At least someone wants to be here

From the WSJ:

New Jersey Landlords Can’t Keep Up With Demand For Industrial Space

Industrial space in New Jersey is so hot that lease deals are drying up.

Across the state, which has become a major logistics hub for online retailers and other industrial tenants, 5.3 million square feet of leases were signed in the first quarter, about 27% less than the average from 2015 to 2017, according to a new report from real estate services firm JLL.

The main culprit: a lack of space.

That is reflected in asking rents, which jumped 11.7% from the same quarter a year earlier to $7.14 a square foot.

“There is an extraordinary under supply of quality space, and when you have an undersupply, you have a reduction in leasing activity,” said Robert Kossar, head of the Northeast industrial region for JLL. He added, “There has been no downturn of demand at all, and if anything, there has been an uptick.”

Available space in New Jersey is constrained across the board, but is even more acute for tenants on the hunt for big-box lease deals of 500,000 square feet or more, Mr. Kossar said. In the last two quarters of 2017, big-box leasing accounted for more than 30% of the total amount of space leased. But in the first three months of the year, no leases larger than 500,000 square feet were signed.

Of the four buildings existing or under construction that had over 500,000 square feet available at the end of the first quarter, only one was in the state’s primary corridor along the New Jersey Turnpike, said Iggy Armenia, JLL vice president of research and analytics.

At the same time, demand has been increasing. The state’s market has about 15 million square feet of space that can accommodate tenants requiring blocks of space larger than 100,000 square feet. But there is about 35 million square feet now sought by tenants, Mr. Armenia noted.

Almost 11 million square feet of warehouse space was under construction in the first quarter, compared with 9.2 million square feet of space in the pipeline in the first quarter of 2017. Nine speculative projects of 3.5 million square feet expected to break ground in the second quarter.

But despite increased construction, few land sites exist for development, and the space under construction is often leased before the building is completed, Mr. Kossar said. So expect asking rents for this new space to be at “high-water mark levels,” the report said.

Posted in Economics, New Development, New Jersey Real Estate | 110 Comments

How do we sleep while our beds are burning?

From the WSJ:

‘My Clients Are Fleeing NJ Like It’s on Fire’

That headline arrives via email from a money manager in northern New Jersey. The Garden State already has the third largest overall tax burden and the country’s highest property tax collections per capita. Now that federal reform has limited the deduction for state and local taxes, the price of government is surging again among high-income earners in New Jersey and other blue states. Taxpayers are searching for the exits.

In the financial industry of course it’s not just the clients who are looking for greener pastures. One hedge fund manager moving his office to a southern state reports that his new home on a golf course will be more than double the size of his house in Chatham, N.J. while generating just one third of the current property tax bill.

Others are staying out of necessity, but that doesn’t mean they want to bet on a Jersey comeback. “The apartment market in New Jersey is booming because nobody wants to own here. As soon as people are not tied to the area for business reasons, they leave,” says Jeffrey Sica, founder of Circle Squared, an alternative investments firm. “We structure real estate deals for family offices and high-net-worth individuals and at a record pace those family offices and individuals are leaving the TriState for lower-tax states. Probably a dozen this year at least,” he writes via email.

In the decade ending in 2016, real economic growth in New Jersey clocked in at a compound annual percentage rate of 0.1, just slightly higher than John Blutarsky’s GPA and less than a tenth of the national average for economic growth.

The Tax Foundation ranks New Jersey dead last among the 50 states for its business tax climate. So naturally new Governor Phil Murphy is proposing an even larger tax burden. A little more than 100 days into his term, Mr. Murphy seems determined to make New Jersey residents miss Chris Christie.

Steven Malanga calls Mr. Murphy’s plan “the U-Haul Budget” for the new incentives it gives New Jersey residents to flee. Your humble correspondent participated in a panel discussion at an event hosted by the Garden State Initiative today and was pleased to discover that at least some residents of New Jersey are not yet ready to abandon hope. They’re urging Gov. Murphy to make the state’s tax burden competitive again. Following federal reform, the residents who remain in blue states have a whole new reason to demand that politicians put out the fire.

Posted in General | 99 Comments

How high can it go?

