NORTHEAST SNAPSHOT, NOVEMBER 2007

Southern New Jersey Multifamily Market

Right now, Cherry Hill and its surrounding communities are the focal point of development in Southern New Jersey. The strength of the region, as part of the Philadelphia market, is demonstrated by high occupancy rates, particularly in Class B multifamily properties.

At the same time, many luxury rental properties have come on the market in recent years, and while occupancy is strong, demand has reached a near-saturation point. As the population density continues to increase in South Jersey, developers expect those luxury vacancies to fill, but it will take time.

The majority of the development at the moment is taking place in and around Cherry Hill, which is a mature, well-established community with close proximity to Philadelphia. Cherry Hill, with rents ranging from $1,000 to $2,200 for one- and two-bedroom apartments, takes advantage of much of Philadelphia’s commuter market, which can afford a more upscale suburban lifestyle. Developers are seeing a great deal of profit to be derived by serving that growing niche.

Currently, the old Cherry Hill raceway at Garden State Park is in the midst of a significant redevelopment including a number of upscale big-box retailers. Multifamily properties in that new development will be coming online next year. 

Cherry Hill Towers, located across Route 38 from the Cherry Hill Mall, was recently redeveloped into luxury apartments to take advantage of the increasing size and affluence of the local market. The owner, Viking Associates, took two nearly abandoned high-rises, gutted them and redesigned them from top to bottom. The buildings re-opened 18 months ago and have met with some success. That’s just one example of the burst of Class A luxury rentals coming onto the market in the past few years.

In addition, Davis Enterprises capitalized on the recent upscaling of the region and recently launched a high-end outdoor shopping mall called The Promenade at Sagemore, which serves the nearby Sagemore Apartment complex as well as the community at large.

Edgewood Properties of Piscataway, New Jersey, has become a driving force behind the multifamily component of the redevelopment of Garden State Park. Developments include Park Place, which is comprised of condominiums and townhomes, and Village Place, which includes apartments. Park Place is currently operating, and Village Place is set to open next year.

Robert K. Futterman and Associates from New York City is also active in the Garden State Park multifamily development, building a multi-use facility called The Towne, which will include 1,649 units of housing in addition to a retail component.

Luxury and high-end developments seem to be the most common these days with many Class B rental properties being upgraded to Class A levels. The improved properties are filling up, though not at the same pace as Class B buildings. Class B vacancy rates are extremely low with occupancy rates in the upper 90th percentile, while Class A vacancies are somewhat higher with occupancy rates in the upper 80th percentile.            

Many developers have banked on the Class A market being the future of real estate in the region. A great deal depends on the absorption rate within that market segment. Look for the trend to increase substantially if occupancy reaches 95 percent or higher.

There have been a number of significant sales in the Cherry Hill area market. Landmark Apartments in Cherry Hill and the Ramblewood Village Apartment in Mount Laurel, New Jersey, were recently sold.

Investors are interested in the strength of Cherry Hill as a submarket of the strong Philadelphia market. In Wyncote, Pennsylvania, The Trilogy sold for close to $150 million. The complex, which the new owner rebranded as the Towers at Wyncote, consisted of approximately 1,000 units, with each unit selling for an impressive $150,000. 

Gebroe-Hammer also has made a number of significant sales in the region. In one of the company’s biggest sales of the year, the 1,738-unit Lynnewood Garden Apartments in Elkins Park, Pennsylvania, sold for $135 million. Gebroe-Hammer also sold Audubon Center, an eight-building complex in northeast Philadelphia for $22 million. In addition, Gebroe-Hammer has brokered the sales of apartment complexes in Merchantville and Clementon in the past few months as well as Cherry Hill.

Growth is expected to continue at a similar rate to last year. The growth might slow slightly as the market matures, but sales in this robust market should continue at a healthy clip.

More and more investors are realizing that this is a deep market. Growth has been steady and national players are starting to target Philadelphia as a desirable, burgeoning region.

— Joseph Brecher is a senior vice president at Gebroe-Hammer Associates in Livingston, New Jersey.

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