May 2, 2018
Welcome to the newest New York Real Estate Update from The Brooklyn Made Show.
This month we’ve seen some big trends and real estate moves in play, and see the market preparing for the peak spring and summer home buying season.
In the commercial real estate headlines
Rents don’t appear to be faring well in New York City this year. What looked like it may have been only a period of seasonal softness, appears to have been extended. All market segments are unique, but asking prices are down, rents are down, and negotiability and concessions are up. This may be an extension of the winter due to ongoing poor weather. Things could spring into action over the next few months and catch up after this correction. Though we may just have to wait and see.
Retail property landlords seem to be especially feeling the pinch this season. Retail rents fell 20% in the first 3 months of 2018. That’s after Manhattan rents fell to their lowest level in 17 years in 2017. Over 209 ground floor rent spaces are on the market, being actively advertised.
Some investors and retailers are taking advantage of this. While Toys R Us and Michael Kors are closing stores, TJ Maxx expanded with the first quarter’s biggest deal at 18,000 square feet on West 57th St. Mango signed the second most expensive lease for 19,000 square feet on Broadway in SoHo according to BisNow. Forever 21 has also announced it is signing a five year lease for 43,000 square feet at 435 Seventh Ave.
Investment activity has still been strong, but not though yesterday’s common channels. The Real Deal reports that investors have been shunning real estate stocks and publicly traded REITs, despite the fact they are trading with discounts as deep as 16.4% below the value of their assets. Instead investors are plowing far more capital into direct investment and private real estate funds. These funds had accumulated $1.2T in real estate by the beginning of 2017, and attracted $71B in new capital over the last year.
Brookfield just bought seven retail storefronts on Bleecker Street in April, where it wants to test out new retail concepts.
While apartment rents in New York have fluctuated as well, there doesn’t appear to be a lot of hope for those looking for affordable housing today.
According to the Department of Housing and Urban Development (HUD) residents are considered rent burdened if they have to pay 30% of their gross monthly income for housing and utility payments. Those who pay 50% or more of their income towards these housing expenses are considered extremely cost burdened. Yet, a report from 6sqft reveals that hundreds of Section 8 tenants are shelling out as much as 80% of their income for rent each month, or more.
New rules could also mean that Section 8 renters have to cough up even more of their own cash to pay for housing. The same goes for those living in New York’s rent stabilized housing. Brownstoner says that efforts to make renters less reliant on government housing subsidies could see housing costs triple under new legislation.
In mid-April, the New York Rent Guidelines Board voted to allow landlords to hike rents on stabilized apartments by up to 3.75%. That’s only around half of what the landlords’ Rent Stabilization Association asked for. Yet, far more than the rent freeze tenants attending the meeting where hoping for.
Fortunately, some affordable housing projects are making it to the market. A new 293 apartment complex in East Flatbush recently celebrated its opening. The project is dedicated to be 100% affordable, with 183 units being dedicated to formerly homeless individuals and families. The building also just won The Urban Land Institute’s 2018 Excellence in Affordable Housing Development.
In other news, what was expected to be the biggest test of cryptocurrencies in real estate so far appears to have fallen apart. The Initial Coin Offering, tied to purchasing the historic Plaza Hotel, which was formerly owned by President Trump for $675M does not seem to be attracting enough investors according to Business Insider.
Bad news for hotel developers. The New York City Planning Commission is blazing ahead with new rules that would limit the ability to build in industrial areas. Both sides have very different opinions on the impact of these developments. Some claim they have stolen jobs and opportunities from those without college degrees. Others point to the data which shows all the jobs and income developments like these have created.
For those looking to score themselves a notable property this month, it’s worth checking out the William Lescaze house. Considered the first modern home in New York City, the renovated and restored townhouse is asking $5M. For those looking for spending more, another of Lescaze’s architectural designs went on the market last year for $20M. The Two family property next door is up for sale for an even cheaper price tag of just $3.95M.
Now, if you thought the NY property tax situation was already bad, those over in Suffolk County, Long Island could be hit far worse in the coming months. Neighboring Nassau County is reassessing all residential and business properties at their new high values. While Suffolk County residents are about to start dealing with new groundwater pollution and sanitation targets. An estimated 75% of properties in the county are not connected to the public sewer system. New units to manage the negative impact cesspools are having on the local water system could cost $20,000 each, plus ongoing maintenance. That may be at least 50% funded by new taxes to offer residents loans to buy them.
In terms of the changing season impacting the real estate market...
The weather has not been kind to the region this winter, with a seemingly endless strong of nor’easters rolling through. By the time they settle down, we'll be rolling right into the 2018 Atlantic Hurricane season which is also expected to be more active than normal.
This storm activity may show up in some slightly dampened sales and leasing figures over the next few months. It is important to keep in mind that these numbers may be more the result of the difficulty in getting out to view property in bad weather, and delays in closings, rather than any reflection of demand for homes, condos, and development sites in Manhattan and Brooklyn.
