By Alex Hassel, Storage.com
Big real estate issues are shaking up New Jersey. According to NBC News, the state had the second highest foreclosure rate in the U.S. in Q1 of 2016, and Atlantic City and Trenton saw the highest metro foreclosure rates in the country that quarter as well.
Known as a gambler’s haven for decades, Atlantic City is on the decline. Job loss is high in the city, thanks to the 2008 Great Recession and casinos opening up in surrounding states, and it’s had a huge effect on the housing market. In the first quarter of the year, one out of every 106 housing units in Atlantic County was foreclosed. The country’s average was one in every 459, and New Jersey’s was one in every 216.
An economist with the Greater Atlantic City Chamber says because so many residents have been unable to pay their bills, a large portion of the population had to leave Atlantic City to find work. Others who remained have had to scale back their living situations.
“More people are losing homes,” says Jeanine Pescatore, a real estate agent at AVALAR Atlantic Properties. “Quite often, we’ll try to help them when they come to us, but a lot of banks are opting for foreclosure to collect private mortgage insurance. We try to get them rentals, but it’s difficult because there’s a foreclosure on their record. A lot of them go live with family members, but basically everyone is going live in a much smaller place. A lot of people end up putting their things in self storage.”
Trenton is facing similar struggles with foreclosures. The city saw one in 168 housing units foreclosed in the first quarter of 2016.
Jose Rodriguez, a real estate agent with Garcia Realtors in Trenton, says a lot of people are losing homes in the area, but it’s not because of massive job losses like Atlantic City. “It’s due to the problem we had ten years ago with the housing bubble,” he says. “Foreclosures have been steady ever since then, but they’re really ramping up this year. A lot of people using HARP [Home Affordable Refinance Program] were able to hold out for a while, but I don’t think it worked because so many people are losing their homes lately.”
Like Atlantic City, foreclosures in Trenton have forced residents to downsize. Rodriguez adds, “Most people are moving into an apartment or out of the area.”
Foreclosures in Atlantic City and Trenton have had an interesting effect on the self storage businesses in the region. One manager at a facility about eight miles northwest of Atlantic City in Egg Harbor Township, who asked for her name and company to remain anonymous, tells Storage.com that she’s not necessarily seeing an increase in rentals, but rather a different type of renters.
“Probably the biggest change is in our commercial space,” she says. “We used to have lots of commercial tenants using large units, but after the downturn, all those businesses started leaving. At that same time, we had a lot of people downsizing their homes looking for storage. We ended up converting those large units meant for businesses into smaller units for the increased demand from tenants who were downsizing.”
Although the facility has consistently seen around 90% occupancy over the last couple of years, the manager doesn’t believe there’s need for new storage supply in the region. “I believe the need for commercial space will come up again, though,” she says. “We’re always getting flooded or hit by hurricanes, and construction or repair companies will almost always have a job here fixing things up. Warehouse developments would do really well.”
Unfortunately, self storage supply in some of the region seems to be low. Kristi Reading is an owner at Buxton’s Boxes Self Storage on Lower Ferry Road in Ewing Township about six miles northwest of Trenton. She did see a big change in the facility’s type of renters in 2015, although she hasn’t been able to accommodate everyone looking for storage space.
“Especially last fall, we did see a lot of people downsizing because they were losing homes,” she says. “They were bringing in furniture and items like that. The biggest problem with our facility though is we’re 100% full. We’ve actually been taking names on a waiting list.”
When she does turn people away, she’ll often refer them to the nearby Hopewell Valley Self Storage off Route 31 in Pennington, which is about ten miles northwest of Trenton, though that facility sits at about 99% capacity as well. Even AR&C Self Storage off of Back Creek Road in Hamilton Township just six miles southeast of Trenton is at 95% capacity.
Reading adds that those who are storing after a foreclosure typically rent for three to eight months, so there’s relatively low turnover. “In terms of supply, I think people here have a big need for storage. People have a lot of stuff,” she says.
It’s not easy to predict the future for Atlantic City and Trenton, especially since there are rumors of two more casinos closing in Atlantic City.
Joseph Kelly, President of the Greater Atlantic City Chamber, says improvements to Atlantic County are on the way. “Even prior to casinos closing, the Chamber and others were working to diversify the economic base. Our biggest upcoming development will be the Gateway Project, a $200+ million investment by Stockton University and corporate offices for South Jersey Gas. There’s also strong potential for a technology park to be located at the FAA. Business is doing quite well when you consider casino revenue is up by 40% and non-gaming revenue has increased from 20% to approximately 37%.”
As for Trenton, Rodriguez believes its situation will slowly improve. “It’s been bad here, but it’s getting better. I think we had a spike in foreclosures, but now we’re seeing a lot of people catching up on their debt and getting loan modifications. People are finding a way to make it work.”
It’s unclear exactly when the foreclosure rates could slow down in the areas, but until they do, those who are downsizing as a result will continue using self storage during their transition.
Alex Hassel is News Reporter for Storage.com. If you’d like to pitch Alex a self storage industry news story, email alex.hassel@storage.com or call 402-779-7328.
