New Jersey Apartment Summit: Garden State Experiencing Dramatic Housing Transformation
by Josh Anderson
FLORHAM PARK, NJ — The New Jersey multi-family market is standing stronger than ever. But it may have some competition from the single-family, for-purchase sector. At CapRE’s New Jersey Apartment Summit last week, we touched base with some New Jersey real estate insiders for their thoughts on how, where and why this competition is taking shape.
We first heard from George Vallone, Founder & President, Hoboken Brownstone Company. “Right now, multi-family permits are at 65% of all permits statewide,” he said. “The story is pretty clear. What you’re looking at right now is a dramatic transformation of housing in New Jersey – going from a single-family to a multi-family market.”
When Vallone started his business back in 1980, he only worked on condos. “We were buying row houses in Hoboken for $20,000 and converting them to condos,” he recalled. “The first one sold for about $60,000 a unit for a nice, 600 square-foot one-bedroom condo in a beautiful row house on 3rd street. Though that would now trade for, oh, I’d say $300,000 a couple of decades later. When the recession hit, we were cranking out a bunch of condo projects, but fortunately we had them all sold out. We were just wrapping them up, so we didn’t get hit.”
That was a turning point, according to Vallone. “The market dramatically shifted at that point,” he remembered. “Demand didn’t stop though — people still wanted to live Hoboken. And they wanted to live in Jersey City. But they weren’t able to or didn’t want to buy condos anymore. So the rental market took over and it’s been a dominant market ever since.” Vallone then said that, with rents now approaching $45, $50 a square foot on the waterfront, it’s a good idea to start to look at whether or not it’s a good time to start building condos again.
Next up, we connected with Christopher J. Otteau, MAI – Principal at Otteau Group as well as Adjunct Professor Monmouth University, who had some explanations – he said to look to demographics.
“When we look at our share of building permits in New Jersey, there’s no surprise that we see over the past three cycles, in terms of years, everything in the urban and rail towns is where it’s going,” he explained. “That’s no surprise to anyone. But where these demographic changes are coming from is the millennials. 25-34, 35-40 year olds, this is the suburban loss. These are our next future buyers.”
According to Otteau, this loss in the suburbs is going to be detrimental to the larger single family housing market, but it will be huge and key for the next for-purchase market that will form in Jersey City, Hoboken, and other places in Bergen County. Otteau pointed out that Hudson and Bergen County are the top place to move in New Jersey, and the biggest groups are 25-40 year olds.
“When you look at home-sale transactions, there’s $35.9 billion projects for 2017,” he explained. “Of that, the condo market is 19%. So just keep that in mind. $6.5 billion worth of condo sales in New Jersey. But when you look at overall CRE transaction volume for multi-family, it’s about half of that. That gives you an idea of how large that condo purchase market still is, what’s happening here, and the potential that could occur.”
Header Photo: Christopher Otteau, Principal at Otteau Group