North Jersey Feels the Recession's Crunch

EAST RUTHERFORD, NJ-The slowdown in the single-family housing sector hasn’t had the positive impact on the Northern New Jersey apartment market many industry insiders would have hoped. According to Jose Cruz, an executive director with Cushman & Wakefield’s locally based Metropolitan Area Capital Markets Group, the culprit is the continuing job losses that have plagued the region.

While the first half of 2008 saw many would-be home buyers opt to rent apartments instead, the trend slowed down as the year progressed and the pace of layoffs rose. More than three-quarters of the positions lost last year occurred in the fourth quarter, he points out. “As renters became more cautious about their employment prospects, shared living arrangements emerged as the preferred option, especially for distressed tenants and recent college graduates living in the most desirable locations,” he states. “As the employment sectors responsible for driving the Northern New Jersey’s luxury rental housing–financial services and pharmaceuticals–have shed workforce, landlords are reporting a slowdown in leasing activity and resistance to rent increases.” Concessions, he adds, have become more common and lease-up at new developments has slowed.

All of this has impacted multifamily vacancy and rental rates. After hitting a low of 2.4% in 2006, the vacancy crept up to 3.1% in 2007, and negative absorption numbers pushed it even higher last year. And while the annual vacancy rate for seven of the past 10 years has been below the area’s average for the past decade, 3.9%, Cruz expects the vacancy to continue to tick upward this year as employers shed more jobs.