Checking in on the Gold Coast Waterfront: Q&A with Jose Cruz, HFF on the Latest in the Gold Coast

JERSEY CITY, NJMr. Jose Cruz is a Senior Managing Director in the New Jersey office of HFF (Holliday Fenoglio Fowler) with over 20 years of experience in commercial real estate. He specializes in investment sales in New Jersey, New York State and Connecticut. Over the course of his career, Mr. Cruz has been involved in over $17 billion of office, industrial, retail, multihousing and land sales. Mr. Cruz joined the firm in March 2010. Prior to HFF, he was the Executive Director of Cushman & Wakefield’s New York Area Investment Sales Group where he spent more than 17 years. Cruz began his real estate career as a Real Estate Analyst at PaineWebber, UBS, Inc. In this Q&A, we gleaned a glimpse of Cruz’s expertise and perspective on the Gold Coast multi-family game, especially on the Waterfront.

CAPRE: Thank you for chatting with us today, Jose, as always. How has 2019 been shaping up as we get into the swing of 2019?

Cruz: We’ve been involved in several multi-family deals on the Waterfront. We’re seeing great activity from the investor side. Various types of investors — both private and insurance companies, pension fund advisors, foreign capital. They’re underwriting multi-family today on the Waterfront. We were just out with one asset, where the pricing was pushed to one of the highest per-unit prices to ever trade on the Waterfront.

CAPRE: That’s great to hear, especially since we’ve been hearing whispers of lots of players bracing for a potential slow-down.

Cruz: We actually marketed a large multi-family deal in the last three months, and we did over 15 tours. That deal has since been awarded. And we’re out with a large multi-family transaction right now, where we’re seeing really good activity. Groups are underwriting upside renovation play.

Jose Cruz, Senior Managing Director, HFF

We’re still seeing new construction on the Waterfront and that’s still attracting both equity and debt. The question keeps coming up about how much more that market can absorb. We’re still seeing really good activity. We’re seeing, from the ownership perspective, good renewals and good increases. Tenant tours continue to stay strong. I think that coming into the spring now, we’re optimistic with some rent growth. But I’m not seeing any negatives. We’re valuing another tower on the Waterfront and based on the activity, it’s likely to be aggressively chased. I’m definitely bullish on the Waterfront. Especially going into the Spring, because the activity from the tenant side is there.

CAPRE: So with that in mind, how does the Waterfront arena compare to other nearby sub-markets?

Cruz: Comparing core deals to core deals, I feel like the Waterfront is outpacing the rest. You don’t get too many opportunities to buy multi-family in Jersey City or Hoboken. It’s one or two a year. There are not that many options. So there’s a scarcity premium on the Waterfront. Also, the deals tend to be larger on a total dollar basis. But if you compare core multi-family on the Waterfront to core multi-family in the suburban markets, the core Waterfront multi-family is performing better. If you’re performing core-plus multi-family on the Waterfront to core-plus multi-family further inland, there hasn’t been enough opportunity on the Waterfront for core-plus, but there is high demand for core-plus multi-family in the suburbs.

CAPRE: We’re looking forward to seeing you at CAPRE’s next New Jersey Commercial Real Estate Summit. What topics do you think will be top of mind for the average Gold Coast player?

Cruz: Rent growth is a topic that everyone wants to hear about. Are we really seeing it? Is it there? Also, construction delivery — starts, completions and absorption rates will be top of mind. Construction costs, that’s something that we’ll hear more about. You’re going to hear different sub-markets coming into to play – Journal Square, Paulus Hook. I think you’ll get questions about further up the coast, outside of Hoboken and Jersey City – how much new development is coming to Edgewater? There’s a lot to talk about.

CAPRE: If you could name one thing you’re concerned about or tracking that could hinder further growth in the Gold Coast, what would it be?

Cruz: Interest rates are something I’ve been talking about. At any moment we could see that run and it’ll have an impact. That’s been one of the concerns. Real estate taxes continue to be something that everyone is also keeping an eye on – especially with what just happened in Jersey City.

CAPRE: What about other kinds of product in Jersey City? What’s going on there?

Cruz: You know, we’re seeing all of this residential development and I’m curious what will happen with new retail coming to town. Given what’s going on with the retail market overall, and what does that mean for the waterfront? And also, office. We’re seeing new office development. All of these product types go hand in hand. So I’m curious to see how they all interplay and how it progresses over the next 18-24 months.

CAPRE: Got it, thanks again Jose. We’ll see you soon!