Sep 6, 2018
Welcome to the newest New York Real Estate Update from Brooklyn Made.
This month we’ve seen more big real estate moves in play, and see developers marching on with new projects that will continue to change the skyline and living trends over the next few years. Yet, the data continues to show the market is changing.
In the commercial real estate headlines...
It’s becoming harder and harder to deny or ignore the fact that the US real estate market seems to have turned. Despite a strong economy and still bullish stock market more data is showing up across the country, suggesting we passed a new peak.
It seemed to start with declining rents in San Francisco, followed by hitting Manhattan and The Hamptons. Now parts of Florida are revealing foreclosures has been growing month over month again. In some cases by as much as 59%.
Still, Manhattan remains home to America’s most expensive real estate. Prices can top $10,000 per square foot. That’s more than double of any others, including frothy San Francisco. However, Manhattan inventory has hit an all time high as of May 2018, and has grown at the fastest pace on record. This surge in residential inventory has also subsequently caused the most price cuts since 2010. 28% of Manhattan property listings slashed prices in quarter two 2018. 21% of Brooklyn properties saw a price cut last quarter.
The slowing market has even hit the former home of Jordan Belfort the ‘Wolf of Wall Street’. After failing to sell with one broker the property has been relisted with a 15% price cut. The $510,000 in savings gives it a new price tag of just $2.89M. Not bad for a Long Island home with 5 bedrooms, 8 bathrooms and over 8,000 square feet of living space.
While new construction may have been faring better than existing properties, those sales fell by over 5% between May and June 2018 as well. The National Association of Home Builders is also reporting that builder sentiment dropped to its lowest point in a year in August 2018. Buyer traffic is also down 2% according to the NAHB, which could signal more weak sales data to come later in the year.
SL Green has continued to liquidate commercial assets in New York City. After an April deal to exit a Broadway property for $633M,SL Green has now agreed to sell its 48.9% stake in 3 Columbus Circle for over $200M. The firm has said it aims to buy back its own stock versus making more acquisitions.
Owners of a 21st floor super-unit in the Central Park Trump Park building may soon seen their property hit the auction block. The New York Post reports they are currently owe over $99,000 in back taxes. That’s in addition to over $9,000 in back taxes on a unit in the building they exclusively use as a gym, and over $34,000 in past due association dues.
If you are in the mood to collect Trump branded real estate, a unit right below the president’s in Trump Tower just went on the market for a modest $25M. The unit offers 6,000 square feet and five bedrooms. Of course, you might have to jump through a lot of security checks and even compete with the president himself to be the next owner.
If that’s not presidential enough for your tastes, then you can always drop $39M on the mansion in the sky at Trump World Tower. You’ll gain an extra bedroom, have over $7,000 square feet, and most importantly, 360 degree views. It already boasts some pretty fine finishes, though you might as well drop a few more million to decorate to your own tastes.
If you’re just visiting the Big Apple, then it’s worth checking out the Empire State Building’s new Art Deco observatory entrance. It won’t be fully complete until 2019, but the work is already looking amazing. Efforts are being made to reduce wait times, though a new VIP lounge could help you enjoy the journey more, if you are willing to pay for it.
In other news, real estate professionals, builders, sellers and lenders just got a big wake up call from HUD. The government is now going after Facebook for allowing advertisers to use its platform to target real estate advertising towards different groups. This is considered a breach of fair housing laws. If HUD or the CFPB seek more data from Facebook to track down advertisers based on the targeting options chosen when running campaigns, this could just be the tip of the iceberg in lawsuits and mega fines for thousands of businesses and independent professionals.
The next major target of a lawsuit should probably be Zillow for the monopoly it is amassing. The online giant recently bought a mortgage lending business, has begun flipping houses itself, and aims to be the number one tenant screening and application portal. All while shooting to take a slice of rental payments to landlords.
In terms of real estate design and building trends, two big factors have come to the forefront of planning. One is social engagement. Social isolation has now been deemed as much of a threat to health and life expectancy as obesity or smoking. The other is using more healthy materials as designs to boost overall wellness. From lighting to airflow to materials used from the bedroom floor to the garage, there are a lot of improvements that can be made to improve health. Expect 2019 to 2020 to be much more about health and wellness in design, as being green and tech smart become the expected norm.
