Good time to be a NYC landlord!
Published: Nov 14, 2013
Since the late 1960s, Manhattan has seen an average of roughly 12,000 new development rental units hit the market each year, according to Columbia University’s Center for Urban Real Estate. But as data from the brokerage Citi Habitats shows, only 15,723 new development rentals units came on the market from 2008 to 2012.
The good news is that the pipeline of new rentals is now beginning to recover from the recession. There are some 23,000 new development rental units slated to come on the market in Manhattan by the end of 2017, according to Citi Habitats. But this is still a low figure in historical terms, and the supply of new rentals is not expected to swell anytime soon.
With home prices rising and banks more open to construction lending, developers have started building condos again, putting rental projects aside after several years of preferring to build rentals. As a result, the few rentals hitting the market now are seeing a frenzy of demand, with some generating long waiting lists.
In the last year, some 22 large new-construction rental buildings (those with 15 or more units) have hit the market in Manhattan and prime Brooklyn, according to data from real estate database CityRealty and permits filed with the Department of Buildings. That figure, which includes 10 projects in Manhattan and 12 in Brooklyn, is significantly lower than in most years.
And there’s not much relief in sight…in the next few years, 36 new rental projects are planning to hit the market in Manhattan, and 30 slated for Brooklyn. That relatively meager pipeline is a result of both rising land costs and shifting trends in construction financing. Immediately after the financial crisis, lenders were more willing to finance rentals than condos. But they’ve recently started warming up to condo lending again as market conditions have improved.
Some major developers who have long focused on rentals are now turning their attention to condos.
And if condo prices continue to increase, the leasing pipeline could shrink even more as projects slated to be rentals switch gears. That’s the reverse of what happened during the credit crisis, when failed condo projects started leasing out their units because buyers were scarce.
Manhattan land costs these days are so high that the only way for developers to turn a profit is by outfitting their projects with condo-like amenities in order to charge between $70 and $80 per square foot, and then packing in as many units as possible. Brooklyn projects now charge between $55 and $65 per square foot. A one-bedroom used to average between 650 square feet to 850 square feet in size. That unit now is being built mostly closer to the 650 square feet mark.
50 North 5th Street in Williamsburg, which began leasing in September, has over 15,000 square feet of amenity space, including two lounges, an indoor basketball court and a bocce court. Monthly rents at the building start at $2,600 for a studio and climb to $7,000 for a two-bedroom penthouse. So far at least, high rents and waiting lists don’t seem to be deterring tenants – 30 of the project’s 229 units were leased in the first week.
• Riccardo Ravasini is a real estate maven and an active agent in New York and Miami. He grew up in Italy where he studied Business and Finance at Bocconi University in Milan before moving to the U.S. He enjoys assisting people in the search for the perfect rental apartment as well as international buyers looking for smart investment properties. Contact him at +1-917-214-2509 or email@example.com.
|Last Updated on Monday, 18 November 2013 12:30|