Cheaper
RENTS TAKE A DIVE
02/01/02
By Martin Espinoza
Journal staff writer
Realtor Mike J. Berney keeps a small color map in his Downtown Jersey City office that's helping him get through one of the worst rental markets in recent history.
The map, which details numerous completed and proposed corporate waterfront development projects, represents thousands of jobs and, hopefully, thousands of people looking for a place to live.
Since Sept. 11, the luxury waterfront apartment market in Jersey City and Hoboken has taken a nose dive. Real estate experts say what was once a 100 percent occupancy rate has been reduced to 89 percent, below the "stabilized" or "worse-case scenario" rate of 95 percent.
Berney, who is associate director of operations for Liberty Realty, says that after Sept. 11, the market was flung into a state of uncertainty, and that is when landlords offer incentives.
"We find in some cases a landlord is willing to pay the realtor fee, which the tenant previously paid," Berney says. In some cases, he says, rents have been reduced by 20 percent and security deposits have been reduced from 11/2 months rent to one month.
"Landlords that are reasonable and understand today's market will get their units rented," Berney says.
For those in search of a waterfront apartment in Jersey City or Hoboken, today's rental market is the next best thing to a fire sale.
A one-bedroom apartment that went for $2,100 a couple of years ago - at the height of the local real estate market - in some cases can go for as little as $1,450 now. A $2,000 apartment that would have cost a renter $7,000 up front, can now be acquired without a broker's fee for $4,000, or for as little as $2,000 where no deposit is required.
The classified section of The New York Times offers an interesting history of how prices have been gradually falling.
In October, one- and two-bedroom apartments at Queens-based Lefrak Organization's Newport complex went for $1,800 and $2,400, respectively. A month later, those prices fell to $1,651 and $1,900, respectively. In January, one-bedroom units were starting at $1,340 and two bedrooms went up from $1,595.
One month before Sept. 11, the Gotham, built and managed by Hoboken-based Applied Cos., advertised its studio, one-, two- and three-bedroom luxury apartments at from $1,700 and $1,925, $2,390, $3,150, respectively. Last Sunday, a Gotham ad had these apartments starting from $1,395, $1,495, $1950, $2,500.
"People don't care if we smile, they don't care what we look like, if we smell good, they just care about the price," said Salil S. Sheth, regional manager for Trammell Crow Residential, the Atlanta-based real estate firm that manages Alexan Liberty House, at 115 Morris St.
Early last year, Sheth says, when the Alexan Liberty House project was finished, rents were being pushed to the upper limits of the market.
"You were getting $2,300 for a one bedroom," Sheth said. "That's Manhattan prices."
Sheth said that only three leases were signed in November, compared to 11 during the same month in 2000. November, he says, was the worst on record.
In response, Sheth said, Trammell Crow slashed rents on a "handful" of one- and two-bedroom units to see "if they would move." And they did. In January, Alexan leased 48 apartments at reduced rents.
There isn't any one particular reason why the luxury rental market along the waterfront is in the dumps. Local real estate experts say the collapse of the dot-coms wiped out a lot of the young renters who made 2000 the most profitable year in local real estate.
A recent New York State-funded report on the national economy calculated that the Sept. 11 attacks have cost the national economy about $639 billion. The report, prepared for the New York state Senate by DRI-WEFA, an economic-forecasting firm with offices throughout the world, estimated that New York City took a $4.6 billion hit.
But Sept. 11 did more than exacerbate an already ailing national economy - the World Trade Center disaster turned the Jersey City and Hoboken waterfront communities upside-down.
Aside from those waterfront residents who lost their lives in the disaster, many also lost their jobs in subsequent layoffs, or had to move because their jobs were relocated. What's more, people have left because commute times have dramatically increased with the loss of Jersey City's Exchange Place and the World Trade Center PATH stations.
Dan Frohwirth, director of real estate for the Jersey City Economic Development Corp., says the current transportation situation is one of the main reasons demand is down for luxury waterfront apartments.
"One of the big things about living in Jersey City and Exchange Place was the PATH station," Frohwirth said.
But he is quick to point out that in a few years, the former World Trade Center transportation hub will probably be rebuilt, more integrated and superior to what it was before.
By that time, the waterfront high-rise offices that Realtors like Berney anxiously await are expected be open for business. Among these are Goldman Sach's 820-foot tower at 30 Hudson St., which is expected to be filled with 6,000 employees.
Of the more than 32,000 waterfront workers, Jersey City is home for roughly 9,000, according to figures compiled last year by the JCEDC. Another 4,000 employees live in other Hudson County municipalities - that's a total of 40 percent who live and work locally.
Frohwirth said he expects that figure to grow to more than 50 percent, as high-rise cranes and noisy construction sites give way to a thriving community and better quality of life. Jersey City is not the same place it was a few years ago, he says. For example, a waterfront home recently sold for $1,165,600 - an indication that people are willing to spend a lot of money to live in Jersey City.
Sheth agreed.
"Jersey City is starting to make a name for itself nationally," Sheth said. "The good news is that the worst is over. That is, barring another terrorist attack or if the Dow crashes."
Liberty Realty, says Berney, opened its Jersey City office several months before Sept. 11 to take advantage of the development boom along the waterfront. The company started renting a space in an old brick building on Montgomery Street last February.
After four months of gutting and remodeling its offices, the company opened in the summer. It's been a constant uphill battle ever since. But he says he keeps looking to the horizon, which is lined with gleaming skyscrapers.
Were it not for the home and condo sales market - which remains healthy because of low interest rates - outfits like Liberty Realty would be in far worse financial condition.
David Paris, managing broker for Century 21 Innovative Realty, says he's also looking toward the future.
Like Liberty Realty, Century 21 opened its doors on Grove Street in November hoping to take advantage of the waterfront boom. Both agencies had offices in Hoboken and had begun to see growth in the Jersey City waterfront market.
"We're not just in it for this year," Paris said. "We're in it for next year and the years to come after that."
Paris says that he's already begun to see signs of recovery. From December to January, his offices have seen a 50 percent increase in traffic - people both coming into his office and calling for information about rentals.
In some ways, Berney says, the increase in available apartments could actually work to his advantage when things start picking up.
"It helps to have a Realtor to sort though what's available," he said.
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