How Jersey City Is Heating Up The Hudson
While Bisnow's recent New Jersey Gold Coast event at The Liberty House in Jersey City was going to focus on the entire Hudson waterfront, a dominant player emerged—Jersey City itself, which has undergone a massive revitalization. Every panelist, whether focused on office, residential or retail, had plenty to say about America's Golden Door.
Mack-Cali Realty CEO Mitchell Rudin was the event's keynote. In a Q&A with Genova Burns partner Eugene Paolino, he updated the crowd on the latest at the firm, where he took the helm late last year.
On the residential side, Mack-Cali has just under 1,000 units going up in Jersey City, and the firm plans to double that, Mitch said. M2 at Marbella in Newport will be opening in a month or so, while URL Harborside is ahead of schedule for its October opening.
People in the residential business can attest to how resilient Jersey City's market has been, he said, in large part due to the cost differential between Jersey City and Manhattan, Brooklyn and Long Island City.
Gene asked if there was any concern over the reported 8,000 units going up in Jersey City and whether absorption is a problem, but Mitch replied it was absolutely fine and that’s why the company is going forward with the first of three apartment towers at Harborside. “We’ll measure success on the first tower before we jump on the second or third.”
When Mitch and his partner, Mack-Cali president Michael DeMarco, joined the firm just after Labor Day, they issued a plan. Among the long-term goals: reducing its office portfolio from 25M SF to an upgraded 20M SF and doubling the size of its multifamily portfolio by 2018.
Right now, it recognizes 75% of its portfolio as core, which produces 80% of its FFO; if you had asked Mitch about those numbers when he started, he would have said it was between 40% and 50%. While most of the firm’s interest is along the waterfront, he said it’s also interested in Short Hills, Metropark and Parsippany.
Mitch also told Gene about a lunch he recently attended that involved people from each side of the Hudson—both whom were less-than-complimentary about Manhattan’s administration.
One person said, “Maybe this mayor is really going to screw up New York City, and isn’t that going to be great for New Jersey?”
Mitch replied, “Oh no, stay away from that. We want New York to be as good as possible.” Because when both office and residential rents go up in New York City, it benefits New Jersey.
One of the last transactions he was involved with at Brookfield Place (while CEO of Brookfield Office Properties) was for a major bank—it was weighing signing a lease at the office complex in the low $50s/SF versus Jersey City in the high $30s/SF. Companies are not going to move for $10 to $15/SF more, but having that price differential enables companies to stay in the New York metro. “It’s far better for those jobs to stay in the area.”
Rumors about New York slowing down is part of a telephone game, Mitch said—every week, some publication is talking about the flailing $25M-plus condo market. But does that impact New Jersey? No, because those aren’t the people looking for office or residential space in the Garden State, he says.
However, one of his peers indicated that after four years of fabulous employment growth, there’s a possibility of the market slowing down in the second half of the year, subsequently putting the brakes on rent growth. Yet his peer’s colleague, who heads leasing, then talked about how busy he’s been and all of the public companies that have reported strong first quarters.
As New Jersey’s largest commercial landlord, Mack-Cali can certainly be a bellwether, Mitch notes—and it recently closed a 335k SF lease renewal and 53k SF expansion with Bank of America Merrill Lynch at 101 Hudson St, while it inked 82 office and flex commercial leases totaling 1.1M SF in Q1. It has 1.6M SF of leases out or proposals pending, as well. His estimate: the year will end with vacancy lower and rents higher.
Much of the Gold Coast multifamily outlook centered around Jersey City, and for good reason—HFF senior managing director Jose Cruz says from 2000 to 2015, the city alone grew from 78,000 residents to 135,000 residents, and it's projected to increase to 145,000 by 2020. That’s why the 8,200 residential units he’s tracking (to be delivered over the next 15 months) aren’t a huge concern, even if it’s twice the amount of construction that happened during the last peak.
Absorption rates are strong; three projects he’s looking at are moving 70 units per month, while the last three years have averaged approximately 52 units per month. And despite this supply growth, rents are also trending upward.
There’s also been a significant amount of people staying on the Gold Coast, bucking the usual trend of people graduating college, spending some time in Hoboken, moving further north, finding a significant other, starting a family, then heading west. Just look at the number of baby carriages you see around Jersey City.
“I think an important number to pay attention to is the fact that the population in Hudson County is the fastest-growing in the entire state,” says JCity Realty owner Natalie Miniard. “We do have a lot of inventory coming, but we need that inventory…keep building please.”
Natalie is the principal broker for her firm, which is handling the leasing for Hamilton House (75 rental units and commercial space) in Jersey City's Hamilton Park. It's also behind the lease-up of The Art House (119 luxury units) and is marketing the Oakman condos, both in Jersey City's Powerhouse Art District.
As far as the makeup of renters, half are coming from Jersey City and there’s a large number hailing from areas like Queens, Brooklyn and Manhattan. And 20% are coming from other areas, like the ‘burbs or as transfers from other parts of the country. But there's not just a focus on Jersey City's waterfront—spots like Journal Square, Bergen-Lafayette and The Heights are getting love too.
