Mid Atlantic Real Estate Journal — New Jersey — January 11 - 24, 2013 — 17A
www.marejournal.com
N ew J ersey
By Brian Whitmer, Cushman & Wakefield, Inc. New Jersey multifamily strong and steady heading into 2013
F
alling vacancies and notable rent growth marked 2012 as yet an-
to pay the type of rents that justify the cost of new high-rise construction. While New Jersey’s abun- dant development may be con- centrated on the waterfront, several major projects further inland have launched or are set to launch as well. The reha- bilitation of Harrison, a former industrial town, is beginning to gain momentum, with multiple developments centered around an under renovation PATH stop. Mill Creek is launching a project in transit-oriented Morristown. New Brunswick, Bloomfield, Montclair, Red
Bank, and Cranford, which all boast strong rail infrastructure, will see some development ac- tivity this year as well. Clearly, mass transportation continues as the main draw for develop- ers, who are catering to tenants that commute to Manhattan via rail. One shift worth noting in- volves the “who” associated with these projects. New Jersey multifamily traditionally has been built and managed by long-term generational owners. In the early 2000s, we began to see institutional capital part- ners enter the market to back
local and regional developers. Today, that group – local opera- tors supported by institutional funding sources – has taken center stage and now comprises a majority of the current devel- opment activity. The Investment Market Within this larger picture, multi-family investment activ- ity in Northern New Jersey was largely in line with that of 2011. Taking the statistics at face value – for those transactions over $10 million – the number of sales (19), units that traded (3,400), and the total dollar volume ($482 million) in 2012
was roughly equal to half of 2011. However, excluding the four largest transactions in 2011, which comprised 54% of the sales volume, the results of the two years fall close to being on par. The activity in 2012 started out slowly but picked up in the second quarter in terms of available opportunities. That faster pace held until shortly before the presidential election, when many investors and po- tential sellers decided to pause and reevaluate. In late Novem- ber and early December, the continued on page 22A
other posi - tive year for the Northern New Jersey multi-family market. The c o n t i n u e d strengthen- ing of funda- mentals at-
Brian Whitmer
tracted an influx of equity and debt capital from existing play- ers and new market entrants alike. Developers and investors continue to intensely target op- portunities along the Hudson River waterfront and around transit hubs further inland. With demand outstripping supply in the Garden State, the average multi-family va- cancy rate at year-end 2012 is anticipated to rest at 3.7% – down from 4.1% at year-end 2011, according to REIS. Effec- tive rents will have grown 3.0% across all property classes year over year, bringing the average monthly rate to an all-time high of $1,536 (breaking the $1,492 record set in 2011 and significantly above the current national average of $1,101). For context, rents are up 8.2 percent since the depth of the recession; at year-end 2009, renters paid an aver- age of $1,420 per month. Ad- ditionally, REIS projects that rents will grow an average of 3.7% annually over the next four years. This trending rate ranks Northern New Jersey 8th highest out of 82 metros in the United States, and supports the argument that multi-family real estate makes a safe bet against inflationary pressures on investments. In turn, the multi-family development pipeline also has reached historic heights, with approximately 21,000 units planned and under construc- tion in Northern New Jersey. Of that, 55% of this new inventory is centered on the Hudson River Gold Coast extending fromFort Lee to Bayonne. A full 40% is lo- cated in Jersey City, which has become a hotbed thanks to its pro-development local govern- ment and continued evolution as a “livable” city with an ever expanding fabric of vibrant dining, retail and services that remain open well after busi- ness hours. Add to that the abundant public transit options available in Jersey City, and renters are more than willing
Metropolitan Area Capital Markets Group
over $1.2 billion of investment sales in 2012
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Andrew J. Merin, Vice Chairman 201-460-3358 David W. Bernhaut, Vice Chairman 201-460-3356 H. Gary Gabriel, Exec. Vice President 201-460-3352 Brian J. Whitmer, Senior Director 201-508-5209
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