From the Real Deal:
The Gold Coast of New Jersey has gotten so hot for developers in recent years that in many areas near the waterfront there is hardly any land left to go around.
The land grab has pushed prices to record levels in some areas as buyers from around the world swoop in and snag the remaining plots. Developers forced to buy land at higher prices are now planning to build condominiums rather than rentals, a relatively new trend for even the most popular areas of Jersey City in Hudson County.
“Everything we had is under contract or sold,” Brian Whitmer, a senior director at Cushman & Wakefield in East Rutherford, told The Real Deal. “Now the expectations by sellers are that their land will be sold for condos because that pricing is much higher.”
Last June, Strategic Capital — the investment arm of China Construction America — paid a reported record $55 million, or $121,000 per unit, for the land to build a 37-story luxury condo building at 75 Park Lane in Jersey City. Strategic Capital is also planning to build a seven-story condo property with 48 lofts nearby at 2 Shore Drive North, the company said.
In November 2015, a much smaller site in the “Soho West” area of Jersey City sold to Hoboken Brownstone Co. for $6.5 million, or $118,000 per unit. Land priced for rental apartments in that neighborhood is significantly lower, around $70,000 per unit, Whitmer said.
Those deals follow in the footsteps of the $500-million mixed-use condominium building at 99 Hudson Street in Jersey City, which began construction a few months ago. The 79-story building, developed by China Overseas America, marked the first condo project in Jersey City in eight years. It will also be the tallest building in New Jersey once completed.
Land prices per square foot in Hudson County — one of the areas in closest proximity to Manhattan — nearly tripled to an average of $81.76 in 2015 from $32.66 in 2006, during the last boom market, according to data from CoStar.
The interest in Jersey City now extends deeper than the waterfront as well. Luxury high-rise developments going up around Journal Square are pushing up prices in that area. A small plot at 823 Newark Avenue sold in 2003 for $475,000 and then traded hands again in December for $1.2 million.
“People keep pushing further and further away from the waterfront, which points to the sustainability in this boom,” said Joseph Sollazzo, real estate economist at CoStar Portfolio Strategy.
Still, analysts are questioning how long the boom can continue. Average prices for land per square foot have dropped so far in 2016, even in Hudson County, though the year is far from over. And an analysis by TRD showed that total land sales volume in the first quarter of 2016 is down — in some cases significantly — versus the first quarter of 2014 and 2015 in Bergen, Hudson and Essex counties. Morris County bucked the trend, with much higher first-quarter sales volume year over year, while Passaic remained about the same. It may be that the pricing has become prohibitive for buyers.
“We’re in the seventh year of this recovery, so the question is will prices pull back a little or will they continue to rise?” said Brian Hosey of Marcus & Millichap.
For now, the influx of people who have been priced out of Manhattan and Brooklyn — and more recently Jersey City and Hoboken — is driving up prices in other parts of New Jersey.