NORTHEAST SNAPSHOT, NOVEMBER 2006
Southern New Jersey Multifamily Market
One of the major goals of real estate development in southern New Jersey is to attract new businesses to the area, which in turn brings employees that need housing. In addition, developers are targeting employees of companies already situated in South Jersey, such as Commerce Bank and Lockheed-Martin. There are numerous mixed-use communities being developed, as people find it more and more attractive to live somewhere that allows them to walk to everything they need instead of having to get into their cars. Many of these communities are aimed at families looking for a strong neighborhood and a beautiful home.
In order for developers to remain successful in southern New Jersey, many have adopted more creative solutions in regards to their typical project assumptions and development parameters. Private sector developers are following the lead of more progressive public sector planning prerogatives and zoning codes, which proliferate mixed-use projects that combine multifamily residential with large-scale, big-box retail and office components.
The majority of the development in southern New Jersey is taking place in three distinct areas — infill sites, transit-oriented sites and opportunistic locations. As the more affluent submarkets continue to show a relatively strong demand for housing and because of the lack of available land, developers are finding urban renewal opportunities or they are willing to go through the lengthy process of rezoning a site location. The Tradition at Cherry Hill, the Klein Company’s latest luxury multi-family apartment project, is a prime example of an opportunistic infill development project. After more than 2 years of negotiation with the municipality and local interest groups, we successfully achieved a use variance on one of the last remaining developable sites in Cherry Hill. This controversial 13-acre parcel along Route 70 had by-right commercial zoning to permit an office development, but for years had undergone review for alternate uses, which were rejected. The Klein Company plans to construct a 233-unit luxury garden apartment community.
There is a statewide initiative to further develop transit-oriented sites that either flank the riverfront or are situated close to the train line’s path of development. Lastly, adaptive re-use opportunities are common in a state that has a rich industrial history. Obsolete buildings that were previous industrial warehouses are prime sites for a wide variety of new uses, and in many cases for economic reasons, the land that these structures occupy is more valuable than the additional demolition costs.
Developers are also combining affordable housing components with luxury, market-rate, multifamily housing in order to have their fair share of exclusionary zoning required by the Mount Laurel ruling. In addition, some developers are taking new approaches with creative strategies such as restoring obsolete buildings such as the Cherry Hill Towers to create rental apartment communities, the adaptive reuse of warehouse buildings such as loft-style apartments, or even combining segments of projects into both rental and for-sale condominium components.
In 2002, developer Carl Dranoff transformed the landmark RCA Building #17 in Camden into luxury loft apartments called The Victor. The 314-unit building is the first luxury condominium on the waterfront in Camden and has been the catalyst for several other developments of its caliber in the area. The Victor serves as a residential anchor to the Camden Waterfront Redevelopment project, which includes advances in infrastructure such as a new ferryboat, light rail lines and an aerial tram over the Delaware River.
Another project that is getting quite a bit of attention is the redevelopment of the 233-acre site of the former Garden State Park Racetrack in Cherry Hill. M&M Realty is turning this large plot of land into a mixed-use community that is comprised of 780,000 square feet of retail, 1 million square feet of office space, 1,659 residential units and a 150-room hotel. This project will be a major economic generator for both the town and the state.
There are several new developers in the southern New Jersey market. As mentioned previously, Carl Dranoff of Dranoff Properties and M&M Realty have been making great strides in development in southern New Jersey. Another new developer, Cherokee Investment Partners is developing Cramer Hill in Camden, a mixed-use development with 5,000 homes, approximately 50,000 square feet of retail, an 18-hole public golf course, a new marina and parks and walking trails. Kushner Companies is making its presence known developing by The Landings at Caspian Point in Atlantic City. This 7.5-acre waterfront community in Atlantic City will include 390 residential units, 10,000 square feet of retail, a 5,000-square-foot restaurant and recreational amenities.
The key markets in the future will be waterfront property, both riverfront and beachfront development. Camden and surrounding areas will continue to be built up, bolstered by improved transportation systems that allow for easier access to areas that were previously more isolated. There will also be a great deal of development in the North Beach section of Atlantic City. Nearly $1 billion worth of projects are currently in development, including Victoria Tower, a new luxury high-rise planned for the beachfront. These developers are primarily targeting second home buyers from New York, Philadelphia and Florida.
The residential units that have been built in southern New Jersey have been well absorbed by the market since southern New Jersey has not been inundated with the high number of multifamily developments that Philadelphia and other cities have seen. The median rental rate in all of New Jersey in 2005 was $935. Vacancy rates are running around 8 percent in southern New Jersey and for comparison, 5 percent in northern New Jersey. No one is denying that the housing market is down; however, the job market in New Jersey is strong, which will help the housing market remain stable. Development will continue to move to less-developed areas such as Atlantic City and spots in Gloucester and Cumberland counties. While there is a limited amount of space in and around Philadelphia, on the New Jersey side of the Delaware River there is room to grow.
In the next few years, there will be a strong push for increased affordable housing options in the state. Governor Corzine announced that he would like 100,000 new units of affordable housing built in the next 10 years.
— Alon Barzilay is the vice president of development for The Klein Company.
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