The 210,303-unit Northern New Jersey apartment market continues to tighten, driven by foreclosures for New Jersey homeowners and spillover demand from a housing shortage in New York City. Although the 164-unit Avalon North Bergen completed in that town in May, 417 units of net absorption during the second quarter pushed the vacancy rate down 20 basis points to just 3.8%. The Class A rate was just 3.6%, compared with 4.0% for Class B/C. Another 333 units completed construction in three projects through September, but strong demand kept the vacancy rate level through August.
Strong demand is ongoing according to Reis, with net absorption at more than 2,600 units in both 2010 and 2011, forecast at more than 1,600 units in 2012, and expected averages of more than 2,250 units per year from 2013 to 2015. New supply struggles to keep up. Reis reports 214 apartment units under construction for completion for the rest of 2012, with 2,900 under construction for later years. Reis also reports more than 2,700 condominium units under construction. The firm predicts the vacancy rate will eventually fall below 3.0% before leveling off.
Rents are strong, but not spiking. In the second quarter the average asking rent increased 0.8% to $1,562 per month, with the average effective rent up 1.0% to $1,511 per month. The year-over-year gains were 2.5% and 3.2%, respectively, and although the increases for July and August were small, identical gains are predicted for all of 2012. Subsequent annual increases are generally expected to range from 3.5% to 4.0%. The Class A and B/C asking averages, meanwhile, ended the second quarter at $1,998 and $1,341 per month, up 1.3% and 0.2% for the period.
Marcus & Millichap predicts a vacancy rate of 3.5% in the overall state of New Jersey for year-end 2012, down 40 basis points over the year. The state’s average asking rent is forecast to rise 3.5% to $1,366 per month.