From CNBC:

March home prices make their biggest jump in 4 years—and half of the biggest housing markets are now overvalued

Home prices have been rising steadily since the recession, but the gains are suddenly accelerating as spring demand heats up in an already highly lean and competitive market.

Prices surged 7 percent higher in March compared with a year ago, according to CoreLogic. That is the biggest gain since May 2014. All 50 states saw home values increase, and prices are now higher than they were at the peak of the last housing boom, although that does not account for inflation.

“High demand and limited supply have pushed home prices above where they were in early 2006,” said Frank Nothaft, chief economist at CoreLogic. “New construction still lags historically normal levels, keeping upward pressure on prices.”

The price gains are greatest in the nation’s largest markets. Half of the nation’s 50 largest markets are now considered overvalued, meaning home prices are at least 10 percent higher than the long-term, sustainable level.

Las Vegas, San Francisco, Denver and Los Angeles are all overvalued, as are Miami, Houston and Washington, D.C., according to CoreLogic.

Prices are seeing the biggest gains at the lower end of the market, where supply is leanest. Sales of homes priced under $100,000 fell more than 20 percent in March, according to the National Association of Realtors, not because there wasn’t demand, but because there was not enough supply.

Posted in Economics, Employment, Housing Recovery, National Real Estate | 96 Comments

Has Newark made it?

From Bloomberg:

A $1 Billion Real Estate Boost for Battered Newark

SJP Properties and Aetna Realty are planning to spend as much as $1 billion on a project beside a Newark, New Jersey, commuter-rail hub, the latest in a spree of upscale developments that have brought new optimism to the long-suffering city.

SJP and Aetna, both based in New York, envision offices, stores, a hotel, homes and a large public plaza next to the Broad Street hub. The station is one of two in New Jersey’s largest city, the other being Newark Penn Station, about a mile to the southeast.

Steven J. Pozycki, founder and chief executive officer of SJP, said it will be critical to find a company to move in and anchor the development. The location, which is accessible by mass transit and car and minutes from Newark Liberty International Airport, should act as a magnet, he said. The 2 million-square-foot (185,000-square-meter) project will run along University Avenue and Orange Street, at the site of a former Westinghouse Electric Co. factory.

Riots back in the 1960s scared developers away from Newark. With a reputation for crime and poverty, the city, just 10 miles (16 kilometers) west of Manhattan, has largely missed out on the urban revival other U.S. cities have enjoyed. The new project, on which the developers plan to spend $700 million to $1 billion, is the most recent sign that Newark’s fortunes are improving.

Other projects include the construction of a new Prudential Financial office tower, the development of an abandoned department store into a mixed-use property that includes a Whole Foods supermarket, and the conversion of the old New Jersey Bell skyscraper into apartments. SJP helped build the Prudential tower and a headquarters for Panasonic Corp. Newark is among 20 cities shortlisted by Amazon.com Inc. for its second North American headquarters.

Posted in Economics, Employment, New Development, New Jersey Real Estate | 63 Comments

Looks pretty gloomy out there

From the Observer:

NJ Politics Digest: Another Grim Take on the State’s Economic Outlook

Yikes, the economic outlook in New Jersey is pretty grim—and it’s not going to get any better.

While that might be the gut feeling of many in the Garden State, a new report puts numbers to their fears, according to a piece on ROI-NJ.

According to the “Rich States, Poor States” report by the American Legislative Exchange Council, New Jersey is ranked 49th out of 50 in economic performance and 46th for economic outlook.

The economic performance rank is based on cumulative GDP growth and non-farm employment growth between 2006 and 2016 and the number of people leaving the state between 2007 and 2016.

“These variables are highly influenced by state policy,” the report notes.

The ecomomic outlook ranking is based on 15 “important state policy variables,” including various tax burdens, the ratio of state employees to residents and debt service as a share of tax revenue.

“At the same time as this very negative economic report is released, our legislators are piling costly labor mandates on the backs of small businesses such as paid leave, and a proposal for a $15 minimum wage,” Laurie Ehlbeck, state director of the National Federation of Independent Business, told ROI-NJ. “Ill-advised policies like these will only make the Garden State die on the vine as other states bear fruit.”

