The narrative forming around North Jersey’s rental market is that it’s softening. By at least one measure, that’s accurate: leasing teams are working harder, showing more units, fielding more inquiries per signed lease, and spending significantly more on marketing than they did three years ago. But the actual rents tenants are paying have held up better than the effort required to collect them would suggest, according to Jesse Toledano, who leads the New Jersey operations at Modern Spaces, a development advisory, marketing, brokerage and leasing firm active across North Jersey, New York City, and now South Florida. The disconnect says more about the competitive structure of the market than about pricing weakness.
Toledano describes a market where the real pressure is coming not from falling demand but from a multiplication of supply sources, including buildings that are already leased up competing with themselves on turnover.
A new 50- or 60-unit building entering the market gets attention: fresh marketing budgets, premium listing placements, and the appeal of being the newest option in the neighborhood. But it competes not only with other new buildings. A 200-unit building in its second or third year, turning over 30% of its units annually, puts 60 apartments back on the market each year – roughly the size of an entire new project.
“It’s not just the new product that’s brand new,” Toledano says. “It’s these buildings that are on their year two or their year three.”
That turnover is partly a consequence of the concessions that helped fill those buildings in the first place. Aggressive incentives – often one or more months of free rent – get units leased at the gross rents lenders and investors underwrote. But when renewal time comes, tenants who were paying on a net basis expect similar treatment. When they don’t get it, they leave. The result, Toledano says, is that concessions fill buildings quickly but generate churn that adds supply back to the market a year later, competing with the next wave of new construction.
Toledano draws a distinction between what the market feels like and what the numbers show. The rate of rent increases has slowed, and in some cases rents have dipped in the low single digits – less than 5%, by his estimate. But much of that apparent softening is seasonal rather than structural. A unit originally leased in August that turns over in November will re-lease at a lower price simply because November is not August.
Toledano says leasing activity is heavily concentrated in the spring and summer months, creating significant seasonal swings in both velocity and pricing. A building that launches in February will take longer to lease up than one launching in April or May, regardless of market conditions.
The more meaningful change is in conversion rates. Renters now treat the search process like comparison shopping across neighborhoods and even adjacent markets. “Sometimes we should give shopping bags,” Toledano says, “because they’re out there making sure they’re considering all options in their price point.” For prospective tenants considering Jersey City, that comparison can span multiple neighborhoods and surrounding municipalities – giving them leverage that did not exist when supply was tighter.
Behind the leasing dynamics sits a deeper structural issue for developers. Jersey City’s cost environment has grown less predictable. Tax obligations on new projects can shift during the construction process – Toledano describes developers who underwrite a project based on one set of tax assumptions, only to face a materially higher tax burden by the time the project launches. “That’s a big jump in your net income,” he says. Statewide, construction spending in New Jersey has risen 19% this year while new construction starts have increased just 1%, according to figures from Otteau Group Chief Economist Jeffrey Otteau reported by NJBIZ – a gap Otteau attributes to projects already under construction, as elevated interest rates delay new ones from breaking ground.
Some developers are looking outside Jersey City toward municipalities like Bayonne, where tax structures have been more predictable, or toward suburban transit-oriented locations like Montclair and Hackensack. Others are reconsidering the product itself. As rental margins compress, condominiums are attracting more interest. “Developers want to keep moving,” Toledano says. “So now we’re looking at projects on a condo basis – will it work as condos? Because the margins are a little bit wider, but so is the risk.”
Several larger condo projects are already in various stages across Jersey City – in Journal Square, McGinley Square, Bergen Lafayette, and the Heights. According to Toledano, how those projects perform will shape whether other developers follow.
The operational shift that has tracked alongside these market changes is in how tenants are found. Three or four years ago, a 60-unit building could lease up with premium placements on listing platforms like StreetEasy and Zillow. Now, Toledano estimates 70 to 80% of leases come through paid social, paid search, SEO, and other direct digital channels rather than traditional listing platforms – including Meta ads, Google Ads, and, increasingly, AI optimization to ensure buildings surface when prospects query tools like ChatGPT.
The same shift is visible on the sales side. Across five condo projects in Long Island City totaling more than 500 units over three years, 60% of deals were direct – buyers who found the project through digital channels rather than through co-brokers or listing searches. In years past, Toledano says, perhaps 10 to 20% of condo deals would have been direct. Those buyers did not come through an existing relationship or a co-broker, and they were not necessarily searching for the project specifically, he says; Modern Spaces reached them through digital advertising.
For developers, marketing spend has become a core operating cost rather than a discretionary line item. A building that could have leased up three or four years ago on listing-platform placements alone would now, according to Toledano, take significantly longer to rent without a dedicated digital advertising agency.
The combination of higher marketing costs, compressed rental margins, and rising construction expenses means the break-even point on Jersey City projects has moved. Developers who entered the market when listing platforms alone could fill a building are now budgeting for a fundamentally different cost structure – one where reaching tenants requires paid digital campaigns before a single tour is booked.
About the Expert: Jesse Toledano leads the New Jersey operations at Modern Spaces, a development advisory, marketing, brokerage, and leasing firm active across North Jersey, New York City, and now South Florida.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
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