NEWARK, NJ−At Thursday’s RealShare NJ Opportunities conference, Jersey City’s development prospects were generally lionized as vibrant, even as the prospects for the office, retail and housing markets splayed out below – literally, since the conference was at the Newark Club, on the 22nd floor – were described as wan.
Only one panelist at the three morning sessions said his company is currently looking to build in Newark and believes its multifamily market is sure to grow. “Mill Creek is looking in Newark currently,” said Mill Creek Residential’s northeast director, Russell Tepper, at a session on “Property Sectors in Focus.”
“We have not yet found an opportunity, either for ground-up or rehab’ that hits on all cylinders,” said Tepper, whose company is working on a 366-unit rental housing project in Jersey City. “There are some challenges in Newark, whether they be political or the question of rent growth, but I do believe over the long term we will see multi-family growth in Newark.”
Hartz Mountain Industries’ Constantino (Gus) T. Milano did say he thinks “it’s a great time to open a hotel in Newark” – as several developers are currently preparing to do, with small-to-medium-sized hotel projects under way.
On the other hand, Milano pointed to the 800,000 square feet of office space being vacated by Prudential at the Gateway Center downtown – visible from the Newark Club on Raymond Avenue – and said flatly: “They are not getting a conventional tenant without incentives coming into the city to fill that. Without state subsidy, it’s just not there.” Two of the Gateway Center buildings are being marketed heavily by their landlords as being eligible for major incentives under the state’s Economic Opportunity Act.
“Retail?” Milano added. “Even some deals that were already made, they fall away. Businesses need a high return to come into the city.”
The industrial market – booming all over the state – is doing just fine in Newark and generating sharply increased rents, said Milano; other panelists, including Brian Milberg, a principal of Sitex Group, and Marcus & Millichap’s Michael Lombardi, agreed.
Meanwhile, Jersey City – the state’s second-largest city behind Newark – is exploding with all sorts of development projects, but most impressively with multi-family development. More than 11,000 units are in the development pipeline (See “Jersey City Surges,” in this month’s issue of Real Estate Forum.)
“We feel really bullish on Jersey City,” said Mill Creek’s Tepper. Last month, his company acquired a long-vacant warehouse in the Powerhouse Arts District for $38 million, which it will rehabilitate and turn into 366 loft rental units.
Asked by panel moderator David B. Wolfe, a partner at Skoloff & Wolfe, if Mill Creek was concerned about the large influx of rental housing to come in Jersey City, Tepper replied, “First of all, we don’t believe that when there are 12,000 planned units that 12,000 will come out of the ground. Also, ours is a unique investment that will provide very unique, highly amenitized loft units unlike anything that exists in Jersey City, within a block of a PATH station.”
Speaking on a separate panel (“Opportunities in Investment and Finance”) Adam Altman of KABR Group said he believes an array of multi-family development happening at the same time helps bolster neighborhoods in Jersey City.
“The Mill Creek project is going on right behind ours,” said Altman. His company is partnering with Kushner Cos. to build Trump Bay – a second tower to the five-year-old Trump Plaza Jersey City – a block from Mill Creek’s warehouse conversion. “We don’t see a conflict there. This is creating a context to a neighborhood,” he said, “and allowing different retail pockets to evolve, all of it existing within the halo of New York.”
Altman said his company is confident the flow of renters will continue strong into Jersey City, as the Hudson Yards and Freedom Tower projects are completed in Manhattan, generating thousands of new jobs for young “Millennials” —who will be attracted to lower-cost apartments across the river. In Manhattan and parts of Brooklyn, apartment rental rates have soared to around $65 per square foot, Altman said.
“Who doesn’t think that many of them won’t take the PATH or hop on a ferry across the river for $45 per square foot, or less, in Jersey City?” he said.