New Jersey’s Gold Coast, the stretch of waterfront running along the Hudson River opposite Manhattan, is in the midst of a building boom, with dozens of developments (mostly rentals) in the pipeline.
And as prices in Manhattan and the outer boroughs climb, Gold Coast towns with strong transit links are increasingly shedding their second-fiddle status.
“This side of the river used to be considered more of a niche market,” said David Barry of Hoboken-based Ironstate Development, which has multiple residential projects in the area. “It’s now considered much more a piece of the fabric of greater New York.”
Over the course of the next few years, the towns along the Gold Coast — which include Jersey City, Hoboken, Weehawken, West New York and Edgewater — are expected to add just shy of 9,000 new apartments, riding a wave of demand that has been growing since 2010.
This month, The Real Deal compiled a list of more than 30 development projects that are either currently being marketed or will come to market in the next two years (see chart). The data came from municipal records, news reports and TRD sources.
Of those projects, 24 are in Jersey City. Weehawken, meanwhile, has four, and Hoboken and Edgewater have three each.
The towns along New Jersey’s Gold Coast have, of course, long attracted apartment hunters looking to get more for their money than they can in New York City. But as Manhattan and Brooklyn — and increasingly other areas in the outer boroughs — become even more expensive, Jersey is becoming even more appealing, especially given the new development that’s now available there, sources say.
“In general, Jersey City and the outer boroughs behave much like Manhattan does,” Barry said. “When Manhattan is tight and it’s hard to find an apartment, in general that bodes well for the outer boroughs.”
At the end of last year, the vacancy rate for multi-family rentals in Hudson County, which covers many of the Gold Coast cities, was 4.7 percent, according to the research firm Reis. That was level with 2012, but a 13 percent drop from 2011.
Residential rents have been rising, too.
In 2013, the average effective rent in Hudson County was $2,650, up 1.7 percent from the previous year, Reis’ data show.
By comparison, average rents in Manhattan climbed 2.1 percent for an annual price of $3,875 in 2013, according to appraisal firm Miller Samuel.
In addition, demand in Hudson County is expected to grow steadily, with rents projected to increase more than 1.6 percent annually over the next five years, according to the commercial firm HFF, which did more than $380 million worth of deals in Hudson and Bergen counties over the last 18 months.
But there are some concerns about the large amount of residential product coming to the market. To wit, the vacancy rate is expected to tick up to 5.4 percent in 2017.
Still, others are confident there will be enough demand to absorb the new units.
“People like to say you can overbuild,” said HFF’s Jose Cruz. “The reality is, they will come for those units.”
Cruz added that if any of the Gold Coast markets have the potential to overbuild, it is Jersey City. But even there, he said, any rental glut would be a short-term “blip.”
Bullish insiders point to the rapid rate of lease-ups as proof that the Gold Coast’s most active markets can absorb the rush of new product.
Most of the recent development has been, and will continue to be, centered in Jersey City, where trendy new shops are popping up and an industry-friendly mayor is using tax incentives to encourage developers to put shovels in the ground.
Recently completed residential projects include the LeFrak Organization’s 158-unit rental tower Laguna that’s part of Newport, the 600-acre, mixed-use city-within-a-city that the company has been developing for nearly 30 years. The building, which sits across the river from Hudson River Park’s Pier 40, was the first completion in the final phase of the Newport campus.
“It did extremely well. It was our most successful lease-up ever,” said Mario Gaztambide, LeFrak’s vice president of residential properties. “We were at 100 percent in less than six months from opening.”
Other buildings that have come online in the last year in Jersey City include Fields Development’s 131-unit Madox Apartments and the Manhattan Building Company’s 155-unit Cast Iron Lofts, which the developer has dubbed Soho West.
In addition, in June, Ironstate launched 18 Park, which the company developed with KRE Group, a firm headed by Jonathan Kushner, the cousin of Kushner Companies’ Jared Kushner. As of the middle of last month, nearly half of its 422 units were leased, at rents ranging from about $2,600 for a one-bedroom to $3,500 for a three-bed unit.
Compared to similar outer-borough neighborhoods that have benefited from a rush of renters priced out of Manhattan, Gold Coast towns offer even deeper discounts, brokers and developers noted.
