Key Take Aways from Northern New Jersey’s August 2022 Meeting
- Charles Heydt (Dresdner Robin) reported that his firm has been very busy throughout the summer with site planning and approvals for a variety of properties. They have also been collaborating on a few projects with NJ Transit. He noted that NJ Transit has created a new group to focus on real estate development around train stations, citing as an example a 1200-unit project near the Jersey City train station.
- Greg James (NAI James E. Hanson) believes that the State of New Jersey is sitting on $4 to $6 Billion from the Federal government via the Cares Act and other government programs, while opportunities for infrastructure, light rail, road improvements, and other transportation issues seem to be on hold. He contends that there is little to no planning, oversight, or accountability for the allocation of this fund.
- In response, Charles Heydt reported that NJ Transit has received money allocated for growth and has recently added two or three engineers who are gearing up for new projects. John Tregidgo (Dresdner Robin) added that his group has been aligned with projects in the public sector for some time, including several in the last 6 – 8 months, and is actively exploring opportunities with the State that affect infrastructure as well as environmental issues. He added that the State is in the process of re-structuring and planning how this money will be allocated for projects like the mid-town tunnel update.
- Greg James (NAI James E. Hanson) continued with an overview of the NJ multifamily market, which is “on fire.” He sees it bursting at the seams in Hackensack and other Bergen and Essex County communities as well as along the NJ waterfront. Construction firms cannot build fast enough to meet demand. His colleague Jonathan Kristofich added that one Bergen County property under construction has already leased a third of its 271 units in one month, with a waiting list for the remaining units. While at the height of the pandemic, landlords and builders were offering prospective tenants incentives to sign, that is no longer the case. Parking (inside and outside), pools, gym memberships, club space, etc. that were once offered for free all have fees. Studios in Hackensack that were going for $2K/month at the height of the pandemic have doubled; $3500/month 2BRs are now priced at $5,000/month or higher.
- Bill Hanson (NAI James E. Hanson) added that residential housing (both condos and houses) continues to be the safest investment, even with rising prices and interest levels. According to Bill and Greg, this market is the only one in which the government puts a ceiling on pricing via Fannie Mae, Freddie Mac, HUD, and similar financing.
- Gregg Manzione (Nationwide Consulting) reported that his developer clients are thirsting to find out what is happening in the current, uneasy real estate market. He anticipates that changes in population growth and make-up will significantly affect the type, design and amount of multifamily housing projects built. One reason is the decline in the school population in the last ten years or so. Another is the transitional nature of multifamily housing. If a couple wants to expand beyond one child or needs a home office set up, they will seek a single-family home.
- Guest Tom Haggerty (SAA) addressed the current shortages of manufacturing components that are slowing the construction and development of several markets. Supply chain issues related to both manufacturing and delivery of construction parts, roofing material, kitchen appliances, cabinets, and more are slowing construction across all markets. And in some cases, there has been as much as a $720K increase in raw materials or parts from manufacturers. Delivery delays in small components for switch gears, for example, have gone from a 10–12-week normal delivery to 32 weeks and then to 51 weeks.
- The group also examined the growth trajectory of several leading towns and cities in the region. According to Charles Hecht, Ridgewood will see the completion of four multifamily projects of 250 units in the next four years. Montclair continues to grow with new multifamily rental and condo housing plus four new multi-unit parking structures in its downtown; as a result, 80% of its stores, restaurants and new downtown arts center are full and active. Morristown has completed a successful 20-to-30-year plan, resulting in a thriving downtown that embraces business, retail, residential, restaurant, and parking needs.
- According to Charles Heydt, Jersey City continues to personify a major city transition with new multi-family condos, modern office buildings, extended light rail, vibrant downtown area, city parks, and easy proximity to NYC. Newark has been transitioning into a more modern city as well, and according to Bill Hanson, needs more vibrant, committed leadership to transform itself into an international destination city (as Guiliani and Bloomberg did for NYC). It has an international airport, a major downtown railroad station, easy commuter rail transportation to NYC, major highways, downtown arts center and sports stadium, and major anchor businesses (Prudential and Audible; Whole Foods)
- Bill Hanson (NAI James Hanson) predicts that over the next 4 to 5 years, the office market will be transformed. While some firms will opt for the return to traditional offices; others will establish hybrid office/home operations. The work week may shorten to 4 days as many want a more balanced work/live lifestyle. Tom Haggerty (SAA) sees the design of office space continuing to evolve to allow flexibility, and simplicity and interaction without gimmicks like indoor waterfalls or wall gardens. Some firms might combine in office and Zoom meetings with work at home options for part of the week. All agree that a return to a physical office setting, and culture would be important for younger employees who would benefit from one-on-one in person training and interactions with their managers and coworkers.
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