Q&A with Brian Philipson, Urban Square Properties: Shifting Demographics Good for New Jersey Multi-Family, Keep an Eye on Empty Nesters

JERSEY CITY, NJ – Brian Philipson oversees Urban Square Properties’ current and new property portfolio. Alongside his partners, he is actively involved and committed to all aspects of real estate development, from deal evaluation, analysis, financing, design, pre-development planning, construction, branding, marketing, operations, sales, marketing and leasing. Since becoming a developer in 1999, Brian has directed numerous new project acquisition and development projects throughout Hoboken and Jersey City. Below, we caught up with Brian to learn about his latest observations and strategies in the New Jersey multi-family arena.

CapRE: Thanks for chatting with us today. It was good to see you at our New Jersey Gold Coast Summit. How did that event go?

Brian Philipson, Urban Square Properties

Philipson: Overall, it was a really good event. There were some great speakers and it was great to  catch up on the trends, which is something I often  like to do. I met several outstanding people from  networking, which was a plus for me.

CapRE: Tell our readers a bit about your business.

Philipson: Basically, I have two businesses. I do development and I also have a rental portfolio. The development is a combination of ground-up and renovation of existing structures.  And the rental portfolio consists of primarily multi-family apartments. Most of what we develop tends to be condos because of the markets we’re in, and we also build to rent as well. We’re in Hoboken and Jersey City primarily, but also do work in Bayonne, Union City, North Bergen and West New York.

CapRE: So how would you characterize the multi-family arena in New Jersey right now?

Philipson: It’s challenging. What’s happened with low rates and the pricing on rentals as well as condos, it’s been driving demand like crazy. The demand has driven prices up to inflated levels and It’s hard to make the numbers work, even in the lower socioeconomic neighborhoods — the prices are still inflated. Things are like, five or even 4 and a half cap rates. That’s the biggest challenge. But we’re growing and managing what we have and picking up things here and there when  we can make the numbers work.

CapRE: Which markets are you most excited about or comfortable in right now?

Philipson: I like working in Bayonne right now. It’s a little easier to work with the city, and there’s not as much competition. Hoboken is very hard because of zoning and Jersey City is hard because of pricing.

CapRE: And what’s your strategy for addressing those challenges?

Philipson: Having a good strong network of professionals around you, which takes time to build up a solid team. You must be overly prepared for anything, there will always be difficulties along the way. People underestimate the things that can happen. So have a lot of fluff in your numbers and stay the course and sometimes evolve as you are moving along.

CapRE: What do you see for the future of New Jersey?

Philipson: I think things are positive. I think the demographics point to more and more people wanting to live in Urban Settings. The trend of suburbanization, which happened for decades and decades, has now shifted so the trend has become urbanization. People are moving back to the cities and as that’s happened, different demographic segments are moving back to the city.

It’s not just young people out of college. From young single people, the demographics shifted to young couples and then families.  Now I’m seeing empty nesters. Instead of moving to Florida, they want to be more active and in cultural centers, so our area is a great example of that happening. It’s happening throughout the country, but the New York City region has seen a large shift. People in the New Jersey suburbs who want to be close to culture and maintain an active lifestyle are looking to the Gold Coast.

CapRE: Interesting. Please tell us more about that trend.

Philipson: It looks like the next shift is going to be people in their late 50s and 60s. This demographic of people seem to be more interested in selling their house in order to get an apartment somewhere like Hoboken. In general, this trend of people moving to the Urban areas is not changing. And as the population grows, it will continue to attract more people. These demographics are very favorable for continued growth. Price pressure will continue to happen in a positive way.

CapRE: So how will you cater to these very different segments of renters?

Philipson: Catering to new segments is already happening. It was mostly about young single, then young married couples, and now families with kids. Jersey City and Hoboken had to build infrastructure, for example. You now see retailers selling strollers and kids’ clothes and children’s bookstores.

The infrastructure has continued. They just put a climbing wall in Hoboken and so now my daughter wants to go there every weekend. Jersey City and Hoboken have adapted really nicely to accommodate for that. For active adults, it’s a whole different type of thing, but I’m starting to see people talk about that as well, and I think we’ll soon see more centers catering to the active adult community.

CapRE: If you could describe the New Jersey multi-family arena in one word, what would it be, an why?

Philipson: Expensive. Because rates are so low. And that’s because, even with high prices, they allow a certain return that other asset classes don’t offer. There are people out there willing to pay a lot because everyone wants to achieve the highest ROI on their investments and they all think real estate can do that. But the problem is, if you pay too much in a high rate environment, you can get stuck in a squeeze a few years out. So to those paying 4% Cap Rates…. good luck.

CapRE: Indeed! Thanks for your insight, Brian. We’ll see you at one of CapRE’s New Jersey Commercial Real Estate Summits soon!