Posted in Economics, Employment, New Jersey Real Estate | 81 Comments

Good times on Long Island

From CBS NY:

Long Island Housing Market Making A Serious Comeback

Bidding wars, competition among buyers and low inventory are driving up demand for homes.

And right now in our region the biggest rush for houses is on Long Island. Some acting fast are worried about interest rates and the new tax laws, CBS2’s Jennifer McLogan reported Thursday.

Susan Weber’s head is spinning. Her four-bedroom family home on the market in Melville received two full-priced offers almost immediately, but she declined a bidding war and just sold it for the asking price of $549,000.

“Have to move more quickly than anticipated. You have to make contingency plans,” Weber said.

The family is buying in Pennsylvania.

According to a report by Miller Samuel Appraisers, Long Island home buyers are giving the housing market the fastest start to the year since the housing boom of more than a decade ago.

“As long as we have this buyer demand, even if interest rates go up, which I think people are talking about more than even the tax bill, I think it’s a great time to sell. People will get the optimum money right now,” said Ann Conroy, the president of the Long Island division of Douglas Elliman Real Estate.

Last year at this time the average numbers of days a home stayed on the market was 98. So far this year it’s 84.

As mortgage rates rise buyers have hurried to close deals.

“Homes are going to go super-fast because there is just such a lack of inventory of the better quality homes at the right price,” said real estate broker Howard Steinfeld.

“It’s just amazing. Any house that is a nice house will get scooped up really, really quickly for a fair price,” Weber added.

Reasonably priced and in good condition are the keys.

According to the report, Long Island’s housing market mirrors what’s happening nationally, with chronically low inventory and steadily rising prices, McLogan reported.

The Long Island region median home price just rose to $410,000, up 6.5 percent from last year.

Posted in Housing Recovery, National Real Estate, NYC | 80 Comments

So long and thanks for all the fish

From CNBC:

Tax bill will slash by half the number of homeowners using the mortgage deduction

The number of homeowners who will benefit from the mortgage tax break is expected to plummet this year by more than half, according to a congressional report released on Monday.

About 13.8 million taxpayers will be able to claim the mortgage-interest deduction in 2018, down from more 32.3 million in 2017, estimates from the Joint Committee on Taxation show. That’s about a 57 percent drop.

Already, the deduction was not used by most taxpayers. Of the 150 million or so tax returns the IRS has received annually in recent years, just 20 percent claimed the deduction, according to research from the Urban Brookings Tax Policy Center.

The anticipated drop is largely due to the near-doubling of the standard deduction that took effect Jan. 1 under the new tax law. Fewer taxpayers are expected to itemize their deductions, which is the only way to take advantage of the tax break for interest paid on mortgages.

The new report estimates that 18 million households will itemize deductions this year, down from 46.5 million last year.

Taxpayers would need deductions worth more than the standard deduction for itemizing to make financial sense. And with few deductions left for taxpayers to turn to, that threshold will be a harder hurdle to clear.

Posted in Mortgages, National Real Estate, Politics | 261 Comments

…and still little new housing

From CNBC:

Home prices just took the biggest jump in four years

Homebuyers, hold onto your wallets. The gains in home prices are getting bigger as the supply of homes for sale gets leaner.

The median price of a home sold in March surged 8.9 percent compared with March 2017, according to Redfin, a real estate brokerage. It is the biggest annual increase in four years. Redfin tracks prices in 174 local markets and calculated the median home price at $297,000.

High prices are the result of very, very low inventory. The supply of homes for sale was down 11.9 percent in March, compared with a year ago. As a result, sales fell 3.7 percent. The number of new listings in March dropped 5.6 percent annually, although part of that may have been due to the Easter holiday falling early this year.

“Sellers are slow to list this year and we aren’t seeing enough new construction homes to fill the gap,” said Redfin’s chief economist, Nela Richardson. “If we don’t see the new listings number turn around next month or a pickup in new housing starts, inventory will be a persistent drag on sales for the remainder of the year.”

Homebuilders are not helping much. Housing starts disappointed in March, with single-family construction falling 3.7 percent for the month. Building permits, an indicator of future construction, declined 5.5 percent for the month and are barely 2 percent higher compared with a year ago. In contrast, multifamily construction is increasing considerably. Builders are banking on continued, strong demand for rental apartments, as homebuyers struggle to find affordable homes.

