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Jersey City Multi-Family 360: Waterfront Rents Beating Expectations Due to Lack of Supply, Interior Neighborhoods Offer Half the Rent with Access to PATH

Jan 5, 2018
by Josh Anderson

FLORHAM PARK, NJ — At CapRE’s recent New Jersey Apartment Summit, we connected with a panel of Garden State insiders to discuss the ever-changing development, investment and leasing arenas.  The discussion kicked off with a focus on New Jersey’s urban growth, particularly in Jersey City. What drives it, why is Jersey City booming, and what kind of returns should we expect in different neighborhoods?

Joseph Panepinto, Panepinto Properties

First up, we heard from Joseph A. Panepinto Jr., of Panepinto Properties. “Well, I’ve got an extreme bias when it comes to developing in Jersey City,” he began. “That’s because I was born and raised there. And my father was born and raised there. I live there with my wife and three children. We live in a Phase One of the Columbus Tower project.”

Panepinto said that his family embodies some of the typical demographics that you see in that area. “I’m able to walk to my office at Harborside, which is 5 minutes away. My children’s school is 2-3 blocks in the other direction. And we’re able to really live and feel the development that is going on,” he shared. But it’s not just Jersey City, said Panepinto. “It has been extreme. It’s been so crowded in Manhattan in the last two to three years…the foot traffic, the car traffic, the retail businesses are all booming in the area.”

“In terms of rent appreciation, on our 2015 multi-family, 550-unit apartment building which we pro forma’d in 2014 at about $42 per foot, we exceeded $50 a square foot by the time we opened in 2015,” Panepinto explained. “That was a real surprise to us. And now we’re studying the effect of new inventory as new buildings are opening — which has been a large number, just in downtown alone, of 7,000, 8,000 apartments being built – on vacancy and rent rates. So far nothing’s really [jumped out].”

Adam Altman, KABR Real Estate

Next up, we connected with Adam Altman, Managing Director and Partner at KABR Real Estate, who is also active on the waterfront. “We were also thinking $42 rent for 450 units and are getting mid-50s,” he concurred. “We have not seen any rent degradation, though it has presented in New York City and Brooklyn. That doesn’t mean it’s not coming though.”

Altman then pointed out how, during a previous presentation that day, it was revealed that some of the vacancy in Jersey City presents in older product coming online. “The demographic that wanted to live in Jersey City is cycling out of old product and into new product” he ventured. “They’re willing to pay $100 a month more, or $200 a month more, to be in that kind of top-tier product. We’re building by Grove Street. What people don’t recognize about our revenue is that rent per average room is higher in Jersey City than in downtown Manhattan, because of lack of supply. There is a real dearth of supply in Jersey City.”

There is a different picture in other neighborhoods, however, like Journal Square or McGinley Square. “I think we’re the first people to build in McGinley Square I think in 100 years — new product. That’s stick built,” Atlman revealed. “Unike on the waterfront, which is achieving mid-50s rent, or in Journal Square, where we’re not in the ground yet but are still achieving competitive product, in McGinley Square we’re looking to low-mid 30s. And that’s less than a mile from Journal Square PATH. So there’s room for all of these products into the New York City area, at different levels.”

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