18C — April 26 - May 9, 2013 — Spring Preview — Mid Atlantic Real Estate Journal
www.marejournal.com
S outhern N ew J ersey B roker
By Brian J. Whitmer, CCIM, Cushman & Wakefield of New Jersey, Inc. Stability continues in the rental housing capital markets
A
nd then (again) there were condo bidding wars...and also an ex-
tracking turned from rental to for-sale around that that time. In one case, the developer was experiencing demand for condos and their construction lender allowed the conversation of the loan from a rental exit to that of unit sales based on the number of purchase contracts they had accumulated. This momentum for for-sale housing has continued and is now pervasive in the top-tier New Jersey Gold Coast submar- kets. For example is Hoboken, where there are condo develop- ments underway that run the gamut from national publicly- traded homebuilders such as
Toll Brothers and their 287-unit third phase of Maxwell House, to multiple small boutique ground- up condo buildings in various locations throughout the town. Realtors are reporting bidding wars, especially for the ends of the unit size spectrum – the smaller units suited for singles and larger units that cater to families. Pricing for condos has risen by approximately a third over the past year (mid-$400’s PSF to $600’s PSF), and is an- ticipated to increase by another quarter throughout 2013 (from the $600’s PSF into the $700’s PSF). So what do these trends mean
for rental housing fundamen- tals? We anticipate a negligible impact to even being comple- mentary. As the pricing of for- sale housing appreciates, and the preference to live in urban settings becomes stronger across all age cohorts, there will be a growing renter base that could not afford to live where they want if not for rental housing. In contrast to the under 35 age set (34.0% home ownership rate vs. 65.4% overall) that is transient and is not looking to put down roots until their fam- ily and job situation has firmed, you have the newly married or expecting a child, in addition to
baby boomers that are looking for more excitement than suburbia or an age-restricted commu- nity. It’s the latter groups that are the ones making the condo purchases, and have a sense of security coming out of the recession that urban assets are more secure than suburban ones. Also, the newly minted families are choosing to stay on the Gold Coast longer and hang onto their walkable lifestyle and shorter commute until their children are in pre-school age before starting to look further west. This deci- sion is readily discernible by the number of strollers seem through Hoboken and Jersey City, as well as the higher proportion of three bedroom units that have been in- corporated into the recently con- structed rental communities. New Jersey, largely via its connection to the employment powerhouse that is Manhattan, has been a benefactor of attract- ing capital seeking investment in multifamily housing. Multi- family housing starts across the nation have nearly doubled since last year (82% increase since March 2012), with the majority of those starts within the coastal gateway cities. It is in these areas that investment funds are targeting, and lenders have shown their comfort in financing, new construction. Coupled with these markets being mature and high-barrier to entry, a premium to both own (as well as rent) has emerged. This has translated into historically low capitaliza- tion rates for stabilized proper- ties, as well as near record-high land valuations. Demand for multifamily de- velopment sites has been strong, and we have taken bids on land sales from both long-term lo- cally-based developers as well as many of the nation’s larger development firms that are look- ing to plant a flag in Northern NJ. While we have yet to see the return of condo developers bidding on development sites, it could be on the horizon and sales velocity firms and pricing rises. In closing, the different facets of the housing market are exhibit- ing positive signs. We foresee continued stability in the capital markets for rental housing and an interesting year for condos as the current flurry of activity becomes printed data and feeds on itself. Brian J. Whitmer, CCIM is senior director of invest- ment sales in the Capital Markets Group of Cushman & Wakefield of NJ, Inc. n
panding pipe- line of future apartments. Both of which have received a lot of atten- tion both an- ecdotally in daily discus- sions as well
Brian J. Whitmer
as in the popular press. The for-sale housing market, at least on the Hudson River Gold Coast, seemed to have turned a corner at the start of 2013. At least two communities we had been
Metropolitan Area Capital Markets Group
$1.3 billion oF investment sales in 2012
one barnes & noble way 1,145,000 sF sale oF single tenant industrial building monroe, nJ
cross island plaza 225,000 sF sale oF multi-tenant oFFice building rosedale queens, ny
gateway business center 250,000 sF
one matrix drive 259,000 sF sale oF single-tenant industrial building monroe, township, nJ
sale oF multi-tenant industrial building south brunswick, nJ
JFk portFolio 481,000 sF
445 south street 320,000 sF sale oF multi-tenant class a oFFice building morris township, nJ
sale oF multi-tenant industrial portFolio queens, ny
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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