At Avalon Bay’s Avalon Cove in Jersey City, for example, the average rent per apartment was $3,246 in 2013, according to the REIT’s SEC filings. That’s compared with an average of $3,460 at the company’s Avalon Riverview in Long Island City.
Developers and institutional investors are crossing the Hudson to markets where rentals still make economic sense. That, in turn, is pushing up valuations for Gold Coast properties and prompting more developers to build. The soaring price of building residential properties in New York City is fueling building as well (see related story).
Jersey City’s pipeline includes Toll Brothers’ 417-unit Provost Square and the two-tower 99 Hudson, the mixed-use development project China Construction America bought last year for $70 million from N.J.-based Hartz Mountain Industries. China Construction’s site will include 1,000 rentals and condos, as well as a hotel when it is completed in 2019.
Tall towers are nothing new to downtown Jersey City. Yet as TRD and others have reported, new projects are creeping further inland into the Journal Square area — which runs along the PATH train line, but has yet to see the kind of large-scale development punctuating the coastline.
“Journal Square, that area hasn’t been tested yet,” said local developer Robert Lehrer. “We won’t know how good it is until the first building is built and occupied.”
In downtown, which includes the waterfront, one-bedrooms go for an average of $2,500. Journal Square rents average $1,450, according to Jersey City brokerage JCity Realty.
Projects in the pipeline include the first phase of KRE’s Journal Squared, which will bring 540 rentals to the PATH station area. Construction began in August. By the time the three towers are done, the project will have close to 2,000 apartments, including the state’s tallest residential tower.
In Hoboken, there are three projects set to bring almost 500 units to market. Sources said the comparatively low number of projects stems from the fact that the area is more mature and that development sites are harder to come by.
“Hoboken is a mile square,” said Brent Jenkins of development firm LCOR, which is working on a plan to develop more than 2 million square feet of mixed-use property along Hoboken’s NJ Transit tracks. “It has seen a resurgence that goes back two-decades-plus, through multiple economic cycles. It’s only natural that after a while, you’re going to run out of land.”
In Weehawken, north of Hoboken and with two ferry stops plus easy Lincoln Tunnel access, condos are more prevalent.
For example, the Avenue Collection, the recently completed first phase of a project by Lennar Urban, includes 74 condos ranging from $800,000 to $4 million. Sales launched in July and by mid-September, more than 60 percent were sold. Lennar already broke ground on the 103-condo second phase.
On the rental front in Weehawken, leasing is underway at Roseland’s 589-unit project known as the Estuary near the Lincoln Harbor ferry stop, and the developer’s River Parc at Port Imperial will bring 280 rentals to the market.
To the north, in West New York, Roseland is also leasing its 316-unit rental River Trace at Port Imperial. And in Edgewater, leasing is underway at James Demetrakis’ 100-unit Infinity, while Daibes’ 300-unit the Alexander is still under construction.
Just as New Jersey land prices are lower than in development hot spots like Williamsburg and Greenpoint, so are the rents.
Still, developers who have not built in the area are now trying to get a piece of the pie. For example, the Edison, N.J.-based real estate investment trust Mack Cali, known mainly for office properties, acquired a large multi-family portfolio in 2012 when it purchased local development company Roseland. In addition to River Parc at Port Imperial, the REIT is now developing the 766-unit tower URL Harborside with Ironstate in Jersey City.
Chinese developers are active, too. In addition to the aforementioned 99 Hudson purchase by China Construction America, which is a subsidiary of the Beijing-based China State Construction Engineering Corp., another Chinese company, the Landsea Group, announced plans to build a 200-unit condo on the Weehawken waterfront in the future.
Brokers are also ramping up their efforts. New York City-based commercial firm Massey Knakal Realty Services recently expanded its New Jersey office, and earlier this year, a Keller Williams franchise opened an office in Hoboken. And recently Natalie Miniard, a former broker with the new development firm the Marketing Directors — which has more than two dozen projects in Gold Coast towns — started her own firm.
“I saw the demand for a Jersey City-based real estate office that really focused on Jersey City,” said Miniard, whose company, JCity Realty, has six agents and is handling leasing for the 119-unit Art House.