NORTHEAST SNAPSHOT, JULY 2005

Atlantic City, New Jersey, Multifamily Market

Anthony Graziano Business Director NAI Atlantic Coast Realty

Along the beachfront, there is increased investor interest around the potential redevelopment of existing condominiums. Developers are looking to build ground-up projects on what vacant land is available as well. No major projects have gotten underway, but numerous investors are looking into potential developments and redevelopments along the city’s waterfront.

The major setbacks delaying any boom in residential development include the lack of viable sites, high density of existing properties and the difficulty of incorporating adequate parking. “Developers don’t want to develop a 10-story condo with only two or three parking spaces available around it,” Graziano says. “It just won’t work.”

The inability to pinpoint just how much demand exists is also a factor in the lack of widespread development. “The specific demand is not fleshed out,” notes Graziano. “We are not yet sure how much interest is out there.”

The majority of existing apartment and condominiums properties comprise what Graziano calls “unconventional” product. These properties typically total five to 25 units. Currently, there is a lack of conventional, mid- or high-rise Class A apartment communities. Apartment rental rates for Class B product range from $750 to $1,200. For Class A units, the rates are higher, between approximately $1,000 and $2,500.

The vacancy rate is less than 5 percent. It is not expected to increase in the near future, as a sizeable amount of demolition is occurring due to redevelopment throughout the city’s popular entertainment district and along the boardwalk. This will help offset any negative absorption that could occur in the near future.

Though activity is scarce, there is reason to believe that it will increase soon and evolve into a large-scale citywide redevelopment. Graziano notes that a number of proposed redevelopments and conversions are in various planning and permitting stages. Two submarkets to watch are the Chelsea neighborhood in the southwest end of the city and the Bayside district. There are numerous proposed redevelopments there.

The outlook for Atlantic City is very positive. There is much activity in the retail sector, as redevelopments and expansions of existing casinos and entertainment venues are underway. For the multifamily market, expect activity to pick up as the amount of demand is quantified and parcels of land are put together. As noted, numerous conversions are in the pipeline and various ground-up projects are in discussion along the beachfront.

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