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2022 Multifamily Investment Forecast Report | Northern New Jersey Market

February 4, 2022 by Marcus & Millichap Research Services

Supply Growth Overshoots Normalizing Rental Demand;
Regulatory Changes Drive Investment Trends

  • Last year’s employment surge along the Hudson drives current stock expansion. After a year of surging rents and declining vacancy, Northern New Jersey is projected to experience a year of effective rent growth and multifamily occupancy closer to the trailing decadelong average. Renter demand growth is expected to slow yet remain strong due to the area’s mix of endemic and exogenous demand factors.
  • Pandemic aftershocks and nearby regulatory changes drive local market activity. Due to yearlong eviction moratoriums and pandemic-related regulatory issues on both the federal and state levels in New Jersey, many longtime owners who were formerly hesitant to sell chose to put their properties on the market in 2021. If adopted across the river in New York City, “good cause eviction” legislation already signed into law in several upstate New York localities may push capital migration west of the Hudson.

2022 Market Forecast

  • Employment (up 2.0%) – Job growth will be modest in 2022 with 40,000 new positions, leaving the area still short of pre-pandemic employment.
  • Construction (12,000 units) – While nationwide construction delays and material shortages continue, developers are expected to finalize 3,000 more units than in 2021 by the end of this year.
  • Vacancy (up 30 bps) – The market observes a slight bump in vacancy to 4.5 percent due to the high amount of construction projects slated for 2022, exceeding more modest local demand.
  • Rent (up 2.4%) – Rent growth tapers from 2021’s record pace, but maintains a rate comparable to the trailing five-year average as effective rent reaches an average of $2,125 per month.
  • Investment – Last year’s compression of cap rates continues marketwide. Investors seeking higher yields on Class C complexes may seek Passaic County deals where offers can hit the 6 percent tranche.

*Estimate; ** Forecast
Sources: CoStar Group, Inc.; Real Capital Analytics; RealPage, Inc.

Metro-level employment, vacancy and effective rents are year-end figures and are based on the most up-to-date information available as of December 2021. Effective rent is equal to asking rent less concessions. Average prices and cap rates are a function of the age, class and geographic area of the properties trading and therefore may not be representative of the market as a whole. Sales data includes transactions valued at $1,000,000 and greater unless otherwise noted. Forecasts for employment and apartment data are made during the fourth quarter and represent estimates of future performance. No representation, warranty or guarantee, express or implied may be made as to the accuracy or reliability of the information contained herein. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice.

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Filed Under: Multifamily, Special Report

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This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate Investment Services is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2020 Marcus & Millichap and Limon Net Lease Group

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