If it seems like luxury apartments are popping up everywhere in New Jersey, you’re right.
There’s a rental unit construction boom happening across the state and the competition to attract younger renters and empty nesters is at a fever pitch. The action is especially intense in towns and villages eager to redevelop former industrial sites.
Many projects are being built with elaborate health clubs, pet washing stations, roof-top swimming pools, lounges and elegant lobbies that reflect a significant shift in how renters – and landlords – view apartment living.
This year, New Jersey builders are on target to complete 15,500 new rental units in 124 properties, according to the National Apartment Association and CoStar Group, a data analytics company. They project the buildings will house as many as 32,000 people.
That’s a 33% increase over last year and double the number built in 2019.
Perhaps more than any developer, Russo Development’s Vermella brand showcases over-the-top in-unit amenities, clubhouses and tile, light fixtures and artwork that resemble expensive hotels. The 10 complexes are all near rail stops and bus stations in Northern New Jersey.
“We want someone to walk into our community and say, ‘Wow!’” said Michael J. Pembroke, Russo’s chief operating officer.
The $8.5 million clubhouse Russo built at the 850-unit complex under construction in Union Township has big screen televisions, an indoor golf range, party rooms, an outdoor theater and concert space with stadium seating and a swimming pool with California-style cabanas. You’d never know it was a former Merck and Schering-Plough manufacturing site.
“A lot of people look at that and say you guys are nuts to build that kind of finish in an apartment community,” he said. “But we’ve gotten a good response.”
The initial occupancy rate is at 60% for units coming onto the market without discounts. Rents range from $1,600 for an efficiency to more than $3,000 for a three bedroom.
The amenities arms race comes with risks, of course.
The current boom peaked just as the pandemic jolted the economy with a wave of joblessness. The unemployment rate in New Jersey was 7.7% in March, among the highest in the nation. Idle workers cannot afford premium rentals that can command $2,000 or more a month for a one-bedroom apartment, rooftop swimming pool or not.
There are other concerns. While rents in New Jersey have mostly held steady, lower rents in New York appeal to many of the millennials and empty nesters the New Jersey developers are targeting.
The other big unknown is the impact of remote work, what it means for off-the-beaten-path bedroom communities like Kearny, Harrison, Union and Hackensack, and where people will shop and seek entertainment. All of those factors could undercut one feature most of the new luxury apartments have in common: proximity to New Jersey Transit rail lines and bus stations.
For now, though, the unknowns remain significant because many shops, bars and restaurants frequented by millennials have closed or are operating at partial capacity.
David H. Borgan, New Jersey Apartment Association executive director, said the pandemic ultimately can help the state’s rental market.
“You saw people from New York leave the city because they didn’t want to be in clustered housing during the pandemic,” he said. “What do people want? They want a live-work-play environment.”
The new luxury buildings, he said, are attracting young singles, empty nesters who sold their homes and a surprising number of young couples who have put off getting married and having children, and now want more space to start a family. He said landlords are also seeing fewer roommates doubling up than in recent years because of concerns about coronavirus contagion.
The move into luxury apartments is a sharp turn for Russo, which made its name building commercial warehouses. Over the past decade, the company evolved into a leading supplier of large data centers for Wall Street clients, including J.P. Morgan Chase, New York Stock Exchange Euronext, Cervalis Managed Hosting and SunGard Availability Services.
In 2012, the company built its first apartment in Lyndhurst. The 300-unit building, Pembroke said, “financially (was) not our best, but we learned a lot.”
Russo and other developers, he said, can afford expensive amenities because of low interest rates, municipalities offering generous tax breaks, fast zoning approvals and large blocks of land at attractive…