The New Jersey multifamily market continues to outperform across a variety of metrics. The state’s high population density combined with its proximity to major metropolitan areas like New York City and Philadelphia have bolstered demand for rental units, particularly among young professionals and commuters.
In addition to these factors, the region exhibits strong demographics that support the growth and stability of the multifamily market. This is in part due to the regional proximity to some of the country’s best universities, making New Jersey residents exceptionally well-educated.
Only three states have a higher share of their population with at least a bachelor’s degree and, as a result, New Jersey boasts the fourth-highest median household income in the nation.
Furthermore, the state’s economy is further strengthened by continued biotech industry growth, with several pharmaceutical companies owning and occupying millions of square feet across the state.
In fact, New Jersey’s life science cluster comprises nearly 20 million square feet, ranking fourth nationally alongside Philadelphia, just behind San Francisco, Boston and San Diego.
Demand Outpacing Supply
New Jersey serves as a pressure release valve for New York City’s extremely tight housing market, which is characterized by a vacancy rate of just 2.7 percent as of the second quarter of this year. New Jersey is experiencing robust renter demand from renters looking to take advantage of the relative affordability and connectivity that the state offers.
As a result, the market has held up substantially better than the broader U.S. market, despite the more than 10,000 units delivering in Northern New Jersey in 2024. Although slightly above the long-term average, the market has maintained a vacancy rate of 5.3 percent as of the second quarter of this year, which is 250 basis points lower than the national average of 7.8 percent.
The bulk of new supply has been concentrated in urban locations like Newark, Jersey City and Hackensack. Suburban municipalities also have seen an uptick in new deliveries because of recent fair share housing settlements throughout the state. These efforts, determined by courts versus laws, date back to a series of court cases beginning in 1975 arguing that municipalities must regionally allocate a “fair share” of affordable housing to low- and moderate-income families.
Suburban fundamentals have also held up because of historically low supply and post-pandemic migration trends. This has created significant pent-up demand for housing in these markets that will fuel development and keep occupancy stable.
Millennials are Renters for Longer
New Jersey has seen a growing demand throughout the state from the millennial population that has historically gravitated to the more walkable and urbanized locations like Hoboken, Morristown and Jersey City.
The lack of supply and affordability within the single-family markets has resulted in the biggest decline in homeownership among millennials. This has fueled apartment demand. On top of having difficulty affording the monthly payment based on rising prices and interest rates, most millennials continue to have challenges accumulating enough capital to afford a down payment.
Although rate cuts from the Fed may lower borrowing costs and increase affordability, the lack of inventory and deliveries of new housing will continue to keep pressure on the apartment market and fuel future rent growth.
Asking rents in New Jersey have outperformed the national average and are expected to conclude this year 2.9 percent, or 150 basis points, above the national average of 1.4
percent.
Pressure to Deploy Capital into the Multifamily Market
The muted transactional volume, driven by the uncertainty created by interest rate volatility, has resulted in limited opportunities for investors to deploy capital into multifamily assets over the past 24 months.
Multifamily transaction volume is down 61 percent since the 2021 peak. This lack of supply has resulted in investors being sidelined for most of 2023 and 2024.
Despite this, there is a tremendous amount of dry powder allocated to multifamily, with over $165 billion of funds being raised for residential, more than double any other asset class. With the Northeast, and New Jersey in particular, as the top target for institutional investors, we expect positive pressure on pricing for high quality assets located throughout the state. As interest rates come down and this capital becomes more active, we expect the market to continue to improve and the outlook to remain extremely positive for the New Jersey multifamily market.
— Ryan Dowd is co-head of Cushman & Wakefield’s Northeast Multifamily Advisory Group. He is based in New York City. Market statics are based on Cushman & Wakefield Research and supported by CoStar and MSCI Real Capital Analytics data.