As it approached its fifth decade, the Carlstadt-based company turned to multifamily — acquiring a 9-acre industrial parcel in nearby Lyndhurst in 2008 that it would take through the painstaking, sometimes-complex process of redevelopment.
That site today is home to 150 luxury apartments and a swanky clubhouse, plus another 150 units that will open in the coming months. And the firm now owns a half-dozen other pieces of land slated for multifamily projects in North Jersey, with more than a thousand units in its pipeline.
Russo is among the growing number of Garden State developers to enter the red-hot multifamily market in recent years as the firms look to diversify and fight through slowdowns in traditional commercial assets. And the trend shows no signs of waning, despite the challenges of making the jump and the prospects of overbuilding.
The shift coincides with an overall uptick in multifamily construction: Through September 2013, the most recent month available, local officials had issued permits for nearly 6,700 new multifamily units, according to the state Department of Community Affairs. That puts New Jersey on pace to have permitted more than 8,900 units last year, the highest total since 11,300 units were authorized in 2007 — one year ahead of the financial crisis.
And many more are in the pipeline thanks to a push that spans from family-owned developers to powerhouses such as Mack-Cali Realty Corp. The Edison-based real estate investment trust has been among the most aggressive in expanding its platform. It acquired Roseland Property Co., one of the state’s top multifamily builders, in 2012 and sells non-core office buildings in order to help fill its apartment pipeline.
“I think development is going to be a very significant part of our growth pattern,” said Mitchell E. Hersh, Mack-Cali’s president and CEO. “It’s the area that we think we can add the most value.”
Under a joint venture with Ironstate Development, the company broke ground last week on one of its most high-profile residential projects to date: a 69-story, 763-unit project in Jersey City. And Hersh said the company has development activity underway that’s valued at more than $700 million, with plans to build on Roseland’s pipeline and the existing stock of Mack-Cali-owned lands.
Despite the appeal of a booming asset class, developers say there are hurdles to building multifamily that aren’t as common with traditional commercial projects. Chief among them is local resistance: Many governing bodies and residents are even more unwilling to consider multifamily development, often because they believe it will strain municipal services or because of a negative perception about high-density housing.
Joseph Langan, president of River Drive Construction, said some towns are open to residential projects, especially in urban or downtown settings. But most favor office and other commercial development because “the people go home at night.
“There are no school kids, and it doesn’t necessarily tax the services that the town has to provide,” said Langan, whose company is based in Elmwood Park. “But housing is a different story.”