For Brooklyn Real Estate News
The L train shutdown effect seems to be showing up in a big way for Brooklyn renters and landlords. National Real Estate Investor reports that Williamsburg rental inventory has jumped by at least 25% over last year as tenants rush to find pads with better commutes. AM NY reports that while rents in Williamsburg are now down an average of $250 per month as landlords scramble to fill vacancies, and as much as $448 for some units, experts are warning rent stabilized tenants to stay in place. It may be getting cheaper for landlords to buy out rent stabilized tenants, and to boost the value of their assets with market rate leases, but it could be hard for movers to find such great deals elsewhere for the long term. This might be a great time for these tenants to find online work and cut out the commute altogether.
Brooklyn is making the new world of remote work even easier too. Over 38% or 2 in 5 workers in NYC are now freelancers. In response the city has sponsored a new freelancing hub in Dumbo. The site will offer free workspace, workshops and other training and consulting.
According to the Wall Street Journal, one Canadian commercial real estate lender is betting big on the Brooklyn office market too. One of Canada’s biggest lenders has pledged a loan of over $200M for a new downtown Brooklyn office building.
Other developers still seem overwhelmingly bullish on Brooklyn too. The City Council just approved a rezoning plan to allow a new 8 building project with over 1,100 apartments in The Broadway Triangle area of Williamsburg.
One Blue Slip, a part of Greenpoint Landing just launched leasing for its 30 story luxury tower. Studios start at $2,600 per month. 3 bedroom units start at $7,950 per month.
In other boroughs
Despite some negative data already covered, sales prices are actually being increased for the new supertall tower at 111 West 57th Street. New records show one two bedroom unit previously listed at $7.5M will now be sold for $15.5M. Also demonstrating the confidence builders have is a dispute with its lead sales agent who is now suing for $30M.
The Rikers Island shutdown is already in play and is expected to result in the building of 4 new jails in the Bronx, Brooklyn, Queens and Manhattan. This could change some neighborhood dynamics in the process. Though it is still a little unclear whether it will actually lower or increase the number of incarcerated in New York City, the majority of whom are sitting in Rikers, waiting for trials and not yet found guilty of anything.
A new 21 story tech training center has the greenlight to go ahead in Union Square with the aim of bringing new tech jobs to lower income workers and strengthening the local workforce and economy.
Citi Habitats reports that the Manhattan rental vacancy rate uncommonly rose to 1.34% this summer. That’s not much of a increase to ease things for renters desperately seeking affordable apartments, but is a stat landlords should keep watching.
Unfortunately, the Waldorf hotel renovations are now expected to extend into next year. On the brightside, now rooms are anticipated to be bigger than many city studio apartments. SO, if you’re ever feeling cramped but don’t have time to getaway, consider a staycation in the city at the Waldorf. The smallest rooms will now start from 650 square feet according to BisNow.
In what could finally be a win for truly affordable housing in New York City, a new Crown Heights building has opened a lottery with units starting at just $938 per month. Unfortunately, income requirements demant tenants earn at least $32,000 to $62,000 per year, meaning they might still have to pony up 50% of their income to get in.
Queens is about to see a new record setting commercial real estate transaction. The Carlyle Group has agreed to pay $284M for a 45 story building in Long Island City.
For Landlords and Investors
For landlords and real estate investors seeking to optimize current debt leverage or expand portfolios capital still appears more than plentiful. There are all types of lenders and funding sources eager to finance real estate investors. Among them are many nonbank lenders, who have increased their market share by 8% in the past 4 years, seeing a 40% increase in originations, and funding of at least $60B last year alone.
Sadly, Market Watch reports that while mortgage rates have actually been heading down, negative trending in the housing market are beginning to have their toll on the wider economy. This is showing up in slow building activity, few sales, low real estate commissions and jobs. This will likely only worsen affordability as workers suffer lower incomes and more unemployment, while property prices and rents remain relatively high in comparison.
It has been a busy year in New York real estate market already. Big players, buyers, and developers haven’t been shy. In fact, we continue to see a run of aggressive new projects coming onto the market, some with even larger price tags.. Brooklyn continues to be one of the biggest beneficiaries of this action, and is receiving much of the investment capital. Rents have been blown around by a variety of factors, though appear to be solidly marching on. Housing inventory may be growing, though there are many economic factors which could impact the direction of the market through the end of the year.
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.
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.