1/12/23 Northern New Jersey Mastermind Group Meeting

Key Take Aways from Northern New Jersey’s January 2023 Meeting

• The Pegasus Group is concentrating on redeveloping Harrison, NJ and in the process of developing 192 units. (Richard Miller – The Pegasus Group)
• Floodplain concerns have been a major issue with new regulations coming up. There is currently a 700-page draft and they are in an open comment period. (Tony Ianuale – Dresdner Robin)
• Stormwater management is getting more aggressive. (Gregory James – NAI James E. Hanson Inc)
• On the financing side, banks are being more hesitant, especially in the construction space. Some banks are not participating and some are looking at 7% thresholds. There is so much risk so it is harder to get more conservative deals done. (Tony Ianuale – Dresdner Robin, John Cree – G.S. Wilcox & Co.)
• Prices on construction materials haven’t been coming down, at least not as much as expected. Less inflation in the labor market. ((Richard Miller – The Pegasus Group)
• There is a lot of talk about the mortgage situation and there is an expectation that construction will fall dramatically because financing will be difficult. (Paul Fiorilla – Yardi Matrix)
• Inflation has caused some companies to lay people off, such as Salesforce and Amazon (though only a small percentage of jobs added). Professional services remains a tight labor market and there is a skills deficit in science fields and those requiring certificates. (Paul Hacker – Axis Insurance Systems, Tony Ianuale – Dresdner Robin, Gregory James – NAI James E. Hanson Inc)
• Amazon hasn’t backed out of any leases locally. Nationally, they walked away from approximately 25 properties. (Bill Hanson – NAI James E. Hanson Inc)
• Companies are having to make decisions about long term leases and deciding if they need offices for their entire workforce or if they can save money by leasing less sq ft. Some companies are switching from Class C space to smaller Class A space. (Tony Ianuale – Dresdner Robin, Gregory James – NAI James E. Hanson Inc)
• City of Montclair Planning Commission is looking at redevelopment of an old train station. Saving the station is easy, but train sheds are more difficult. (Tony Ianuale – Dresdner Robin)
• Adding underground parking adds a lot of costs and creates issues when building above the parking structure. (Richard Miller – The Pegasus Group, Tony Ianuale – Dresdner Robin)
• There are lots of office buildings that are over 40 years old and the office market needs new product, but it’s hard to build on spec in this market. (Bill Hanson – NAI James E. Hanson Inc)
• Multi-Family Rents are at an all time high in New Jersey and Northern New Jersey rents are up 8.6%. (Paul Fiorilla – Yardi Matrix)
• Occupancy rates are incredibly high in properties with 50 or more units in Central New Jersey. (Paul Fiorilla – Yardi Matrix)
• The data on multi-family doesn’t suggest everyone is leaving. Highest rent growth ever and occupancy and demand are high. (Paul Fiorilla – Yardi Matrix)
• There is a  lot of discussion about refinancing. Lots of loans that originated in the last couple of years with floating rates are facing maturity default situation. (Paul Fiorilla – Yardi Matrix, John Cree – G.S. Wilcox & Co.)
• Bloomberg predicted a hard landing in the multi-family sector and Real Page says absorption of multi-family has turned negative on a national level, but that’s not what many are seeing in practice. Occupancy rate dropped some, but from a historical perspective it went from an all-time high to a little bit lower. (Paul Fiorilla – Yardi Matrix, Mateusz Wnek – CoStar Group)
• There are estimates of 2-3 million housing unit shortage nationally. Locally and nationally there is a long term undersupply.  (Paul Fiorilla – Yardi Matrix)
• Single family starts have slowed, but not multi family starts. (Paul Fiorilla – Yardi Matrix)
• Slow down in migration nationally, but doesn’t seem to be a problem as far as multi-family demand goes. There is also more luxury supply stock being delivered. (Paul Fiorilla – Yardi Matrix, (Mateusz Wnek – CoStar Group)
• 2020 was difficult with lots of tenants moving out and having to lower rents, but has bounced back since then. (Richard Miller – The Pegasus Group)
• Some towns are adopting new zoning to allow modified living adaptations to single family homes because of a lack of affordable housing. Though likely not a big enough factor to compete with apartments. (Paul Fiorilla – Yardi Matrix, Tony Ianuale – Dresdner Robin)
• NYC occupancy rate is high. (Paul Fiorilla – Yardi Matrix)
• Some larger areas have physical limitations to growth where as areas like Texas have more land to expand. (Richard Miller – The Pegasus Group)
• Some places like Las Vegas are cheaper, but schools aren’t as good so having to send kids to private schools offsets some of the savings. (Paul Fiorilla – Yardi Matrix)