Cuts and Jobs Act, but we are now beginning to see what this means for the Real Estate sector. For example, the limit on state and local tax deductions (SALT) continues to impact the single-family home mar- ket in states with high real estate taxes such as New Jersey. Recent studies have reported that 30% of home- owners in NJ are unable to fully deduct their taxes, and many first-time buyers have been hindered to enter the market because of that. The good news is that we have seen mortgage rates drop in the last quarter after trending up in 2018. Also incorporated into the tax reform legislation was “The Opportunity Zone Pro- gram” enacted to incentivize real estate investment and development in low-income communities across the coun- try. Opportunity Zones are designated tracts allowing investors to provide capital for projects in exchange for certain tax breaks, and 75 municipalities representing every county in NJ have at least one opportunity zone
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Contributing Columnist Stuart Berger
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