By Nat Gambuzza, Berkadia
As the real estate market continues to evolve, New Jersey stands at the forefront of upcoming opportunities that are influenced by the state’s unique economic conditions. With pent up demand from buyers who were inactive last year and plenty of dry powder ready to be deployed, the market is poised to see an uptick in transaction activity moving through 2024.
Markets across the U.S. saw a decrease in deal activity over the last 18 months due to a tough lending environment, increased interest rates, and economic uncertainty. October of 2023 saw a peak of 5 percent on the 10-Year Treasury Yield, which naturally caused investor hesitation. Today, it has dropped to the low 4’s, providing investors some comfort coming into 2024. The Fed has also changed its sentiment on raising rates further, taking a more accommodative approach.
2024 optimism can be found with the reduction of interest rates, lenders who have been sidelined reentering the market, and determination from buyers and sellers to start transacting. All of this is happening while the fundamentals for apartments in NJ remain at the top of all national rankings.
Regional Dynamics
New Jersey’s real estate market has diversified pockets of capital for investors to tap versus other parts of the country. Private capital has been and will continue to be the first movers in this cycle shift.
Fortunately, New Jersey has plenty of it coming from family offices, high net-worth individuals, syndicators, and business owners outside of real estate. New Jersey also benefits from capital outside of the market targeting New Jersey.
Northern New Jersey ranks as one of the highest in the country for rental growth at 3.4 percent. This is happening while occupancy rates are climbing to north of 97 percent. All of this is taking place as approximately 15,000 units of new supply enter the market.
Outlook for 2024
The 2024 real estate forecast for New Jersey looks very promising. In fact, in November of 2023, New Jersey had the highest national lease renewal rate (81.5 percent) as compared to other MSAs. This year is providing a clearer line of sight for the multifamily sector, paving the way for transactions and more optimistic investors.
Nat Gambuzza is senior managing director at Berkadia.