The Real Deal New York

Jersey City sees new wave of activity

By Melissa Dehncke-McGill | November 01, 2013 07:00AM
From left:

From left: Eugene Cordano, Joseph Covello, Jacqueline Urgo and Tom Pichi

Jersey City — once considered by many in New York to be a pop-up city that primarily offered cheaper office and residential rents directly across the river — is evolving into something more.

For example, the influx of trendy New York City retailers and services — including the Williamsburg arcade-bar Barcade; the restaurant Thirty Acres, and the well-known doctors’ practice Tribeca Pediatrics — is just part of the story. Residential real estate there is also booming, and not just in the high-profile high-rise towers along the waterfront.

In this month’s Q&A, The Real Deal talked to residential brokers who work in New Jersey’s second-largest city. They said both prices and activity for sales and rentals are up significantly since last year in almost all housing sectors.

Plus, they said they’ve seen a serious increase in New Yorkers (and especially Brooklynites) looking to relocate there. One broker said that while prices are on the rise in Jersey City, they are still 10 to 12 percent less than they would be in, say, Brooklyn Heights or Cobble Hill.

In addition, they noted that those who once lived in Jersey City condos and moved deeper into the Garden State once they had children are now upgrading to brownstones and row houses in Jersey City itself. And, investors are also snapping up properties.

All of this coincides with a major push by Jersey City’s new mayor, Steve Fulop, to incentivize developers, who have already constructed a slew of towers along the waterfront, to do the same further inland. The goal is to transform neighborhoods like Journal Square and Bergen-Lafayette that have good public transportation access to Manhattan.

And the city is already well on its way. “Looking at pictures [of Jersey City] from 1980, every building looks bombed out, with bars on the windows,” said Phil Rivo of Armagno Realty. “Now the biggest problem is getting hit by a Bugaboo stroller.”

The biggest challenges at the moment are low inventory and dealing with increases in flood insurance rates, spurred on by Hurricane Sandy. For more on which projects are coming on the market, which buyers are most active and which areas investors are targeting, we turn to our panel of experts.

Eugene Cordano
executive director of sales, New Jersey, Halstead Property

It’s been reported that there’s a new wave of New York City residents relocating to Jersey City. Are you noticing New York transplants driving a lot of the activity there?

Absolutely. A lot of New York City transplants and out-of-staters are seeking out Jersey City. It’s really established itself, much like Hoboken, as a real destination. It’s not as strong as Hoboken just yet, but it is a strong second.

Who are the most active buyers in Jersey City now, and how does that differ from the past?

Condo buyers are probably the most active. But single-family and two- to four-family homes, with rental income coming from the basement unit, is a very strong subset of that market. The demographic of people buying condos is still those working in Jersey City or Manhattan. On the single-family side, it’s young families and families who need more space. They have the ability to get that space here, versus Brooklyn or other parts of the tri-state area, at a cheaper price.

How quickly are properties selling in Jersey City these days?

The time properties are spending on market is at an all-time low. It’s roughly 40 days [on average] between the time a property comes to market and the time it’s closed on the books. In 2008, when Lehman collapsed, days on the market were double and triple that.

How are residential sales and rental prices in Jersey City these days? How much are prices up or down by compared to a year ago, two years ago and during the boom?

Prices are up significantly year-over-year. Single-family homes in downtown Jersey City average about $825,000, which is up 27 percent since 2012. The average price for a two- to four-family in Jersey City is $919,000, which is up 15 percent from 2012. Condos, which average $520,000, are up 11 percent from 2012.

Which price ranges and housing types are struggling the most now in Jersey City?

In the downtown waterfront neighborhood, there really isn’t a price point or type that’s struggling. There is no vacant land to speak of, though there are some projects that are stalled. The entry-level market outside of downtown is slow. Journal Square is right next to the downtown area and is only up 3 percent year-over-year, with an average price of $255,000 for a single-family row house. That market is still down 19 percent since 2010. It’s farther away from the PATH, about a 15- to 20-minute walk, and doesn’t have a waterfront.

Jersey City has a number of new projects underway, such as Toll Brothers’ 420-unit Provost Square, and a 1.2 million-square-foot hotel and rental project at 70 and 90 Columbus Street. Which upcoming projects do you think are going to have the biggest impact on the market?

I think Provost is the most intriguing and will do the most. It has the most potential to be the catalyst to get [activity] going in the Powerhouse Arts District.

What’s the residential inventory like in Jersey City these days, and how does that compare to a year ago, two years ago and during the boom?

There are roughly 336 active listings in all of downtown Jersey City, primarily the waterfront. That’s an all-time low. There are 144 condos on the market. [During the] doldrums, the average was 300 to 400.

