For rent
More Jerseyans shunning McMansions for life in luxury apartment buildings

Sunday, November 18, 2007
BY SAM ALI
Newhouse News Service

If you want a glimpse of where New Jersey's housing market is headed, a good place to start would be Eleven-80, a 317-unit luxury apartment building in Newark.

Located just a few blocks from Penn Station, the newly renovated Art Deco-style high-rise is packed to the gills with over-the-top amenities on a par with anything a well-heeled renter might find in a luxury Manhattan apartment. There's a slick, four-lane bowling alley, full-size gym with steam room and sauna, 24-hour concierge service and indoor basketball court.

William and Bray Mitchell, New Hampshire transplants who have been renting a two-bedroom apartment at Eleven80 for the past year, are officially hooked on apartment living. The Brays, both 50, describe themselves as "empty-nesters," with their three children off at college. So when William Mitchell's company, Audible.com, an online audio-book seller, relocated to Newark, the couple had no qualms about packing their bags and renting an apartment in the city.

While a single-family home still defines the American dream, the number of high-end renters is growing in New Jersey, according to developers and experts on the state's housing market. The trend is fueling the development of luxury apartment buildings in places such as Livingston, Morristown, Rahway and Red Bank.

Eleven80, Newark's first high-rise luxury residential development in almost 40 years, was completed last year and is already two-thirds occupied, according to Arthur Stern of New York-based Cogswell Realty, the developer.

Rents range from $1,400 a month for a studio to $2,600 for a two bedroom -- significantly cheaper than the average two-bedroom luxury rental in Manhattan, which can run upwards of $6,000 a month. In Jersey City, a similar apartment can run between $3,600 and $4,200, Stern said.

Rents in Newark and elsewhere in New Jersey represent a bargain for empty-nesters like the Mitchells, who want to trade in their trophy homes for a more hassle-free lifestyle; young professionals, who want the vitality of city life but don't want to pay Manhattan prices; and well-heeled couples who want to live in style while they accumulate enough money to afford New Jersey's sky-high housing prices.

"If you are a couple and you are both starting your careers, and you have settled into a salary of $60,000 or $70,000, it's hard to spend $6,000 a month on a Manhattan rental and still save enough money to save and get ahead," Stern said.

CONVENIENCE
For the past five years, Alta Prinsloo, her husband, Stoffell, and their two children have been renting a three-bedroom apartment at the Crest, a high-rise luxury rental in Fort Lee. Initially, it was not really a matter of choice.

The couple -- both expatriates from South Africa -- had no credit history when they arrived in this country, so it was difficult to obtain affordable financing to buy a home. Renting, therefore, was a practical alternative.

Alta Prinsloo said the Crest seemed to have it all -- a fitness center, heated pool, indoor basketball court, park for her children, drop-off and pick-up of dry cleaning, 24-hour maintenance.

"It's a community by itself," she said, a real perk for a foreigner who is unfamiliar with the lay of the land.

Over the past five years, however, the couple have built up a good credit rating and could purchase a home if they wanted to stop renting. Every year, when their lease expires, the topic comes up. But they always decide to stay put.

"We say, 'Oh, we have to do something, but no. It's just too comfortable,'" she said.

The Mitchells feel the same way.

Bray Mitchell half-jokingly describes the home she left behind in New Hampshire as "the beast." They still own it -- but probably not for long.

"We call it the beast. It's the equivalent of having two kids in college all the time, just in terms of upkeep," she said. "Here, we don't have to worry about plowing the snow or who is cutting the lawn. It's cheaper for us to live here."

And more fun.

"God, yeah," Bray Mitchell beams. "We love the bowling alley. They give you your own set of shoes. Bill's company has had parties here. He'll go down and throw a game while I'm cooking dinner."

Last month, when Bon Jovi's concerts at Newark's new Prudential Center drew a near-capacity crowd, the Mitchells were there.

"It was wonderful," she said. "Now that it's open, this whole area of our neighborhood has become much more vibrant at night."

SHIFTING DEMAND
With the exception of Hoboken and Jersey City's Hudson River waterfront, dubbed the Gold Coast, people don't typically think "luxury" when they think of apartments in New Jersey.

In fact, for years the multifamily housing scene in the state was dominated by drab, box-like garden apartments occupied by the young, the college-bound, the poor and the transient.

Jeffrey Otteau, who runs an appraisal firm in East Brunswick, said a number of shifts are under way that will power the demand for upscale rentals in New Jersey.

For one thing, housing costs have jumped 87 percent during the past five years, while salaries have risen at a much more subdued 16 percent, Otteau said.

And the number of high-paying jobs leaving the state keeps growing, according to James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. In 1990, New Jersey accounted for a 20 percent share of all pharmaceutical jobs in the nation; today, that has dropped to a 13 percent share, Hughes said.

At the same time, thousands of jobs in the telecommunications industry have disappeared with the breakup and sale of AT&T and the sale of Lucent Technologies to the French company Alcatel.

HOME SQUEEZE
But even as the number of high-paying jobs in the state shrinks, New Jersey consistently ranks among the three most expensive housing markets in the nation, Otteau said.

And the shortage of affordable starter homes shows no signs of letting up, he said. The main reasons: A severe shortage of land coupled with strict land-development policies have driven up housing costs in New Jersey and basically discouraged the development of small single-family homes, he said.

Today, the average price of a lot in central or northern New Jersey is about $400,000, Otteau said.

By the time you add material and labor to construct a home, you end up with a home "well in excess of $800,000," he said.

Add to this equation the fact New Jersey has the highest median real estate taxes in the country -- more than 50 percent of all households pay more than $5,352 in property taxes per home -- and it's easy to see why more people who might have considered purchasing a home a few years ago are now turning to the rental market, Otteau said.

"People living in New Jersey are feeling squeezed in terms of how far their incomes will stretch to afford the cost of living here," Otteau said. "Therefore, prospective homeowners in their 30s who opt to rent will continue renting instead of buying a home."

Today's renters have little in common with the standard renter of the past, Otteau said. They are much older, for one thing -- between 32 and 40. And they have much more money to spend.

"They have a taste for the good life," Otteau said. "These young people started their careers leasing very expensive automobiles, eating out a lot and living a very expensive life relative to their earnings. This is the next stop."

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