“The change towards multifamily could be the initial signs that affordability is starting to impact the mix of construction,” noted Tendayi Kapfidze, chief economist at LendingTree. “Multifamily units are at lower price points and include significant rental units. Notably, single-family housing starts are particularly weak in the high-cost Northeast — that is also the most exposed region to the negative impacts of the tax plan.”

Buyer demand is still strong, despite higher prices. Sellers are pulling back, however, likely worried they won’t be able to find anything else they like or can afford. The average home went under contract in 43 days in March, more than a week faster compared with a year ago and a March record. Nearly a quarter of the homes sold for more than their list prices.

As mortgage rates continue to rise, current homeowners will have even less incentive to sell. Sales have been dropping as a result of the tight supply, and prices usually lag sales by a few months. That does not appear to be the case, however, in this cycle, as demand is outweighing everything else. It may be that young buyers are waiting, and renting longer, in order to save for higher-priced homes.

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 35 Comments

Out with retail, in with industrial

From Real Estate Weekly:

Developers struggling to meet demand for New Jersey industrial space

New Jersey can’t keep up with demand for industrial space, according to Duke Realty leasing vice president Ben Rosen.

“There are no buildings available under 300,000 square feet in northern New Jersey—and the demand for industrial space is strong and consistent,” said Rosen “The trend driving the industrial market is the supply side and the industry can’t keep up — it takes too long to develop and there is not enough land.”

Panelists agreed the industrial sector will remain strong for the foreseeable future with the continued strength of e-commerce and the move away from brick and mortar retail stores.

Jeff Milanaik, principal, Bridge Development Partners,noted that “the capital markets appetite for industrial is phenomenal — there is an uptick of activity in the ports and the inherent need for warehouse space.”

Regarding the office market, John Saraceno, Jr., Managing Principal, Onyx Equities, noted that there is a carnage of commercial office space, “and location, location, location is more important now more than ever. We are seeing the same process over and over of people tired of occupying 30 to 40-year-old office buildings.”

There is not a lot of quality office space on the market and there are a lot of people fighting for the same space. He also noted that the parking density trend is not going away, as we see more tenants wanting more parking.

All in all, panelists remain optimistic about the state of New Jersey’s commercial real estate market over the next couple years with some of the driving factors including the repurposing of retail centers for industrial use; increased activity at the ports; redeveloping and upgrading office buildings to include amenity packages geared towards millennials and new technology; and federal tax reform.

Posted in Demographics, Economics, New Development, New Jersey Real Estate | 28 Comments

They sound pretty smart to me

From the Times of Trenton:

‘Brazen criminals’ are taking advantage of the housing crisis

Brazenness is the hallmark of con artists and nowhere is that more evident than with shameless real estate scammers who rip off unsuspecting renters and property owners.

A case in point was the recent arrest of a dozen people by Mercer County authorities on charges of running a complex rental scam.

Authorities say the accused would move into homes that were vacant or being foreclosed, change the locks, turn on utilities and live rent-free. Sometimes they would create leases and rent the properties to others, causing a lot of confusion for real estate agents and police who are called in to sort out the situation.

Often, the scam goes unnoticed until a bank inspector or property manager stops by to check on the home or to show it. That’s when they discover someone living in the house that should be empty.

“These are brazen criminals who educated themselves on squatters’ rights and took advantage of the civil court process,” Mercer County Prosecutor Angelo J. Onofri said when he announced the arrests and charges on April 6.

Posted in Foreclosures, Housing Bubble, New Jersey Real Estate | 248 Comments

Your parents had it easy

From CNBC:

Posted in Demographics, Economics | 103 Comments

Don’t need NY to tell us we’re cool … but it sure don’t hurt

From the NY Times:

Wait, New Jersey Was Once Not Cool?

New Jersey chic used to have a name: Bruce Springsteen. And that was pretty much it, at least according to the Garden State’s haughty neighbors across the Hudson River, a point that justifiably rankled generations of New Jerseyans. No matter how much New Jersey natives fired back by extolling the virtues of spacious split-levels on family-friendly half-acre lots, or summer beach strolls in Cape May, or even New Jersey’s rich literary legacy (forget Brooklyn Heights; Norman Mailer was from Long Branch!), New Yorkers long took it as a birthright to dump on their neighbors to the west.

