NORTHEAST SNAPSHOT, JUNE 2006

New Jersey Multifamily Market

Robert Holland Senior Vice President, Co-Managing Director The Kislak Company

New Jersey has a very large range for rental rates across the multifamily sector, and aspects such as construction costs are leading to higher rental rates. Overall, Southern New Jersey (e.g. Camden, Burlington and Gloucester counties) can have rental rates as low as $500 per month, while other areas such as Hoboken, New Jersey — near New York City — can see rental rates as high as $5,000 per month. In recent years, vacancy rates were higher in New Jersey because of low interest rates, which resulted in more buyers than lessees. However, a recent change in interest rates has slowed home buying and is leading to an increase in occupancy in apartment buildings. Northern New Jersey vacancy rates stand at 5 percent or less, and vacancy in Southern New Jersey checks in at 8 percent or less.

Lennar Corporation, which is headquartered in Miami, and WCI Communities, also headquartered in Florida, are two multifamily developers new to the market. A lot of development is taking place on the Gold Coast, which is attracting residents who work in New York City. New Jersey’s Gold Coast is a very desirable area for both high-end and affordable housing development, which continue to attract all types of residents.

Several significant multifamily developments are rising along New Jersey’s Gold Coast. Roseland Property Company recently developed the Hudson Club at Port Imperial. In addition, Kushner Companies recently completed a $600 million project on Perth Amboy’s waterfront, and the company also completed multifamily developments in Asbury Park, Cranford, Newark and Atlantic City, New Jersey. These developments, along with others, will improve the quality of life in New Jersey and provide homeowners/renters with new opportunities for living arrangements.

Cities such as Perth Amboy, Montclair, Asbury Park, Long Branch, Jersey City and Hoboken, New Jersey, are undergoing redevelopment programs. One of the main reasons redevelopment is taking place in New Jersey is because towns and cities want to improve their communities. Towns are able to replace or convert dilapidated buildings with new developments, effectively improving appearances and increasing housing.

In the future, keep an eye on the submarket along Route 78 West. This corridor runs from New York to Pennsylvania, and factors such as a better commute from New York City to the Lehigh Valley, Pennsylvania, makes the area more attractive for commuting residents. Available land also makes this area attractive to developers. Moving west from New York City, the further you go, the more affordable the housing becomes.

New Jersey’s multifamily market will continue to grow by new construction and redevelopment. With close proximity to New York City and a strong job market in this area, the population will continue to expand and support the need for multifamily development. Once the current development absorbs, New Jersey will need to build again. After cities such as Hoboken and Jersey City were reinvented, developers moved on to Asbury Park and Perth Amboy, and this cycle in New Jersey will continue with the demand here to support it.

In the past several years, many national developers ignored New Jersey as an area for multifamily development because of its lack of available land for development, so they went to states such as Georgia and Arizona, which had the land but not the jobs nor the population growth, factors that led to overdevelopment. New Jersey still may not have the land, but now it has the opportunity to redevelop, which appeals to national multifamily developers.

— Robert Holland is senior vice president and co-managing director of The Kislak Company.

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