The skyline of Jersey City today looks nothing like it did a decade ago as evidenced by the incredible amount of development seen over the past few years primarily in the downtown Jersey City area. The Real Estate market in Hudson County is booming.
(click here to see the development map)
Developers are taking full advantage of the growing real estate market by investing heavily in the downtown Jersey City and Journal Square area with over 9,000 new units currently under development and a total of 37,000 approved units coming down the pike. Developers are aggressively advertising luxury living with New York City views, offering enticing amenities such as gyms and pools and offering up to three months of free rent on the signing of a new lease. These are all incentives that will lead tenants their way.
Days on Market
A direct result to the surrounding areas of new development was an increase to the average days on market for rental units. While downtown Jersey City rentals stayed relatively consistent averaging 37 days on market throughout 2016, surrounding areas such as Hoboken experienced an increase from 25 days in early 2016 to 34 days in early 2017. Hard to rent units that sat on the market for 172 days in 2016 are now seeing 383 days before they are rented.
Rental Rates & Brokers Fee
Decisions on keeping rental rates competitive and/or paying the broker's fees are key incentives to attract a new tenant. In an attempt to avoid a prolonged vacancy, the single investor that is using their condominium as an investment property is now beginning to offer concessions to keep up with the competition. As an example, landlords with high turnover of their rental units are starting to offer paid broker fees either in half or the full amount. The single investor should note that both decisions will have an effect on their bottom line.
Capitalization Rates
"How is Jersey City's development affecting my investment?"
This is a question that we hear quite regularly. There is good news to this question and then there are future predictors we are keeping our eyes on.
The good news is that we continue to see steady growth in the value of property being sold in Hoboken and Jersey City. In fact, condominiums that go on the market at competitive asking prices often receive multiple bids within days it being listed.
However, the increase in property values can affect the capitalization rate on your investment while rental rates try to stay competitive. The capitalization rate (net income/purchase price) is used to estimate the investor's potential return on his or her investment. While we see continued growth in property value, a reduction in net income by keeping their rents at competitive rates or absorbing broker’s fees are bringing capitalization rates down.
What does this mean to the real estate investor in Hudson County? As rental developments continue to grow in Jersey City, it may become more difficult to find a tenant when your investment is vacant. You still have a strong investment that is valuable if you decide to sell it in the near future.
Feel free to keep in touch with us to have regular conversations about our active renter and buyer database. We can help weigh your options on how your long-term investment strategy will work in this growing and competitive market. Finally, when the time is right for you, we can help you develop a solid exit plan.
If you have any questions or want to discuss strategies, do not hesitate to reach out to Natalie Alonso and Michael Cruz from the Alonso Cruz Group.
Natalie Alonso Natalie.alonso@cbmoves.com (201)-575-0639
Michael Cruz Michael.Cruz@cbmoves.com (917)-405-1283