While supply-side concerns remain modest statewide, more than 1,300 units will be delivered this year in Hudson County, according to a recent Marcus & Millichap Real Estate Investment Services report. As a result of this added supply, and a growing stock of shadow rentals from the tepid but still-expanding condominium market, concessions in the county are projected to rise to nearly 5% of asking rents in 2010, compared to a low of under 2% in late 2008.
Nevertheless, employment concentrations within, and near, the Hudson County submarket will keep vacancy among the tightest in the state. Vacancy also will remain at healthy levels in Morris and Passaic counties; however, elevated rents in the latter will underpin continued concession increases, says Marcus & Millichap vice president and regional manager of the New Jersey office.
In Central New Jersey, modest inventory growth and minimal movement in vacancy will hasten the recoveries of rents. Construction output will be similarly muted in Southern New Jersey, though a slower rebound in hiring will maintain upward pressure on vacancy.
Sales velocity remains low but steady statewide, although firming investor confidence and improving economic conditions are expected to boost deal flow in the coming quarters, finds the report. In the north, conservative buyers will remain focused on operationally sound assets in Bergen, Passaic and Morris counties, though more aggressive investors will take on high-vacancy or troubled properties in East Essex and Hudson counties, where cap rates are expected to increase measurably this year.
Sales in Central New Jersey reached a low point in 2009, but more positive economic and operational outlooks should attract buyers to northern Middlesex and Mercer counties, where employment-generated renter demand is healthiest. While investment activity in Southern New Jersey is projected to pick up in 2010 due to growing investor confidence, the region's slower employment recovery will likely keep the uptick modest.
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