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As property managers and multifamily investors, we believe the returns we all enjoyed over the past couple years are done. The old tenets of investing in quality products in good locations and implementing your value-add/development plan with a close eye on expenses with multiple exit strategies will be the recipe for successful investments in 2023.
Most forecasts call for a peak in mortgage rates around 7.5 to 8 percent in early 2023, then gradually coming down over the course of the year to 5.5 to 6 percent. Drastic increases in rates will bring opportunities to buy at a discount as one- to five-year mortgages due to reset in 2023 at higher rates will force selling. Prudent investors that have been on the sidelines will finally be rewarded.
Multifamily rents nationwide have fallen for the past four months as per CoStar data, but in New Jersey we haven’t seen rents decreasing. Rents have stabilized and automatic increases on renewals and turnovers we implemented throughout 2022 will slow down. The ROI of keeping a tenant at the same rent is better than raising their rent and losing them to other buildings offering incentives.
(973) 771-5170 112 Jabez St., Suite 100 Newark, NJ 07105
From a macroeconomic perspective, we can expect 2023 to be
a challenging year. After several years when many businesses experienced record profits, we are entering a period of “survival of the fittest.” With interest rates, core inflation and labor costs at their highest levels in many years, we can expect new construction to slow down. As with the Great Recession of the late 2000s, however, the strongest players in the marketplace will further solidify
their position and grab share from weaker players. Our clients
are primarily well-capitalized, long-term investors. We anticipate helping them take advantage of opportunities that might not have existed prior to this ongoing Fed tightening cycle. So, although we are likely to see a moderate downturn in new construction, we will see an uptick in acquisitions of vulnerable, less well-capitalized entities, as well as an uptick in project approval for when rates and costs stabilize.
(973) 840-7804 Harborside 5
185 Hudson St. #2510 Jersey City, NJ 07311
The multifamily, mixed-use market in New Jersey is strong, even in the midst of uncertainty concerning interest rates and rumors of recession. Our clients are moving forward with existing projects and looking to acquire new sites.
With entitlements taking one to two years on average, then design and bidding taking another six months and construction duration of one and a half to two years, most new projects will not be coming online for three to four years. Knowing this, most developers believe that the market may be considerably different at that time.
The current residential rental market has been bolstered by higher mortgage rates prohibiting first-time buyers from purchasing homes, thus keeping them in rental housing. Another source of demand in New Jersey is that the extremely high rental rates in Manhattan and Brooklyn have forced renters over the Hudson River to lower rents in New Jersey.
(609) 397-9009 ext. 112
80 Lambert Lane, Suite 105 Lambertville, NJ 08530
We have been tracking trends and conditions closely. There will likely be challenges for all of us in 2023. A few key performing markets, such as multifamily/mixed-use, will slow down. However, we are confident this will still be a solid year for us, with projects like The Crossings at Brick Church Station kicking off and others in the pipeline. The industrial sector will continue to lead the way in new construction. 2023 may be the year we see the multilevel warehouse market making its way into New Jersey. The traditional retailer is at a fork in the road. Look for grocers, QSRs and service- oriented businesses to make up most of this market. Hopefully, we will see this volatile market with high interest rates and inflation start to reverse if the Fed shifts its positions.
(973) 904-0213 601 Hamburg Turnpike Wayne, NJ 07470

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