The firm forecasts that 129,500 employees will lose their jobs this year, a 3.3% reduction in the state's job base. In 2008, the state withstood 81,600 layoffs. The impact of those employment losses on the apartment market differs in each portion in the state. In the high-rent districts of Northern New Jersey, for instance, asking rental rates have dropped the quickest, but vacancy increased only 30 basis points in the second quarter. In the first half of '09, the Northern New Jersey vacancy rate rose 130 basis points to 4.8%, while asking and effective rents slipped by 1.4% and 2.6% to $1,497 per month and $1,436 per month, respectively.
In Southern New Jersey, meanwhile, the vacancy rate has stabilized, while asking rents rose marginally due to the area's affordability compared to Philadelphia and Central New Jersey. Over the past two quarters, apartment owners in Southern New Jersey have recorded a 50 basis point increase in vacancy to 7.2%. During the same period, asking rents have increased 0.1% to $940 per month and effective rents have inched up 0.4% to $887 per month.
Even though rents have appreciated in recent years in the central portion of the state, sustainable asking rent growth during that time has moderated rent cuts so far in 2009. Similarly, vacancy in the area has climbed since mid-2008 but is still the lowest in the state, ending the second quarter at 3.8%, a jump of 20 basis points since year-end 2008. Asking rents in the region have declined 0.5% year-to-date to $1,152 per month, and effective rents have receded 1.3% to $1,108 per month.
Statewide, New Jersey is faring better than other areas of the US. Yet its apartment vacancy hit 4.7% in Q2, the highest level since 1992. Further, in the past 12 months, the overhang of untenanted apartment units climbed 100 basis points, following a 10 basis point gain in the previous year.
In Q2, asking rents fell 0.4% year-over-year to $1,296 a month, while effective rents shrunk 1.4% to $1,243. In the first half of this year, however, asking and effective rents regressed 0.9% and 1.9%, respectively.
Although a number of large projects are currently under way, delivery of rental units has slowed over the past 12 months to 1,040 apartments. In the previous year, 3,320 units came on line. Construction will remain on a slow track, as Marcus & Millichap reports that in the past 12 months, the number of multifamily permits issued statewide has fallen 43% to 7,140 units.
Sale activity in the state's multifamily sector has diminished as well. Deal velocity has decreased 11% in the past 12 months due to the recession and concerns over falling revenues. A greater percentage of class A acquisitions, however, has boosted the median price 2% to $79,000 per unit. "Similar to rental trends, investment activity has varied considerably across the state," says Michael Fasano, regional manager of the local office of Marcus & Millichap, in a statement.
Although most transactions in the state continue to be recorded in Northern New Jersey, the number of sales in this region has dropped 10% since mid-2008. Coinciding with softening demand, the median price has fallen 6% to $77,500 per unit.The number of apartment purchases in Central New Jersey has rebounded 40% in the past year, after acquisition activity decreased sharply during the preceding 18 months. At the same time, the median price in the region has retreated 4% year-over -year to $91,500 per unit .
In Southern New Jersey, economic uncertainty has slowed sales velocity approximately 55% over the past 12 months, making it difficult to determine a median price. Buyers are focusing on infill assets between Interstate 295 and the Delaware River, particularly properties listed in the mid-$60,000 to mid-$70,000 per unit range.
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