KRE Group president Jonathan Kushner is excited about everything his firm is doing in Jersey City, including the 650k SF Journal Squared and 550k SF on Marin Boulevard under construction.
“The business model in Jersey City is pretty simple—we build at half of the cost of Manhattan and rent it at half the cost," he says. "As long as there aren’t big job losses in New York and transportation is good, we do think renters will come.”
Jon has a dozen young hires in his office aged 25 to 35, and none want to be west of Jersey City. “They want to be close to New York or living in New York," he points out. "And New York is, as we know, pretty unaffordable.” (80% of the renters in his buildings are going to Manhattan at least three times a week, whether for work, family, friends, culture, shopping or lifestyle.)
Cole Schotz member Leo Levya moderated the panel and asked about the market for condos.
“There’s absolutely a market,” said Natalie. “All of these amazing rental buildings in the area are filling up very quickly, vacancy is low, and price per square foot is still good. And they’re a wonderful pool of people who would like to be buyers in the near future.”
Oftentimes, she explained, people come to Jersey City and want to know the neighborhoods first before buying. In addition to Oakman, the only other condo project that’s really rising is Gull’s Cove 2. “They want to put down roots, but there aren’t many opportunities.”
Jon added he’d consider building condos, as the entry price in New York City is over $2k/SF. “If you do the math, we’re trending at half the prices at rentals—why can’t we trend at half the prices on condos? That price per square foot is pretty financeable and we think there’s a market.”
He adds that rents in Jersey City, while fair, are not bargains—you can service a decent mortgage at the prices people are paying. But people want to know the schools, parks and services will be there for the long term. “Buyers want to know they can stay for seven to 10 years,” he points out.
The "Spotlight on Jersey City" panel focused on the city’s revitalization, which has been furthered by Mayor Steven Fulop’s administration allowing real estate to create the environment, The KABR Group managing member Adam Altman said. Among his firm’s projects are One Journal Square, 30 Journal Square and Trump Bay Street, and it has had 3.5M SF of buildable FAR over the last five years.
But the transformation has been an evolution over many years, he pointed out. One of his partners founded a company in Jersey City that's been there for over two decades, and Adam has been watching the city over the past five years. “When you hear people talk about Jersey City at a party in Gowanus [Brooklyn], you know it’s the place to go,” he said. “You walk around and there’s the hip factor that people are looking for.”
Retail, though, has lagged behind office and residential, he pointed out. KABR has 400k SF of residential that is coming online over the next four to six years, depending on the development cycle, and he says there’s tremendous demand for what’s available today. At its Warren at Bay project, it has major restaurant and fitness companies looking at the space, wanting to plant a flag in Jersey City.
SILVERMAN’s focus is on mixed-use development, and many of its retailers are small businesses. Project manager Briana Wilkins says the company has fostered over 60 entrepreneurs over the years, which has enhanced the vitality of the community. It just built Charles & Co Downtown, which will host a co-working space and where its sixth retailer just opened.
“There’s something so wonderful about being able to go home at night, stop downstairs and pick up a bottle of wine then have dinner with your family on the roof terrace,” she says. As a real estate company, you get to be part of something bigger than yourself and be a part of the community, which excites her firm. “We want to create a vibrant and inclusive community, especially with an increase in retail and an emphasis on small businesses."
She noted that since Mayor Fulop has been in office, 450 small businesses have opened in Jersey City. “That’s a crucial ingredient to the revitalization of Downtown and the surrounding areas.”
Onyx Equities managing principal Jonathan Schultz has been in real estate for over 25 years, and he’s feeling the excitement and energy that Jersey City is bringing to the industry. “You go to any other panel in New Jersey, and it’s pretty boring…you have to figure out what to talk about,” he said.
Jersey City is the single biggest transformation that New Jersey has gone through, he said. He’s friends with many Gen Ys, and when Jersey City comes up in conversation, they’re excited to be there and part of an amazing community. The residential, which always comes first, is building a base of great labor, he said, and as an office and retail guy, he’s seeing the fruits of that—1.4M SF in development proposals, 3M SF of approved projects and retail beginning to catch up.
Retail is is a strong component of why and where you live, he pointed out, and makes the community more vibrant and thrive. Thankfully, Jersey City’s numbers are changing for the better.
From the administration level, a revitalization like Jersey City’s starts with leadership and providing vision based on reality, says Jersey City Deputy Mayor Marcos Vigil.
Both he and his wife were living in Midtown Manhattan, and every couple of years, they moved a little further west until they started joking, “We’re going to be moving across the river.” Eventually they did, buying a house in Jersey City because they liked what they saw—including families with children and a cultural grit that hasn’t been washed down.
“The mayor has looked at the ways we can better communicate what the community needs and when you look at the statistics, the driving force is the demographics,” he says. Jersey City is one of the youngest cities on the East Coast and the youngest in New Jersey. No particular ethnic group is more dominant than the other, and 72 languages are spoken across the city, with 52% of households speaking something other than English at home.
These statistics have made Jersey City a microcosm of the United States, he says. “And you can see it all within 16 square miles. That is something future generations are going to be looking at, and this is what’s spurring growth. This is not going to die. This will continue over and over for the next 30 years.”
Genova Burns partner Jennifer Mazawey moderated.