Property Tax Adjusters limited on Long Island reminds us that this is a more important year than ever to appeal property tax assessments and bills. Deadlines for filing some state and local property taxes and appeals may have been slightly extended this year due to the storms, new tax bill, and the number of property owners expected to file appeals. Check the appropriate deadlines for your county to see if you still have time.
As we move through spring to the busiest time of the year for property sales, this is an important time to reinspect our homes, investment properties and apartment buildings. Inspecting trees, foundations, cleaning out gutters and checking smoke alarms are all basics to be covered.
For Brooklyn Real Estate News
Brooklyn is still perhaps the hottest area of the country. Netflix has even been on the ground shooting new film work. DUMBO is currently working to install an urban fitness trail to give Brooklynites a free workout, complete with workout obstacles. The Business Improvement District is accepting pitches for the design which will be trialed for one year.
The City Council just paved the way for a sprawling new 8 building affordable apartment complex in Williamsburg’s Broadway Triangle area. Out of 1,146 apartments, 287 would be subsidized.
Of course, not all affordable housing projects turn out to be that successful. DNA Info reports that following a lottery last year which attracted 93,000 people to get in line for a shot at 300 units in Prospect Heights, many apartments are still empty. In fact, 100% of some classes of units in the Atlantic Yards are still vacant. The developers are still looking for tenants for the studio to 3 bedroom subsidized apartments which run from a little over $2,000 per month to over $3,000 per month.
The old Domino sugar factory is moving closer to bringing even more green space and affordable apartments to Brooklyn as well. Once complete 700 of the 2,800 new rental apartments will be designated as affordable. The developer has also just released new renderings for the site’s 6-acre waterfront park.
Next to Macy’s in Downtown Brooklyn Studio Gang is developing an iconic new 51 story condo tower, with a refreshing staggered design. The building will host 480 apartments and 55,000 square feet of outdoor and indoor amenities. The same developer is also working on giving the Macy’s building a facelift as well.
The biggest deals in Brooklyn for quarter one this year include:
Other new developments in Brooklyn which have filed or received permits include, a 4 story, 8 unit apartment building at 898 Bushwick Ave. 253 Mother Gaston Blvd is also to get a new 16 unit apartment building, just 5 blocks from the Atlantic Avenue subway station.
The proposed 80 Flatbush development with 900 new apartments and 2 new schools still continues to be protested by some, even despite gaining overwhelming 3 to 1 backing from those voting in an online poll.
For coffee lovers, Starbucks has announced it is bringing its brand to Bed-Stuy. Taking over part of the Fat Albert department store, many wonder whether this is the next step in the gentrification of the area, an attempt to secure cheaper labor by the big coffee brand, or just a new place to gather and connect.
In other boroughs
The Bronx looks set to continue its rise in popularity and investment this year. JLL Capital Markets has announced receiving a $41.6M loan to acquire 12 rent stabilized multifamily apartment properties in the Bronx.
New York City’s first soccer stadium also looks like it is coming to the South Bronx. The stadium is part of a larger mixed-use development costing $700M. In addition to the stadium, the development is set to include an 85,000 square foot park, 150,000 square feet of retail, 25,000 square feet of medical facilities and 550 affordable apartments.
Over in Queens Handel Architects have released new images of what will be the borough’s new tallest tower that will rise next to Long Island City’s clock tower. The new 63 story tower will include a play area, fitness center, library and coworking space.
The Winklevoss Twins’ Gemini Trust exchange for digital currencies is expanding its offices in Midtown South, taking their space up to 51,000 square feet.
For Landlords and Investors
If you really want to upgrade your properties, a report from the New York Post reveals some of the high-end materials being built into New York City Properties.
The one big issue now is that many Brooklyn and NYC real estate owners, renters and investors are just getting tired of the high prices and even higher taxes. They see how high the market is now, and see it as a good time to move, or at least their capital somewhere else.
For New York landlords dealing with vacancies, there are always creative solutions. It could just be a matter of deploying the right broker to handle things. It could be Airbnb or opening up basement apartments for extra rent. Or it could be partnering with corporations for corporate rentals.
Some are investing in and moving to California and Florida for the weather. Many others are moving to Ohio cities like Cincinnati and Cleveland in order to get far more home for their money and to get started acquiring rentals properties. CNBC says that over 800,000 people from California and New York are about to flee new higher taxes.
It has been a busy quarter in the New York real estate market already. Big players, buyers, and developers haven’t been shy. In fact, we continue to see new plenty of new projects coming onto the market. Rents have been blown around by a variety of factors, though sales appear to remain strong, and capital bullish on all major New York boroughs.
Well, that’s it for this month’s round up. Look out for our other upcoming reports, and check out the latest data on the Manhattan and Brooklyn residential and multi-family market, and which features and neighborhoods are yielding the best rents at NewYorkMarketReports.com.
This is episode is brought to you by our sponsors The Ratner Team and Spartan Renovations. The Ratner Team are your local New York real estate experts for buying, selling, leasing and investing in property in the Big Apple.
Spartan Renovations is a leading NYC firm specializing in architectural and engineering design, project design and management and general contracting services.
Make sure you like and share this report, and leave your comments on this news, or any trends you think we overlooked or you want to hear more about in the comments section.