Until recently, it was easy for home buyers to get credit, making the sales market strong. Condos were selling in luxury projects from Bayonne to North Bergen.
Now, in early 2008, the subprime mortgage crisis has impacted banks in their lending to developers, and some developers are avoiding committing to condos and are constructing rental buildings instead. That usually ensures there is a ready pool of tenants to occupy the building and a constant source of income for the property owner.
However, the situation in Hudson County is not so black and white, according to various realtors, developers, and government officials.
What comes through in the various conversations and through research into rental figures is that Jersey City and Hoboken still have strong markets for both rentals and condos due to their proximity to Manhattan, while other Hudson County towns have varying degrees of success.
Some numbers
Apartment market analyst Marcus & Millicap, based in Encino, Calif., found in their 2007 National Apartment Research Report that the Northern New Jersey region, which includes Hudson County, will continue into 2008 as a “consistently strong-performing apartment market.”
Their report says rents in 2008 are expected to rise 4.5 percent to an average of $1,534 per month in the region. The report also forecasts an additional 8,100 jobs this year in the Northern New Jersey region and developers are expected to complete 1,000 apartment units this year.
Information complied by the New Jersey Division of Community Affairs (DCA) found that from January to October 2007, 3,817 multifamily units in Hudson County were approved for permits for construction, and 908 were approved for permit for occupancy, including both rentals and condos.
Rentals in Jersey City and Hoboken
Several high-end Jersey City developments have ended up as rentals.
In September, two large rental buildings, 50 Columbus and Grove Pointe, opened within a block of each other in downtown Jersey City.
50 Columbus is a 35-story 400-unit housing complex at Columbus Drive and Warren Street. The rentals start at $1,825 per month.
Developed through a partnership between the Hoboken-based Applied Development Company and the Jersey City-based Panepinto Properties, the owners already have leased out 80 percent of the 400 rental units already completed including eight duplex townhouses.
The developers also are building two 48-story rental towers next door at 79-90 Columbus, featuring 942 units and 320 parking spots.
In October, when longtime developer Joseph Panepinto discussed why when he started construction of 50 Columbus in September, 2005, he said that the fact that it was rentals had to do with an earlier market change.
He and Applied had been working on another building after the turn of the millennium, and because condos were hot, the other building was changed from rentals to condos. Once they sold that building to Donald Trump, they started working on 50 Columbus as a rental project.
Grove Pointe, located a few feet from the entrance of the Grove Street PATH train station, is a complex with 458 rentals and 67 condos. The project was developed by SK Properties, a subsidiary of Schenkman/Kushner Affiliates based in Bridgewater. There will also be a Starbucks coffee shop and a Duane Reade drugstore in the building. Rental prices ranges from studios at $1,900 to two-bedroom, two-bath topping out at $3,200. “Jersey City is great for rentals and they attract especially a young workforce,” said Jonathan Kushner, one of the principals of the Bridgewater-based SK Properties. “A lot of them are young and bright and hardworking.”
The Cliffs Lofts is a four-story rental-unit complex located on Paterson Plank Road and Mountain Road that will see completion this spring. It is being built by Brass Works Urban Renewal, LLC, of which the principal investor is Hoboken developer Sanford Weiss. The project has 120 rental units with 88 parking spaces. Also, the developers will reconstruct the “100 steps” leading down the Palisades from Jersey City to Hoboken. In Hoboken, which is populated with young professionals who recently graduated from college, rentals have a great presence on the city’s now burgeoning west side.
There are the Upper Grand buildings (1000 Jefferson Street and 800 Madison Street), both of which have added more than 400 rental units to this northwestern section of Hoboken. The buildings were constructed by a partnership of the Tarragon Corporation, the URSA Development Group, and Sage Residential.
The builders of the Harbor Station North District at the Peninsula in Bayonne, formerly known as the Military Ocean Terminal, have recently looked to get approval from the Bayonne Local Redevelopment Authority to switch from for-sale to rental apartments.
In a published interview, Josh Sternberg, vice president of development for Roseland/Bayonne LLC, which is partnered with Fidelco and S/K Bayonne Associates to build the 447 residential units at Harbor Station North, said that the team was looking for the “flexibility to use rentals” in response to current market conditions.
Also in Bayonne, Trammel Crow Residential (TCR) has approvals to build 535 luxury rental apartments as part of the Bayonne Bay District at the former Military Ocean Terminal, along with a clubhouse and parking deck.
Not buying into homeownership
The nationwide housing slump in the past year immediately put developers in a position where the for-sale sign changed to for-rent.
National developers Toll Brothers, builders of several condo projects in Hoboken and Jersey City, announced late last year that they had suffered through a 22 percent decline in home building revenue in the first quarter of this year since the same time last year.
In an interview in February with the Associated Press, Toll Brothers Chief Executive Robert Toll described how the economy – despite lowering mortgage rates and falling home prices – has taken its toll on the potential buyer.
“Buyers seem to be hiding,” Toll said in a statement. “The market’s problem is a lack of confidence, not just regarding the direction of home prices, but … the overall economy.”
The most famous example of developers seeking the rental panacea for ailing condo sales is the Velocity in Hoboken. The 128-unit condo development located between Sixth and Seventh Streets made headlines in 2005 when the developer announced with pride that the first phase of the project – 44 condos – were reserved in less than 12 hours.
A different scenario unfolded two years later, when in June 2007, 40 of the Velocity’s units were put up for auction at the Hyatt Regency in Jersey City. But only nine sold. Now the developer is trying a new tactic by going the rental route.
But wait – there’s room for both
If you’re Albert Cupo, you’re not ready to jump on the “rentals in, condos out” bandwagon so quickly.
Cupo is the owner of AJC Reality in Jersey City and president of the Liberty Board of Realtors. With over 30 years experience in real estate, Cupo has seen all kinds of cycles where condos and rentals have had their rise and fall in the market.
As far as this year, Cupo says while rentals are definitely in demand in Hudson County, condos are still in demand in what he still calls a “buyers’ market.”
“There is no better time to buy since the [mortgage] rates are favorable and prices are dropping,” Cupo said. “And Jersey City and Hoboken are still desirable places to live for those who are moving from Manhattan but still have jobs there.”
But Cupo knows the rental market has grown hotter, saying his office has seen a 15 to 20 percent jump in demand for rentals from the year before.
He said as far as the rest of Hudson County was concerned, it hinges on location. And there is one other factor.
“A lot of people who after relocating to Hudson County are really trying to use public transportation,” Cupo said. “With the extension of the [Bergen-Hudson] Light Rail, you have a case where Bayonne has become a major player as well as other areas of North Hudson served by the light rail.”
Comments on this story can be sent to rkaulessar@hudsonreporter.com