Are you seeing more Brooklyn transplants priced out of that borough looking to relocate to Jersey City?

Yes, and we are actually seeing transplants with a bit of sticker shock as to pricing in Jersey City. Having said that, our pricing is still on average 10 to 12 percent below what a comparable apartment would be in Brooklyn Heights or Cobble Hill right now.

What are the biggest challenges to selling and renting homes in Jersey City today, and how do those challenges differ from what you’ve seen in the last few years?

Post-October 1, the new FEMA flood zone maps and pricing took effect. Right now the waterfront in general is all within the flood zone. It’s the most pertinent challenge we have to selling. As [insurance] policies renew, buildings will have to have elevation certifications redone, and pricing is probably going up on all of these policies. Previously it was lack of lifestyle and things to do after 5 or 6 p.m. Now there are nightlife and music venues. You can smoke a cigar, have Chinese, Indian, Italian food — whatever you want.

James Tortorelli
branch vice president, Coldwell Banker

How is overall residential sales volume and rental activity in Jersey City these days?

According to data from the Multiple Listings Service, sales volume is up 21 percent from the same time a year ago, while rental activity is up 49 percent over the last two years.

Which price ranges and housing types are performing best right now in Jersey City?

Two-bedroom waterfront condos priced between $450,000 and $650,000 tend to be the best performers in our market right now.

Most of the new residential development in Jersey City has been along the waterfront. What do you think of Mayor Steve Fulop’s recently announced plan to give more incentives to developers who build in other neighborhoods, and how do you think it will impact the overall real estate market in Jersey City?

It will offer more alternatives to people priced out of the downtown/waterfront area. It can only help Jersey City by providing additional options for potential buyers.

What’s the residential inventory like in Jersey City these days, and how does that compare to a year ago, two years ago and during the boom?

Residential inventory in Jersey City continued to fall in 2013, down 19 percent year-over-year, and down 49 percent since the end of 2010, according to MLS data.

Other than the waterfront, which residential neighborhoods in Jersey City are seeing the most change right now?

The other up-and-coming neighborhoods and projects include the renovated Hamilton Park area, a development plan for a new arts site at White Eagle Hall, and the new development plan for the Journal Square PATH Station Plaza.

Joseph Covello
broker/owner, Liberty Realty LLC

How are residential sales and rental prices in Jersey City these days?

Prices are up about 10 percent from one year ago, depending on type and location. We are now mirroring 2006 pricing.

Which price ranges and housing types are performing best in Jersey City?

No doubt, the waterfront three-bedroom market and the brownstone market have shown the largest percentage increase.

Which price ranges and housing types are struggling the most now?

Certain sectors have still not totally recovered from the financial crash. The more commuter-friendly the neighborhood, the better and faster the transformation.

How long are properties staying on the market in Jersey City these days?

The average is 30 to 40 days — half of what it was a year ago, and equal to 2006.

How much of a discount exists in Jersey City compared to Brooklyn?

Approximately twice the square [footage goes] for about half to two-thirds of the cost, but there are many variables factored into this equation.

Phil Rivo
sales agent, Armagno Agency

Are you noticing New York transplants driving the activity in Jersey City?

There have always been a lot of New Yorkers looking to relocate to Jersey City because of the proximity, but it has always been as a second choice. Now it’s a destination.

In general, who are the most active buyers in Jersey City now, and how does that differ from the past?

In the past there were a lot of renters. Now people are buying condos or, if they owned condos, they are buying townhouses. The downtown market was thought of as Hoboken, and if you couldn’t afford Hoboken you’d settle for Jersey City. Post-Sandy, people really discovered Jersey City. Sandy has brought people from Hoboken in addition to the people from Jersey City and New York who were always coming. We are also getting a lot of empty nesters. I have had clients this year from Basking Ridge, Summit, Westfield and Short Hills; empty nesters that are moving back here to be closer to the city. People with children used to plan their exits to towns like Summit, Montclair and Maplewood, as well as Westchester. Now they’re staying and others are moving back here. I sell a lot of brownstones, and this year, for every house that I listed, there were three or four offers, if not more, and usually over ask.

How is overall residential sales volume and rental activity in Jersey City?

When people talk about the boom, they are usually talking about six or seven years ago. [But there is a] boom now in Jersey City. There is a lot more housing now than there was then. And there are a lot more buyers looking for property.

What do you think of the mayor’s proposal to give more incentives to developers who build in inland neighborhoods?

