A model apartment inside Hudson Lights, a new 276-unit luxury complex in Fort Lee. — Courtesy: Tucker Development
By Joshua Burd
Apartment rental rates in northern New Jersey will grow for the sixth consecutive year, a new report has found, as leasing activity keeps pace with the roaring pace of new construction.
The report, by Marcus & Millichap, found that average rent in the region will rise 4.1 percent to end the year, ticking up to $1,789. Researchers point to strong net absorption that kept the vacancy rate stable in 2016, despite the fact that 8,500 new units have been delivered.
That means that, heading into 2017, the North Jersey rental market is still benefiting from the formula that has fueled construction during the current cycle: local job growth, connectivity and the fact that even newly built luxury units are still more affordable than New York City.
“Demand remains the strongest in the interconnected coastal region, bringing the greatest amount of new apartments to Hudson, Essex and Bergen counties, respectively,” Marcus & Millichap wrote. “Sizable leasing activity will enable the sixth consecutive year of rent gains and will be in line with completions this year, holding the vacancy rate under 5 percent.”
More than 16,600 rental units are under construction, the report found. Some 70 percent of that activity is taking place in Hudson County, which continues to lead the pack in pricing and saw effective rent rise 4.1 percent year over year through the third quarter.
That brought average monthly rent in the county up to $2,480, thanks to thriving cities such as Jersey City and Hoboken. In Bergen County, rents reached $1,723 in Q3, an increase of 3.9 percent from a year earlier.
Marcus & Millichap pointed to greater affordability in Essex County, where it tracked rents at half of those found in Hudson County, but found that the average still rose 2.7 percent over the same period.
That uptick in rental rates follows a 6.8 percent increase in 2015, according to the report. And while Marcus & Millichap described it as “a slightly subdued pace of growth,” the report said that investor interest in North Jersey continues to be strong.
Prices climbed 17 percent on average to $158,700 per unit, the report found. Hudson and Bergen counties led the way, with properties trading at $211,700 and $188,300 per door, respectively.
The report also noted that a scarcity of quality assets along the Hudson waterfront has led buyers to search farther inland. As a result, transaction velocity in Morris and Passaic counties has doubled.
That activity includes signs that investors are seeking greater value in those counties and elsewhere in the region, Marcus & Millichap said. For instance, investors turned to the greater Newark submarket to find initial yields in the mid-6 to mid-8 percent range, as opposed to 5 percent or less in Jersey City and Hudson County.
