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10C —April 26 - May 9, 2019 — Spring Preview — M id A tlantic
Real Estate Journal
CRE T ax /A dvisory
By Stuart Berger, Sax LLP 2019 real estate industry forecast & trends for New Jersey
A
s we move along further in 2019, the nation’s economy appears to
I am neither an economist nor fortune teller, but with more than 30 years of experi- ence in the Real Estate indus- try 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 coming future. The Impact of TCJA on Real Estate It has now been over a year since our industries saw sweep- ing 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 market in states with high real estate taxes such as New Jersey. Recent studies have reported that 30% of homeowners in NJ are unable to fully deduct their taxes, and many first-time buy- ers 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 Program” en- acted to incentivize real estate investment and development in low-income communities across the country. Opportunity Zones are designated tracts allowing investors to provide capital for projects in exchange for certain tax breaks, and 75 municipali- ties representing every county in NJ have at least one oppor- tunity zone designated. The retail landscape contin- ues to be a challenge as con- sumers are turning more and more to online shopping than Current Trends & Expectations
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 de- mand generated by e-commerce and the need for warehouse and shipping facilities. 2019 will show no sign of softness in this area and the legalization of cannabis will only increase demand. In the resale market, invento- ry remains low because of many factors. While the demand for product for empty nesters (indi- viduals moving after their chil- dren have moved out) remains high, new products are limited by NJ’s difficult entitlement process and the high cost of ac- quiring 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 cit- ies and in rental spaces. Trulia, 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 communities continue to em- brace multifamily develop- ment to both increase their tax base and meet the ever- growing need for affordable housing. Over 60% of the building permits in NJ con- tinue to be allocated to multi- continued on page 18C
have its ups and downs due to many moving parts. With regards to the Real Es t a t e i n - dustry in par- ticular, there a r e ma n y
Stuart Berger
variables that have shaken things up, and I believe we will not understand the full impact of change until the dust has settled.
The Real Estate professionals at Sax understand what it takes to achieve profitability, growth and long-term success. We leverage our industry expertise to advise real estate owners, developers, investors and family-owned businesses on the best ways to face industry challenges, stay compliant, seize new opportunities and reach their financial goals. Lean on the strength and knowledge of Sax’s Real Estate industry advisors to exceed even your own expectations. Learn more at SAXLLP.COM.
SPECIALIZED SERVICES INCLUDE:
› Tax Structuring and Compliance › Cost Segregation › 1031 Tax-Free Exchange Planning › Estate Planning & Wealth Transfer › Feasibility Studies › Loan and Mortgage Restructuring › Worker’s Compensation Audits
› Succession Planning › Buy-Sell Agreements › Aordable Housing
› Tax Credits and Incentives › Renewable Energy Advisory
Clifton , NJ 973.472.6250 › Pennington , NJ 609.737.6600 New York , NY 212.661.8640 › saxllp.com
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