Full disclosure, I was on Mayor Fulop’s transition team focusing on real estate development. He really wants to focus on the neglected areas. Bergen Lafayette has had its problems in the past, but in reality, some parts are less than a mile from downtown. He’s trying to be fair with abatements and give incentives to developers. He knows the waterfront will sell, but where will the city be in 15 to 20 years? As this area continues to blossom, it’s natural that areas that are two miles away will be developed, so the abatement policy is focusing on those areas.

Which upcoming projects do you think are going to have the biggest impact on the Jersey City market?

I am very excited about what is happening in Journal Square. That was once the hub of the city … and there are thousands of units being built there. It’s a great diverse community. It has a larger Indian town than 6th Street in Manhattan. That’s being redeveloped as a tourist area. There is MANA Contemporary, an art and storage space that was just completed. It was developed by Moishe’s moving company originally as art storage, and now has artist work space.

What’s your outlook for Jersey City?

I see Jersey City doubling in size — as long as we take care of the infrastructure and the PATH is improved. The only thing you pay for here is property tax. There is no city income tax, and everything from babysitters to food shopping to restaurants is 20 percent cheaper. The schools are also getting better because people stay and become invested in the community.

What are the most surprising trends you’re seeing in the Jersey City market?

People are buying multifamily buildings that aren’t covering the rent because they believe in Jersey City that much. They think that rents will continue to go up. For years people have snickered at Jersey City, and now the same brownstone that’s been here since 1845, that nobody would consider, is the [hot] ticket.

Can you give us a sense of how much of a discount exists in Jersey City compared to Brooklyn, for both rentals and sales?

For rentals, I think the prices are about 20 percent lower than they are in Brooklyn. For sales in the high-end condo market, I think it’s about equal when you factor in the usually lower maintenance and the higher taxes. For a few years, banks weren’t allowing developers to build condos; they were only building rentals. So now we have a shortage [of condos.] For houses, I think it’s also about equal per square foot.

Other than the waterfront, which residential neighborhoods in Jersey City are seeing the most change?

In Hamilton Park, there is new development [Jersey City-based developer] Silverman did a good job with. There’s also a warehouse in Hamilton Park that’s been converted to 150 residential units by Shuster. LeFrak owns property and can wait until the market is stronger to build it. You might not recognize Jersey City in 10 years. Looking at pictures from 1980, every building looks bombed out, with bars on the windows. Now the biggest problem is getting hit by a Bugaboo stroller.

Jacqueline Urgo
president, the Marketing Directors

Are you noticing New York transplants driving a lot of the activity in Jersey City?

Yes, we are seeing a larger group of New Yorkers. Today, 50 percent of our buyers are coming out of New York, where in the past those buyers only made up about 20 percent of the market.

How are residential sales and rental prices in Jersey City these days?

Sale prices are higher than at any point in history. We are slightly above the boom prices — 25 percent above values two years ago. Rental pricing is steady and up about 5 to 10 percent.

Which price ranges and housing types are performing best right now in Jersey City?

The higher-end luxury market is performing the best. At the beginning of the turnaround, one-bedrooms were the highest demand. Today, larger condos and townhomes are the most sought after.

Which upcoming projects do you think are going to have the biggest impact on the Jersey City market?

Eighteen Park, which will open this spring, is the first architecturally significant building to enter the Jersey City marketplace. Seventy Columbus will be a great addition to downtown Jersey City. And KRE’s J Squared will transform Journal Square. [The Marketing Directors is representing all three buildings.]

What are the most surprising trends you’re seeing in the Jersey City market?

People are comparing Jersey City to Brooklyn. That never happened years ago.

How much of a discount exists in Jersey City compared to Brooklyn?

Both condos and rentals average 25 to 30 percent cheaper in Jersey City than in Brooklyn.

Tom Pichi
broker, Metropolitan & Waterfront Residential Brokerage

How is overall residential sales volume and rental activity in Jersey City these days?

Sales volume is up by over 20 percent year-over-year. Currently demand is outstripping supply by a wide margin. Bidding wars are quite common, and new listings are snapped up quickly.

How are rental prices in Jersey City?

Rental prices have remained somewhat flat year-over-year.

Which price ranges and housing types are performing best right now?

There is a huge demand for apartments in the $500,000-to-$700,000 range. At these levels, the rent-versus-own equation favors buyers.

K. Hovnanian Homes recently announced that it sold one of its penthouses at 77 Hudson for a record-setting price in Jersey City of $2.8 million. What does that deal say about Jersey City?

Our firm represented the buyer in the transaction. One of our agents, Sujay Shah, worked with this buyer for over a year. The sale indicates how the Jersey City waterfront has matured and the increasing affluence of its residents.