Multifamily Hotter than Beyonce's Album
Thereâ€™ll be 13,500 multifamily starts in NJ this year—up 30% from 2012. (Only 17 videos, Bey? Youâ€™ve gotta up your game.) Yet demand continues to outpace supply, panelists said at yesterdayâ€™s third annual Bisnow NJ Multifamily Summit.
Mill Creek Residential managing director Richard Murphy (right, with moderator Andy Norin, a partner at Drinker Biddle) credits continued barriers to high-density development, young folks marrying later in life (all the single ladies need leases until they're crazy in love), and declining homeownership. "These are not short-term numbers," he says. And the 35-and-under crowd wants to be in high-style areas like Newark, he told the crowd of 100 at The Newark Club.
Ingerman development principal Lara Schwager (here with Woodmont Properties CEO Eric Witmondt) says her firm is looking at land for development, but towns still prefer for-sale over rental housing. Even though for-sale developers are gobbling up the land, rentals are where young people want to be, she says. "They want to be disconnected from mowing the lawn and plowing snow." (Certainly after this white December.) Seven to 10 years ago, rentals were taboo, Eric adds, but product now coming online is for renters by choice versus renters by necessity.
That means not only delivering renters, but an amenity base. "We try not to rent apartments, but a lifestyle," Richard says. "We'll overpay to get into those environments." These residents are also "walking wallets" that'll spend money in the community. (We feel objectified and will file a complaint... after we swing by this sale at Sephora.) The trick to getting community leaders on board is to show previous successes; Eric says Woodmont invites them to its other projects to get a feel for the product and what it could do for the community. Lara adds as long as you pick the right site in the right market at the right markers, it'll work out.
KRE Group prez Jonathan Kushner (left, with Tucker Development CEO Richard Tucker and HFF senior managing director Jose Cruz) says every project his firm is building has some form of retail. In certain markets, it's also a money boost—in NY, while residential sells for $1,800/SF, retail can sell for $8,000/SF. If your project is large enough, the merchandise mix is critical, says Richard, whose company is developing the 1M SF Hudson Lights mixed-use development in Fort Lee and says an anchor like Shop Rite, which is going in one of its other projects, wouldn't be a fit there. Retail doesn't work everywhere, though, Jose points out—the 'burbs are trickier, and it has to be the appropriate mix or investors won't be interested.
Since multifamily is "the belle of the ball" and the most easily financed, some owners are looking to convert their buildings into housing, says The Martin Architectural Group principal Mike Rosen, who's seeing this in both industrial and office. (We're happy to treat our office like a bedroom if that'll make financing easier.) Jose says HFF recently worked on the sale of an office building in South Plainfield that's being torn down for multifamily, while it's closing next month on a 150k SF office building in Weehawken that'll also become housing. Industrial park developers are also taking remaining, unfinished acres for building multifamily, which can "quadruple the value" of the property. Joining him is CohnReznick partner Sharon Gordon, who also moderated.