Jersey City Surges
Real Estate New Jersey is part of the Forum LOCAL series of features in Real Estate Forum magazine. This is an HTML version of an article that ran in the May 2014 issue of Real Estate Forum. To see the story in its original format, click here.
Some are calling it a “surge”—10,000 apartment units teeming their way through the pipeline in Jersey City over the next five years. Others say it’s an “explosion” of development, and seem a bit wary of fall-out down the line. (Will rental rates, which have been throttling upward for years now, stop growing? Will occupancy, which is currently close to maximum, slacken?) No one, however, describes Jersey City’s rapid transformation into a cool place for the Millennial generation to live as a bolt in the wrong direction. And everybody and his sister, it appears, is jumping in with a new project.
“It has gotten kind of hard to keep track of all of them, it’s true,” quips Jonathan Kushner, whose KRE Group has just completed work on one project, 18 Park, in the Liberty Square redevelopment area and is in the midst of site work for another, Journal Squared. KRE is preparing to build the first of three huge, skyline-altering towers it will erect at Journal Square. The Journal Squared towers will be 54, 70 and 50 stories tall, with the iconic glass-faced structures to be built in that order.
Journal Squared is just one of a larger group of towers approved for the neighborhood centered on a mass transit center with a heavily traveled commuter rail station and bus depot. Furthermore, a smallish project by comparison—56 loft units emerging at the former site of a vacant office building—is nearing completion. Matt Weinreich, a New York City developer who five years ago helped turn around a neighborhood in the West Village, is now focused on faded Journal Square as a place that can be alchemized into a dynamic urban niche, starting with his Kennedy Lofts.
The grand plans for Journal Square have been on the books for more than a decade. “Imminent construction” has been announced intermittently by various builders over the years, fizzling every time. “Now it’s real,” says Kushner. “Jersey City is rising everywhere, in all its neighborhoods, not just the waterfront, and it is definitely going to rise at Journal Square, the second-busiest transit center in the New York Metro.”
As New York City’s over-heated, uber-high-priced rental market appears likely to stay that way for the foreseeable future, and now Brooklyn is hewing to the same track, demand for comparable, close-in rentals on New Jersey’s Gold Coast has turned white-hot, developers say. On April 8, Warren@York, a new building in the historic Paulus Hook neighborhood close to the Exchange Place PATH station in Jersey City, opened its 139 units. Half were leased within the first week. BNE, the developer, says 80% were taken within three weeks. The boutique-style building has a 24-hour concierge and amenities that include on-site parking; it is also priced stratospherically for the “old” Jersey City: one bedrooms start at $2,130; two-bedrooms range from $3,125-$3,540 and with a den, up to $5,090; and three-bedrooms go for $4,375 to $5,690.
“The deal is still the same today,” says Cushman & Wakefield’s multifamily investment specialist in New Jersey, Brian Whitmer. “People working in Midtown, the World Trade Center, they all have to live somewhere. New Jersey has always been cheaper than Manhattan, and now, Brooklyn.” He and other investment analysts say the price discount for tenants crossing the river to rent in New Jersey, traditionally quoted as about a third, has widened, headed toward 50%, causing demand to skyrocket in Jersey City. But won’t it flatten after 10,000 units “flood” Jersey City’s market in coming years, investors and bankers continually ask him. He answers, with confidence, “The history of the Gold Coast has proved that if you build it, they will come. There might be a few years of stagnant or moderate rent growth up ahead, but nobody should be afraid there won’t be heads for beds.”
In its first-quarter report, HFF said the apartment market along the Gold Coast is still riding a wave of demand that only began to crest in 2010. HFF’s Jose R. Cruz predicts demand will remain steady “and grow another 1.6% over the next five years.” Last year, average rents rose to $2,714 from $2,676 in 2012, an increase of 1.5% in Hudson County, according to Reis. HFF’s analysts say that even as thousands of units emerge onto the market in Jersey City, rent growth will be just “slightly mitigated.”
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