New Jersey Apartment Summit: New Jersey Demographics Changing Quickly, Transitioning to European Model
FLORHAM PARK, NJ — Jeffrey G. Otteau is the President of the Otteau Group. He manages all facets of the firm’s business and has been actively engaged in real estate consultation and valuation since 1974. He holds the State Certified General Real Estate Appraiser certification which is the highest level offered. Frequently quoted in the New York Times and Wall Street Journal, and having made television appearances on CNBC, Bloomberg, Fox 5 News and NBC News, Mr. Otteau is widely respected for his knowledge and insight into real estate trends. On November 30, CapRE welcomed Otteau to Florham Park, New Jersey as the Keynote Speaker at the 7th Annual New Jersey Apartment Summit. In this keynote, Otteau touched on three major topics, the second being how New Jersey is transitioning to a European economic and demographic model. Below is the first of two Insider Reports covering this topic.
The characteristics of who live in New Jersey, New York City, Connecticut and throughout the United States have changed, says Jeffrey Otteau. This is due to constrained income (check out CapRE’s previous Insider Report that cover Otteau’s previous remarks on changing incomes in New Jersey). “Households are very different than what they used to be in terms of characteristics,” he says. “It’s inevitable that if your salary isn’t rising as fast as your parents or grandparents’ salaries did when they were in their 30s and 40s, you’re going to need to find a way to live within your means. And that means a change in your lifestyle. The changes we are seeing in our economy and demography are best described as a transition to a European model. I’m going to take you through what these changes are one by one.”
According to Otteau, each of these trends has been playing out in Europe for quite some time, beginning with very low birthrate and very small household size. “Today in New Jersey, 65% of all households are childless,” says Otteau. “If you haven’t heard that number before, it won’t fit through your ears. That’s children 18 years of age or younger. Wanting to buy a home with a backyard and a picket fence and a swing-set is primarily driven by households with children, who want their children to grow up with greener pastures.”
“The fact that households are no longer bearing children increases the demand for apartments and smaller-size rental spaces,” Otteau says. “It reduces demand for homeownership. Today in New Jersey the majority of our households are either one person or two-person in size. And our school enrollments are crashing. We’ve already lost more than 20,000 students in our public schools over the last decade. And the Department of Education predicts that over the next five years we will lose another 60,000 students. This is the European model. This is what plays out all across Europe today. And with it comes labor shortages and the need for immigration. So this is something we’ll need to take into account as we plan for our future.”
“Perhaps the most obvious example of this in Europe is the brand new holiday that Italy added to its calendar of holidays in 2016,” Otteau adds, laughing. “The Italians refer to this day as giorni di fertilitata – it’s fertility day. They’re paying everyone to stay home and pregnant!”
Next, Otteau points to migration within New Jersey over time. “Areas in the western part of the state are places that are losing population,” says Otteau. “Our population is moving closer and closer to where the jobs are, to where the transportation infrastructure exists, and yes, to New York City. Because that is where the majority of economic growth and opportunity have been concentrated recently. Overtime, population growth and a declining number of households means certain death for real estate owners.”
Stay tuned for the conclusion of this discussion in a forthcoming Insider Report. Continue the New Jersey multi-family conversation with CapRE. Check out our upcoming events ->