6B — March 11 - 24, 2016 — New Jersey — M id A tlantic
Real Estate Journal
www.marejournal.com
N orthern N ew J ersey By Brian Whitmer, Cushman & Wakefield Multifamily outlook: “Investment demand following demographic shifts”
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to Bayonne. As a result, the fundamen- tals of multifamily product in Northern New Jersey have remained strong and are ex- pected to continue in the near future. The 5-year trailing average annual vacancy has been 4.1% versus the forward looking 5.2%, according to REIS. The same statistic for asking rent growth has been 3.0% versus 2.3%. Although the projections are slightly divergent form the historical averages, the statistics still point towards stability and positive rent growth. These are the reasons Northern
or funds being allocated to acquisitions and the availability of product
New Jersey is on everyone’s radar—including the largest investors, including pension fund advisors, life companies, and REITS. We heard time and again that these industry players have their sights set on being net buyers in 2016, adding to their portfolios, whether through develop- ment joint ventures or the acquisition of existing assets. Supported by this sentiment, we are expecting unleveraged rates of return, or cap rates, in this market to remain where they have historically been tracking—in the mid-4% range for best in class product. Beyond the Hudson River Gold Coast, there is also a spill- over effect of rental housing demand within New Jersey, especially within a 45-minute train ride of Manhattan. An interesting take-away from the NMHC conference is how investors are further defining what a “TOD,” or transit- oriented development, means and what elements it has to exemplify to qualify. The per- centage of residents who are actually using the train on a daily basis should be 50% or greater, a green grocer should be within a 5 to 10 minute walk, and there needs to be a downtown core nearby that includes multiple restaurants, bars, and necessity retailers. It is those municipalities and apartment communities that are on investors’ must-have lists. In further support of the growing focus on acquiring in TOD locations, we had mul- tiple meetings at the NMHC event where investors brought along a NJ Transit train line map. They noted specifically that they were most interested in following the train lines as they head west out of Penn Station to see what oppor- tunities there were to either develop or buy existing com- munities in the towns serviced by the rail. Another trend worthy of no- tice is that there is a shifting focus to Class B apartment properties, especially in areas that offer walkable retail and provide the opportunity for value-add upgrades. This is driven by the anticipation that annual rent growth for renovated Class B apartments will outpace that of Class A communities. The rationale is that of a deeper pool of affordability, willingness of continued on page 16B
lifestyle and a waning desire to own. Those are some of the takeaways from the recent National Multifamily Housing Conference (NMHC) – trends that are very much in play for the year ahead and beyond. The three assets classes, or investment strategies, that were commonly part of most investors’ 2016 game plans, were development joint ven- tures, forward purchases of communities nearing comple- tion, and Class B communities in urban-suburban areas that have walkable retail, public transit, and development of Class A communities over the
past decade. The matrix for New Jersey is that it is a market interlinked withNewYork City by a public transit system and commuting times that can rival being in the city itself. As rents and condo prices in Manhattan and Brooklyn have continued to soar, at pricing that can be double to three times that of New Jersey, more people have made the decision to move off the island in search of a bet- ter value proposition. One of the more attractive places for those who relocate has proven to be New Jersey’s Gold Coast, stretching south fromFort Lee
for sale, the multifamily sector is see- i ng s t r ong investment d e m a n d overall and ready capi- tal targeting certain asset
Brian Whitmer
classes. The “chosen” asset classes are those best posi- tioned to benefit from the demographic shifts in favor of apartment living – people in search of a more urban
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