As the writer Frank DeCaro put it in this Clinton-era Styles cover story: “New Jersey didn’t become a national punch line — ridiculed as a repository of industrial waste and bad taste — without reason. The words ‘New Jersey’ conjure up sights and smells for many nonresidents of the northern stretch of the New Jersey Turnpike — tank farm after pipeline after brewery.” And that was from a guy who grew up in the town of Little Falls!

Consider the deeper context. As recently as the ’80s, even Jersey natives like Mr. Piscopo, from Passaic, were expected to milk their home state for easy laughs. Remember his Paulie Herman character from “Saturday Night Live”? The whole gag was built around the supposed horror of being trapped with the Jersey-est of Jerseyites in, say, a diner booth as he squawked, “I’m from Jersey? Are you from Jersey?”

The pendulum had to swing eventually, and sure enough, by 1999, the Garden State was in full bloom, according to Mr. DeCaro. Exhibit A: Lauryn Hill, of South Orange, then “the most popular woman in hip-hop,” shouted to a sold-out Madison Square Garden, “New York, let me take you out to New Jersey and bring New Jersey back,” without, he added, “a trace of irony or condescension.”

By that point, the article argued, New Jersey had “captured the attention of moviegoers, readers and couch potatoes alike,” thanks in part to Generation X film directors from New Jersey like Kevin Smith (“Clerks,” “Chasing Amy”) and Todd Solondz (“Welcome to the Dollhouse,” “Happiness”), not to mention a certain HBO show involving an angst-ridden mob boss.

It was the dawn of a “post-Springsteen school,” Mr. De Caro wrote, “that has rethought the suburbs as a place of humor, color and intrigue. These works recast New Jersey’s little towns as Peyton Places with secrets in every cupboard, and they raise the question: If the suburbs are so boring, why is this stuff so fascinating?”

It made sense that New Jersey was suddenly embraced by the cool crowd, Mr. DeCaro argued, since seemingly every other celebrity turned out to be from there. A Vanity Fair story from a few years earlier, “Garden State Babylon,” listed more than 120 New Jersey-bred celebrities and influencers, including Charles Addams and Pia Zadora, broken down by turnpike exit. Meryl Streep, Martha Stewart, Bruce Willis, Jack Nicholson, Deborah Harry, Tom Cruise — was anyone super-famous not from New Jersey?

And then there was that little-known comedian from Lawrenceville, Jon Stewart, before he transformed comedy television with “The Daily Show.” No wonder that by 1999, New Jersey had “gone from a private shame to a juggernaut,” as the playwright Paul Rudnick, from Piscataway, was quoted as saying.

Two decades later, those old New Jersey jokes sound as dated as a Bob Hope routine (although Jersey bashing enjoyed a brief renaissance with “Jersey Shore”). Sure, the Nets fled the Meadowlands for Brooklyn. But lately, the real flow seems to be going the other way, as stratospheric real estate prices in New York City have inspired members of the creative class to decamp to the Boss’s backyard to live, raise families and, you know, “create.”

The migration is enough of a thing that Time Out New York ran an article a few years ago, “The Coolest Places in New Jersey for New Yorkers,” that offered Garden State alternatives to New York neighborhoods: Montclair as Greenwich Village; Jersey City as Williamsburg; Westfield as the Upper East Side; and so forth. It was a useful guide for would-be colonizers, surely. But ask any Jerseyite: They really don’t need New York publications to tell them they’re cool, thank you very much.

Posted in Demographics, Humor, New Jersey Real Estate, NYC | 119 Comments

No surprises here, big money stays in Manhattan

From Bloomberg:

New York City’s Top Earners Still Choose Manhattan Over Brooklyn

Brooklyn may claim the popularity contest, but Manhattan’s still home to the city’s highest earners.

That’s the upshot from a Bloomberg analysis of household earnings by zip code, which showed five of the top 20 areas with the highest adjusted gross income in the Northeast in Manhattan. None were in Brooklyn.

