New Jersey developers face financial pressure and regulatory hurdles
Writer: Mariana Hernández
June 2025 — As the Garden State works to meet development demand while finding balance in current economic conditions, developers are navigating a complex path forward. Market stabilization of the real estate market, increased supply, and the role of high interest rates are shaping investment behavior and valuation.
Developers must find ways to be patient and well-capitalized. While the market shows signs of finding a balance between prices, interest rates, and inventory, buyers continue to wait for transactions to continue. The active home listing increased by more than 14% compared to last year, and the mortgage rates can range from 5.8% to 6.8%, depending on terms.
Success in the New Jersey real estate market depends on navigating economic headwinds with strategic vision, while also staying ahead of evolving policy changes like Governor Murphy’s proposed zoning reforms aimed at expanding housing supply by cutting red tape. This will allow developers to streamline the approval process, reduce project delays, and pursue more diverse project options that are in high demand.
Invest: recently spoke with Steve Bussel, president at Bussel Realty Corp; Kevin Haney, president and CEO of Colliers Engineering & Design; Thomas Trautner, governance co-chair of the Urban Land Institute Northern New Jersey; and Edwin Cohen, principal partner at Prism Capital Partners, to discuss the opportunities that New Jersey’s real estate development market navigates in a complex financial environment.
Steve Bussel
In 2023, the market began to stabilize with a decrease in demand and an increase in supply. This carried through 2024 and into 2025, as the downward trend continues. Once the tariffs situation is behind us, and once more manufacturing can be created in the country, I believe that the current policies may be the best thing that can happen to this country, but even more so, the best thing to happen to industrial real estate. We will see how all of this shakes out, but it can be a boon for industrial real estate. Once the current inventory is absorbed, the rents will go up, which increases valuation. Cap rates are currently a little high because of interest rates. If interest rates go down and the current supply is diminished, I believe cap rates will come down, which will increase valuations.
Kevin Haney
2024 was pretty impactful from an interest rate perspective. Higher interest rates impacted a lot of developers, and the real estate development world in general, not only from a residential perspective, but also from a commercial perspective. When the money got too expensive, a lot of those projects didn’t really make financial sense anymore. A lot of those projects were put on hold, delayed, or just stopped completely.
The small reduction in interest rates toward the end of this past year sparked a little bit of momentum in the development world, but more importantly, people started to recognize that this is the new norm. People don’t anticipate interest rates going significantly lower again, so it normalizes itself over time. Now we’re starting to see momentum pick up again with commercial development. Developers are getting used to the cost of money, they’re changing their performance on the business model, and moving forward under those new ground rules, so to speak.
Thomas Trautner
The rising costs may impact (and delay) timelines and may require more strategic problem-solving. New Jersey has always had a high barrier to entry, which is not new. If a project presents a strong opportunity and offers a significant return on investment, developers generally find ways to proceed. The challenge lies in managing portfolios and timelines while dealing with these financial pressures. The more significant issue is for off-market deals or projects with additional layers of complexity or risk. Developers may be less inclined to take on projects that, while promising, carry entitlement risks or uncertain costs related to environmental concerns. There is also a broader impact from Wall Street on real estate development in New Jersey, compounded by the state’s regulatory environment. Just over 2024, we have seen that there have been both progress and setbacks. While legislative and regulatory bodies have good intentions, some recent climate resiliency regulations have had unintended consequences.
Edwin Cohen
It can be a tough road to get things done in the state of New Jersey. This market is not for the weak of heart and not for the undercapitalized. You need to be careful and work with a great team that knows how to buy and purchase and that has access to reliable contractors and subcontractors. Unless you have a strong financial partner in your corner, it can be a difficult process. We have the best of the best as far as that goes and are never at a loss when it comes to raising additional capital for our projects. The key is to fit the particular project with the proper partner. Additionally, you need to have patient money, not people who want to get in and get out with a big hit. That is not us, so it works.
Top image provided by Prism Capital Partners
For more information, please visit:
