Mid Atlantic Real Estate Journal — January 17 - 30, 2014 — 17A
www.marejournal.com
2014 F orecast
By Thomas McConnell, CCIM, Marcus & Millichap New supply absorbed as rents rise in New Jersey
A
partment demand cre- ated by the surge of new jobs generated
Approximately 2,200 units are scheduled to be completed in 2013. Developers delivered the most units in Hudson County with 997 rentals coming on- line. The majority of these, 554 apartments, are in Jersey City. Essex County had the second-largest amount with 536 rentals brought into ser- vice. The majority of these, 239 apartments, were in Newark. In 2014, completions will total 3,500 units, with the majority, 2,700 units, located in Hudson and Essex Counties. Despite an increase in construction, oc- cupancy in the Northern New Jersey region remains very
tight. New demand will offset most of the supply additions, though vacancy will tick up 30 basis points to 3.8% by year end. Effective rents will reach $1,909 per month by year-end 2014, a 2.9% gain. Through the first three quar- ters of 2013, the number of apartment listings was insuffi- cient to meet buyer demand in the region, a trend that is an- ticipated to continue through year end. Anticipation of the Fed’s actions resulting in ris- ing interest rates and thus potentially raising cap rates, combined with the current competitive buyer market,
motivated some investors to list their properties while they retained the most control over the final sale price. Value-add properties in highly desired neighborhoods are trading at cap rates in the mid-4 percent area, though after renova- tions, the real cap is evaluated to be in the mid-6 percent range. First-year yields in the 8 percent range are sought after in more stable commu- nities in northern Newark. However, high-yield assets are limited and most properties in the $1 million to $10 million range are trading between a mid-4 to mid-5% cap rate.
Investors searching for a leg up are revaluating previously bank-owned assets or proper- ties disposed by individuals unable to meet previous loan obligations. Numerous buyers are scouring the counties for value-add assets in townships that are transforming into live-play neighborhoods, at- tracting young professionals. Others are evaluating mixed use properties, where rental rate growth tends to lag be- hind market rates. ThomasMcConnell,CCIM is a director in Marcus & Millichap’s National Multi Housing Group n
in Northern New Jersey and in Man- hattan is giv- ing local op- erators more l e v e r a g e when negoti- ating leases.
Tom McConnell
This is particularly true as the cost of living inManhattan rises, forcing tenants to mi- grate across the Hudson River in search of affordable hous- ing. Now that occupancy in the region is above 96 percent, operators are raising rental rates more aggressively in townships without rent control laws. This is pushing apart- ment demand further inland and into areas without direct proximity to major transporta- tion corridors. Builders have responded relatively quickly to favorable conditions, activat- ing previously approved multi- family permits. Completions of market-rate apartments have pushed ahead over last year’s deliveries, with most of the units concentrated in Jersey City and Hoboken. As this new space enters the market, strong demand will generate a normal turnover rate, keeping occupancy low. Approximately 5,486 units are underway with comple- tion dates stretched into 2015. Marcus & Millic- hap arranges sale of three U.S. post offices ELMWOOD PARK, NJ — Marcus & Millichap Real Estate Investment Services has announced the sale of three United States Post Of- fices, located in Normandy Beach, Roselle Park, and Flor- ence NJ, according to Ryan Nee , regional manager of the firm’s New Jersey office. All three assets were sold for a combined price of $1,450,000. Michael Lombardi , direc- tor of the Net Leased Proper- ties Group, and Julienne Pape , an associate, both in Marcus & Millichap’s New Jersey office, had the listing to market all three properties as part of a larger portfolio of post offices on behalf of the seller, a private investor. Lombardi and Pape also represented the buyer in the sale of the Nor- mandy Beach post office. n
Recent closings arranged by Thomas McConnell & Kevin McCrann of Marcus & Millichap’s National Multi Housing Group
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Thomas McConnell, CCIM, Director National Multi Housing Group Office 201-582-1031 • Cell 732-977-7079 thomas.mcconnell@marcusmillichap.com
Kevin McCrann, Director National Multi Housing Group
Office 201-582-1024 • Cell 973-727-9935 kevin.mccrann@marcusmillichap.com
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