NJ Tops Charts For Most Competitive Multifamily Market

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Good morning. Competition for multifamily units is shifting away from traditional U.S. South and West markets to the Northeast and smaller metros. Meanwhile, can office property owners weather the coming economic storm?

Today's edition is brought to you by Percent, the modern investment platform for private credit.

​⏱️ Read time: ± 5 minutes

New Jersey Crowned The New King of Multifamily

The U.S. South and West have traditionally been the top multifamily market hot spots. But according to a recent Yardi RentCafe analysis, demand is shifting from the Southeast back to the Northeast.

Cooling Sunbelt: RentCafe has reported that North Jersey has taken over the title of the most competitive rental market in the US from the Sunbelt, as multifamily demand has started to move towards the Northeast at the beginning of 2023. Currently, eight of the top 20 hottest rental markets in the country are located in the Northeast.

Fierce competition: Yardi looked at a number of metrics (like days apartments were vacant, occupancy percentage, number of prospective renters competing for a given apartment, percentage of lease renewals, and share of new apartments completed) and measured markets on a scale of 0 to 126 for competitiveness. The national score currently sits around 60.

New Top 10: Rounding out the top 10 metros were Miami-Dade County, FL; Harrisburg, PA; Grand Rapids, MI; Omaha, NE; Southwest FL; Milwaukee, WI; Broward Country, FL; Orlando, FL; and suburban Chicago, IL. Competition for multifamily units has also increased in smaller metros like Portland, ME, and White Plains, NY.

➥ THE TAKEAWAY

King of the Hill: New Jersey topped the charts with a competitiveness score of 115. Newark and Jersey City are still keeping things affordable, while North Jersey is the place to be foraffluent renters seeking spacious and luxurious apartments near NYC. But if you want to move to Newark? I’ve got a bridge to sell you.

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Will Office Owners Survive The Coming Storm?

Office property owners that were able to weather the pandemic are now facing a new and growing obstacle—lower demand and higher interest rates.

Rising tide of defaults: With a growing wave of loan defaults making headlines, most notably recent defaults by Columbia Property Trust and Brookfield (BAM), office properties nationwide are feeling the stress. The CMBS delinquency rate for office properties rose 55 basis points in February to an average of 2.38%, up from 1.83% in January, with the expectation that those numbers will continue to climb in the coming year.

Work from home horror: The shift to hybrid and remote work continues to hurt demand for office. According to Cushman & Wakefield (CWK), office absorption was negative by 37.1 MSF in 2022, which pushed average vacancy rates to a new historical high of 18.2%. Cushman & Wakefield predicts that the volume of vacant office space could rise to 1.1 BSF by 2030.

Not dead yet: CRE lenders don’t believe that office is dead, but they are hesitant to keep making office loans due to the uncertainty in the sector. Rent growth isn’t keeping up with inflation and rising interest rates are going to push cap rates higher. According to Fagan Kevin Fagan, head of CRE economic analysis at Moody’s, “office has some staying power and is more of a reinvention story, there is very likely going to be pain this year.”

➥ THE TAKEAWAY

Only the strong will survive: Lenders are still making loans on properties when they feel confident in asset quality and borrower reliability. However, lending has dropped dramatically in Q4 and is expected to remain low in early 2023. In short, the uncertainty around office is higher than any other property type and the rest of the year is expected to be a mixed bag, at least for now.

📈 Chart of the Day

According to the U.S. Labor Department, inflation rose in February but was in line with expectations. The consumer price index rose 0.4% for the month, putting annual inflation at 6%.

• Safe haven: Economist Nouriel Roubini has partnered with Goldman Sachs (GS) to offer a new hedge against inflation risk.

• Pack your bags: Meta (META) plans to cut another 10,000 jobs as part of their ‘year of efficiency.’

• Uncertain future: Signature Bank’s real estate clients were left with more questions than answers after the FDIC takeover.

• Can’t let go: Meet Jorge Perez, the 73-year-old billionaire founder of Related Group.

• Distressing times: 34 of the 50 largest MSAs exhibited higher levels of CRE loan distress in February than in January.

• Trouble in REIT-land: In an interview with The Real Deal, REIT analyst Alex Goldfarb says headwinds are coming.

• Chatbot chatter: CRE professionals are finding fascinating ways to utilize ChatGPT to be more efficient at work.

💼 Talent Collective

In partnership with Bullpen

Check out Bullpen's new roles this week, including a great position as a development director for an affordable housing project.

• Director, Development

💰 Hourly (Remote) ❗️ Ground-up affordable housing

• Transaction Coordinator

💰 Hourly (Remote) ❗️ Multifamily and self-storage

• Lease Administrator

💰 Hourly (Remote) ❗️ Restaurant property emphasis

Looking to hire? Connect with Bullpen 

🤝 Deals & Dealmakers

• Time for timber: Dallas-based developer Crow Holdings is developing a mass timber office building in North Texas.

• Hot hotels: Global hotel construction pipelines reached an all-time high at the end of 2022.

• Mo for Miami: Former Red socks player “Mo” Vaughn is planning an apartment development in Miami’s Wynwood neighborhood.

• Bye bye billionaires: A condo in Extell Development’s One57, once considered the star of Billionaire’s Row, sold at a $6M loss.

• Sweet deal: CBRE Group (CBRE) acquired the LA and Orange County affiliates of Integra Realty Resources.

• Solar sustainability: A $600M solar panel production facility project will bring 850 jobs to Central Ohio.

• Building Brooklyn: NY developer Al Laboz is scooping up land to build Brooklyn’s largest skyscraper.

📖 Read about how millennials in PA turned an abandoned high school into a 31-unit apartment building.

🖥️ Watch The Real Deal break down how SVB’s shutdown came about, and what impacts it might have on real estate lending at large.

🎧Listen to Crescit Capital Strategies Founder Joe Iacono reflect on his 30-year CRE career and how he thinks the market will adjust to volatility this time around.