Nicholas Nicolaou, Gebroe-Hammer Associates
Abundant financing, unrelenting demand in an undersupplied industry and low rates are driving Northern New Jersey’s multifamily investment market toward pre-recession levels. Nowhere is this more evident than in the urban commuter hub of Hudson County. Known as an integral part of New Jersey’s Gold Coast, Hudson County serves as one of the most active investment and rental markets in the region thanks to its proximity to Manhattan and high concentration of multifamily properties.
Long-term owners in the area increasingly are aware of the market conditions, and trading has started to approach unprecedented levels. A prime example was the recent $21 million sale of a four-property Hudson County multifamily portfolio, with units located throughout Jersey City and Hoboken. The deal marks one of the most highly bid sales in Hudson County this year, with more than 20 competitive offers submitted for the portfolio consisting of 159 apartments and six commercial units. Following three rounds of bidding, the seller, which had owned the property for more than 40 years, accepted the highest non-contingent offer. All of the properties were fully occupied at the time of sale, and the largest — a mid-rise elevator building on Magnolia Avenue in Jersey City — sold for $12.7 million.
The buyer of the portfolio, a private investment group with additional holdings throughout Hudson County, plans to implement capital improvements to render the properties even more competitive within the hot rental market. This is a common theme in today’s marketplace as multifamily properties with the potential to add value rank at the top of acquisition strategies. Business plans regularly include property improvements such as common area refurbishments and kitchen and bathroom retrofits with modern appliances and amenities. Upgrades like this set the stage to reposition a property, enabling investors to realize a greater return on investment.
In Jersey City, extensive redevelopment efforts are fueling the voracious appetite of investors seeking to leverage the area’s gentrification. Projects include the newly opened Kennedy Lofts, the first, non-waterfront luxury residential building added to Jersey City’s housing stock in several years; Journal Squared, a three-tower, high-rise project; and the preservation of the Jersey Journal’s former site at 30 Journal Square.
Millennials Migrating to the Gold Coast
Hudson County’s allure for investors includes its strong, diverse tenant base from millennials to empty-nesters to hard-working families. Current occupancy rates in Jersey City are 98 percent and occupancy rates in Hoboken exceed 98 percent.
Increasingly, millennials are flocking to regions like the New York metropolitan area, with its positive economic outlook and good job prospects. According to a recent RealtyTrac.com survey, Hudson County ranks among the top 10 counties attracting this young generation. In fact, from 2007 to 2013, the millennial population in Hudson County increased 44 percent, serving to further bolster the area’s tenant base. For this group, renting is the norm, and homeownership will likely remain both undesirable and out of reach for the majority in the foreseeable future due to stricter lending guidelines and uncertainties in the housing market.
As buyers continue to set new benchmarks for what they are willing to pay, multifamily assets in Hudson County will remain the darling of the investment market.
— By Nicholas Nicolaou, Vice President, Gebroe-Hammer Associates. This article originally appeared in the November/December 2014 issue of Northeast Real Estate Business magazine.