By Joshua Burd
Sustained demand will likely stave off a major spike in apartment vacancy in northern New Jersey, Marcus & Millichap said in a new report, despite what’s slated to be the largest infusion of new supply in decades with more than 15,000 units coming online this year.
The forecast, which the real estate services firm released on Monday, said the high volume of luxury rentals will likely recalibrate Class A vacancy in the short term, especially in Essex and
Hudson counties, pushing vacancy in the region to 5.1 percent by year-end. Yet the report noted that vacancy in top-tier space last year was well below the long-term average of 7.4 percent, even with local downsizing in traditionally office-using sectors.
Those employment trends are likely to reverse in 2024, Marcus said, fueling new gains in high-paying industries and buttressing demand for apartments. The firm added that the ratio of home price to income in the region also exceeds the national average, disincentivizing higher-earning renters from buying.
“The robust demand for luxury apartments in northern New Jersey, against a backdrop of increasing supply, points to a resilient market sector that has managed to rise above the challenges,” said Jim McGuckin, vice president and regional manager of the firm’s New Jersey office.
The report also highlighted trends involving older apartment buildings, noting that the Class C vacancy rate in northern New Jersey has held under 3 percent for 12 straight quarters, the longest such span on record. Modest but steady employment gains are also poised to continue, creating additional tailwinds for mid- and lower-tier properties.
And while deal flow has slowed in most submarkets, transaction velocity in Morris and Passaic counties held steady from 2022 to 2023, the report found. The consistent activity in inland areas likely stems from a lack of incoming supply and notably tight operations, with both maintaining vacancy rates below 3 percent entering 2024.
“The demand for all rental units in northern New Jersey remains extremely high, as long as the average mortgage payment remains significantly above the average monthly rent, we expect to see that demand continue,” McGuckin said.
