Northern New Jersey Multifamily Market

Many people retain the perception that commercial real estate, as a whole, is doing poorly right now. While this may be true for certain sectors in certain parts of the country, northern New Jersey’s multifamily sector is not one of them.

“In North and Central New Jersey, I would say that multifamily, in terms of value and prices, is holding up better than any other type of commercial real estate,” says Jeff Wiener, president of Woodbridge, New Jersey-based The Kislak Company, adding that while demand for other property types may wax and wane, people always need a place to live.

This demand, coupled with New Jersey’s dense population demographics, has caused investors to see New Jersey multifamily as a safe option in a time when few investments could be called safe.

“People are afraid of Wall Street. People are afraid of even having their money in banks. So the apartment housing market, from a sales point of view, is holding up well,” Wiener says.

Two notable recent transactions include the sale of Northwood Estates, a 253-unit multifamily property located in North Brunswick that traded for $27.5 million in November 2008 (see sidebar), as well as a 120-unit property located in Hackettstown that recently sold for $10.15 million. Wiener notes that there is not a lot of apartment turnover in New Jersey, so when communities such as these two are purchased, owners tend to hold onto them for the long-term. The reasons for this include the long-term appreciation of New Jersey multifamily assets, as well as not feeling the need to dispose of a property. If an owner is getting a positive cash flow every month, why sell?

Regardless, prices are coming down a little bit, which Wiener has attributed to the financial markets. Banks and other institutions have gotten more conservative with their lending and tougher with their requirements. But that does not mean that they have lost faith in the strength of the sector.

“Lenders still look at apartments as the safest value of all of the real estate sectors,” Wiener says.

New development has slowed down, as owners delay projects in hopes of a better economic climate a year or two down the road. While booming markets like the Gold Coast are still seeing completions, many areas have seen the development pipeline shrink to a trickle. While this may cause housing shortages a few years in the future, it does give the market the ability to absorb any surplus product, down economy or not. 

For the future, Wiener sees an increase of demand for multifamily rental product in northern New Jersey fueled by two new groups of renters in the market. The first group is made up of people that are transitioning from owners to buyers. The other group comprises people who otherwise would be first-time homebuyers, but are putting off the decisions to purchase a house for now in favor of renting.

“People, in general, are becoming a lot more conservative,” Wiener says. “There are a lot more people renting that might have been buyers before this economy got weaker.”

New Jersey’s multifamily market may not be at the peak it was a couple of years go, but it remains one of the top-5 rental markets in the country. While this trend will most likely continue, Wiener hesitates trying to predict too far into the future.

“We feel North and Central New Jersey will hold up well,” he says. “Are the prices going to come down a little bit more? No one can predict that. Apartments will be affected less that other types of commercial real estate, in my opinion, but how the overall economy in the marketplace is going to hold up — really, no one can predict that in the next year. It’s like asking what’s going to happen to the stock market in the next year.”

— Coleman Wood

©2009 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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