NEW BRUNSWICK—The multifamily asset class may be gettingoverbuilt, and developers should be thinking about how to react ifconsumers change the way they look at their shelter needs, saidmembers of the New Development, Redevelopment and Repositioningpanel at last week's RealShare New Jersey conference.

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“There is going to be a point when multifamily becomesoverbuilt,” says Constantino (Gus) T. Milano,managing director, Hartz Mountain Industries. “Thefundamental question is whether people are changing the way theylook at shelter needs. Is luxury rental continuing as a long termcommitment or is it a trend that's coming to an end? Marketing hasbeen white hot in the state for a significant time.”

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“A lot of driving force in the market is liquidity, and smallerplayers skew the market,” says Ronald Ladell,senior vice president, New Jersey, for AvalonBayCommunities. “Merchant builders are not really looking atthe issues of whether demand exceeds supply, they don't care, theybuild it and they're gone, unlike build and hold developers. Peopleare underwriting multifamily on a razor's edge, trending rents, andnot construction costs. They could get caught in the switchoverwhen the market changes.”

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Hudson County and The Oranges are ideal locations to benefitfrom the multifamily boom, says Ken Sisk, nationalclient manager, Partner Engineering & Science,because of their proximity to excellent transit and New YorkCity.

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In New Brunswick, the bulk of its renters are commuters, and thetown would like to encourage more home ownership, targeting a 60/40split with renters, says Christopher Paladino,president, New Brunswick Development Corporation.But, he says, planning for the next generation oftenants/homeowners is difficult.

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“The Millennials are looking for more amenities and smallerunits. They are willing to live in high rises, they don't want tolive in suburbs,” Paladino says. “It's important to remember thatthe person we're building for now isn't at Wharton today, but is inEnglish Comp at Brown, Johns Hopkins, or NYU. Where is that persongoing to want to live and work?”

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Panelists agreed that housing and economic development in theGarden State are being constrained by continued uncertainties overaffordable housing requirements.

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“Affordable Housing is a complete debacle,” saidLadell. “It will not get resolved. The Governorhas proposed something, and that has been challenged and revised. Ifully believe it will be 2017 before there is some traction thatmoves affordable housing forward.” Towns tend to tell developers tocome back with proposals in “a couple of years” so they defergiving any guidance, making it hard for developers to makecommitments, he says.

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“A failure to solve this could kill economic development in NewJersey and render us non-competitive with the states around us,”says Carl Goldberg, co-president,Roseland. “Developers demand predictability. Wecan't do pro formas without understanding what theaffordable housing obligation may be. This is chasing privateinvestment away from New Jersey at a time when we are desperate tochange the perception that New Jersey is an unfriendly place to dobusiness. Every other state in the region has dealt intelligentlywith affordable housing. The fact that New Jersey has chosen toignore those approaches is nothing short of catastrophic.”

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Goldberg also points out that companiesconsidering relocation to New Jersey need more than just attractivework environments. He tells about a pharmaceutical companyexecutive considering a move to New Jersey from Kansas. “I canafford housing, but I want my executive assistant and midlevelmanagement to come with me,” Goldberg says theexecutive told him. “None of them could find shelter in New Jerseyaffordable at their salaries and commensurate with what they havein the Kansas locations.”

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New Jersey has failed to deliver housing “across a wide spectrumof price points,” says Goldberg. “Until we do, wewill not regain our competitive edge.”

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Steve Lubetkin

Steve Lubetkin is the New Jersey and Philadelphia editor for GlobeSt.com. He is currently filling in covering Chicago and Midwest markets until a new permanent editor is named. He previously filled in covering Atlanta. Steve’s journalism background includes print and broadcast reporting for NJ news organizations. His audio and video work for GlobeSt.com has been honored by the Garden State Journalists Association, and he has also been recognized for video by the New Jersey Chapter of the Society of Professional Journalists. He has produced audio podcasts on CRE topics for the NAR Commercial Division and the CCIM Institute. Steve has also served (from August 2017 to March 2018) as national broadcast news correspondent for CEOReport.com, a news website focused on practical advice for senior executives in small- and medium-sized companies. Steve also reports on-camera and covers conferences for NJSpotlight.com, a public policy news coverage website focused on New Jersey government and industry; and for clients of StateBroadcastNews.com, a division of The Lubetkin Media Companies LLC. Steve has been the computer columnist for the Jewish Community Voice of Southern New Jersey, since 1996. Steve is co-author, with Toronto-based podcasting pioneer Donna Papacosta, of the book, The Business of Podcasting: How to Take Your Podcasting Passion from the Personal to the Professional. You can email Steve at [email protected].