NJ rental market rates among strongest in U.S.The New Jersey apartment market is one of the strongest in the nation, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the U.S. Department of Commerce, thanks to its link to both the New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. and Philadelphia metropolitan areas. New Jersey's multifamily rental inventory boasted an impressive occupancy rate Noun 1. occupancy rate - the percentage of all rental units (as in hotels) are occupied or rented at a given time pct, per centum, percent, percentage - a proportion in relation to a whole (which is usually the amount per hundred) of more than 95% at the end of May 2006, continuing to best both the national rate and northeast regional rate of 94%. This success can be attributed to the state's combination of outstanding location, dense population, high barrier to entry in mature markets and a general inventory undersupply un·der·sup·ply n. pl. un·der·sup·plies A supply smaller than what is appropriate or required. tr.v. un·der·sup·plied, un·der·sup·ply·ing, un·der·sup·plies . New Jersey's demographics bode well for apartment owners. More than one third of the state's 3.2 million households rent their homes and pay an average of $1,200 per month--a 25% premium compared to the national average monthly rent of $909. The rental market is further bolstered by New Jersey's affluent population, indicated by an $82,927 average household income and its status as the nation's most densely populated pop·u·late tr.v. pop·u·lat·ed, pop·u·lat·ing, pop·u·lates 1. To supply with inhabitants, as by colonization; people. 2. state, with 1,152 persons per square mile (as compared to New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of State's 318 persons per square mile and Connecticut's 613 persons per square mile). The state's total apartment inventory consists of more than 1,500 properties comprising nearly 400,000 units. The highest concentrations of multifamily properties are located mostly within the densely populated northeastern counties of Bergen, Hudson and Essex. These counties either support an area employment center or serve as bedroom communities for Manhattan commuters. Rental rate trends Shifting market conditions have poised the state's rental market for solid gains in 2006, and the foundations for near-term aggressive rate growth are being laid. Rising interest rates are placing hopeful homeowners back into the apartment rental market. Additionally, the condominium condominium In modern property law, individual ownership of one dwelling unit within a multidwelling building. Unit owners have undivided ownership interest in the land and those portions of the building shared in common. conversion boom has created limited inventory over the last 12 to 18 months by claiming many former apartment complexes. Finally, both economic and employment growth forecasts remain strong across the entire tri-state region For other tri-state regions, see . The Tri-State Region is commonly used in the area surrounding New York City to unambiguously refer to the greater metropolitan area. Sometimes the phrase is shortened to "the Tri-State," or "the Tri-State Area" is used instead. . New Jersey's average rent consistently ranks it among the top 10 most expensive places to lease. However, it still is well below the $2,400-per-month average paid in neighboring neigh·bor n. 1. One who lives near or next to another. 2. A person, place, or thing adjacent to or located near another. 3. A fellow human. 4. Used as a form of familiar address. v. New York City. In fact, rental rate growth has hovered near inflation over the past half-decade due to a renter's market, but it has begun to pick up pace as evidenced in both the northern and central regions. During 2005, statewide monthly rents increased on average $36.00, or 3.2%, nearing par with the northeast regional average of $1,285 per month. So far in 2006, many market participants are reporting the ability to raise rents between 6 and 8% with no adverse effect on occupancy, with some reporting 10% increases, and concessions have disappeared for Class A properties. During the first quarter of 2006, the average rent in Northern New Jersey, including Bergen, Passaic, Morris, Essex, Hudson and Union counties, registered in at $1,300 per month. This was 22% higher than the average rent of $1,000 for Central New Jersey, which includes Mercer, Middlesex, Monmouth, Somerset and Ocean counties. Although Northern New Jersey posted higher rents, Central New Jersey's rental rate grew 3% from last year, while Northern New Jersey grew just 2% during the same time period, according to REIS n. 1. The word is used as a Portuguese designation of money of account, one hundred reis being about equal in value to eleven cents. 1. A common title in the East for a person in authority, especially the captain of a ship. and Cushman & Wakefield research. Investment sales activity Within this context, the New Jersey multifamily investment sales market has remained very active throughout the past 24 months, with significant movement among condominium converters and institutional investors, and prompted by an abundance of equity and favorable lending rates. In addition, demand has surged as institutional buyers have come to recognize the state's economic stability and strategic location as an excellent long-term play for portfolio diversification Portfolio diversification Investing in different asset classes and in securities of many issuers in an attempt to reduce overall investment risk and to avoid damaging a portfolio's performance by the poor performance of a single security, industry, (or country). . The apartment investment environment was extremely liquid at the end of 2005 and the first half of 2006, with approximately 42 properties (8,000 units) changing ownership, totaling $1.12 billion in sales. The median price per unit was $150,000, a rate 30% higher than the national average. Per transaction, the average cap rate was 5.15%, and the average occupancy rate was over 97 percent. Notable investment sales included AvalonBay's disposition of The Tower at Avalon Cove, a 269-unit apartment community in Jersey City, in late 2005. Developed by AvalonBay, the tower fetched $106 million, or $394,052 per unit. Condo converters continued to push pricing benchmarks paying upwards of $420,000 per unit for "Gold Coast" apartments located directly across the Hudson River Hudson River River, New York, U.S. Originating in the Adirondack Mountains and flowing for about 315 mi (507 km) to New York City, it was named for Henry Hudson, who explored it in 1609. Dutch settlement of the Hudson valley began in 1629. from Manhattan. Construction and occupancy trends During the last 12 months, 15 new apartment communities including 2,700 units were brought on-line in New Jersey. During the first quarter of 2006, the average statewide vacancy rate registered 3.75%--considerably lower than the national rate of 5.8% and northeast regional rate of 4.3%. Near-term vacancy rates in both Northern and Central New Jersey are anticipated to drop below 3% as purchase financing becomes more expensive and creates a heightened predisposition predisposition /pre·dis·po·si·tion/ (-dis-po-zish´un) a latent susceptibility to disease that may be activated under certain conditions. pre·dis·po·si·tion n. 1. to lease. As such, new rental projects are well positioned for success, supplying new inventory to meet increasing demand. Looking ahead, we expect these positive trends to continue, fueled by New Jersey's strong market fundamentals. BY JOSE CRUZ Jose Luis Cruz (Cheo) can refer to different people:
CUSHMAN & WAKEFIELD'S METRO-AREA CAPITAL MARKETS GROUP |
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