Zoom out a notch, though, and Manhattan loses its luster compared to the tony suburbs in the tristate area. In fact, half of the top 20 ZIP codes in the Northeast are in commuter towns in New York, New Jersey and Connecticut.

Harrison, New York, was home to the Northeast’s highest earners, with average AGI of $976,200. Gladwyne, Pennsylvania, and Weston, Massachusetts, followed with the only other averages above $850,000. New Jersey’s first entrant was Far Hills at fourth, while Riverside, Connecticut, was sixth.

So the next time you’re on the Port Jefferson line on the LIRR, the New Haven Line on Metro-North, or running late on the Morristown Line on NJ Transit, appreciate the democratization of commuting. You could be next to a millionaire. Or maybe it’s you.

Posted in Demographics, Economics, New Jersey Real Estate, NYC | 131 Comments

NJ wages up 4%

From the Star Ledger:

N.J. workers are earning more $$$ but it’s not all good news

New Jersey workers now have a few more bucks in their pocket.

The average hourly earnings of New Jersey employees in the private sector went up by 4 percent over the past year, according to the latest U.S. Bureau of Labor Statistics data.

That’s a faster rise than from 2016 to 2017, which saw a 2 percent increase.

And heck, that’s good news for workers who are looking for a little more cash to pay everything from their weekend bar tabs to childcare or healthcare. But experts and economists said the news isn’t all roses and butterflies, as it suggests a labor shortage may be taking hold in the state.

“[Employers] are having a hard time filling open positions,” said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. “There are jobs available, but applicants don’t have the education or skill level necessary.”

That tends to push wages and earnings up.

Workers in the state made, on average, $29.64 an hour in February 2018 compared to the $28.51 an hour they were making in February of last year.

Nationwide, New Jersey ranked as having the 11th-highest earning increase over the past year. Maryland had the highest average hourly earnings increase, at 6.8 percent.

It’s hard for New Jersey employers to find qualified applicants, especially younger workers who may have the needed skills but prefer to work in New York City or Philadelphia, Hughes said. A U.S. Federal Reserve survey published in January found labor shortages across the country.

“[Employers] have to increase wages for the entire job category to make it more attractive for people,” he said.

Talent wants to live in urban, walkable communities close to public transportation, and New Jersey communities that are not investing in those things will be missing out no matter how much money they offer their workers, said Pete Kasabach, executive director of New Jersey Future.

“We’ve underestimated the importance of place and how it’s a major driver of wages,” Kasabach said.

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 81 Comments

Large scale development possible in Jersey?

From Centraljersey.com

Sayreville will build ‘largest mixed-use project in New Jersey history’

Development is moving forward on a 418-acre, $2.5 billion mixed-used development in Sayreville.

Riverton, a mixed-use project that will be located by the Raritan River and total 5 million square feet in size, is being developed by North American Properties, a multi-regional real estate operating and development company in a join venture with PGIM Real Estate.

Due to the scale of the project, which the company said is “considered the largest mixed-use project in New Jersey history,” the date has not been set yet for completion.

Mark Toro, North American Properties managing partner from Atlanta, compared Riverton to Avalon, an 86-acre, $1 billion mixed-use development in Alpharetta, Georgia.

“We create great, walkable places that connect people to each other, cities to their souls, partners to opportunities and individuals to experiences that move them,” Toro said. “We are bringing together a world-leading visionary team to create New Jersey’s next great hometown, advancing the community-building skillsets we developed at Avalon.”

With Riverton, Toro stated such a project has not yet been deployed in the Northeast before.

Among the reasons for having the project at its location in the borough was, according to North American Properties, its proximity to 2 miles of waterfront with access to the Atlantic Ocean and the Driscoll Bridge on the Garden State Parkway, which approximately 372,500 vehicles travel on daily.

The area also receives further activity due being located by Route 9 (a national highway) and Route 35 (a state highway). As a result, the company found that the area provides “unimpeded access” to the New York metropolitan area and its marketplace.

Toro also stated Riverton will be constructed on an undeveloped, vacant space that will function as a “central gathering place” for both New Jersey and New York City, as it will also be located in the center of several New Jersey municipalities.

Posted in New Development, New Jersey Real Estate | 98 Comments