Jun 5, 2019
Welcome to the newest New York Real Estate Update from Brooklyn Made.
This month’s roundup shows how the DNA of NYC and its real estate continues to change. While property sales and retail has been soft lately, a new wave of buildings all coming to market at the same time, and plenty more permits behind them could push the market solidly into one direction or the other. A new spree of recorded sales could be great. If they don’t happen, competition might create great acquisition opportunities across the NYC map.
The landscape is changing with new developments, and over the long run, there seems but no stopping New York as an innovative playground for real estate developers, architects, and creatives.
Keep listening to get the scoop on all of this, the most notable news this month and what it means for landlords and investors.
In the commercial real estate headlines…
Here come the defaults. While there are plenty of shiny renderings to show off new developments coming to market, it seems the commercial mortgage defaults are beginning to pop up again as well.
545 Madison Avenue’s $30M loan from Barclays has entered special servicing due to “severe cash flow issues.” Last month another of Thor Equities’ landed in default over a $37M mortgage in struggling Soho. Another property on Fifth Ave. Thor exited a few years ago has also gone into default with over $230M in non-performing debt.
None of this seems to have deterred Warren Buffett from lending Kushner Companies $800M to finance a $1.1B portfolio purchase for apartments in MD and VA. Kushner Companies also seem to be on a spree of moving into new Opportunity Zones down the east coast, all the way to Miami.
VRBO and Home Away join Airbnb in the hot water for its short term rental business in NY. HomeAway has so far failed to supply listing data to the city as required. Expedia has purchased 3 short term rental platforms since 2015, including HomeAway for $3.9B. You may well have seen many of these private home and condos listed along with hotels on Expedia over the past couple of years.
Google has been going all in on Chelsea, with another $600M purchase of The Milk Building. This growing monopoly adds on to its $2.4B purchase last year and is reportedly part of another $1B expansion spree.
If even some of Manhattan’s biggest dealmakers can’t afford their rent these days, it’s no wonder homelessness in NYC is still so big. Counts, which can be difficult to get right, already put the local population of homeless as big as the 10th largest city in the state. Shelter populations appear to remain flat, but the city continues to spend $3.2B on homeless services.
5G is coming. Well, they already have it in Chicago and Minneapolis. How long before we get it across NY is going to depend a lot on state and local lawmakers hashing out who gets what money from carriers and how much can be charged. Proposals call for $200 per ‘box’, versus what some are now charging over $2,000 for. If there isn’t a good compromise, it just isn’t going to make financial sense for the carriers to bring 5G here.
Among the newest amenities to hit the multifamily market is Brookfield’s new partnership with a delivery service and waste management firm which gives residents brand name items in reusable containers. Everything from popular brand cleaning products to ice cream and juices are now delivered like the old milkman in eco-conscious, reusable containers to improve the sustainability of existing and new developments.
Tour 24 also has an app which now facilitates self-guided tours for prospective renters, streamlining the process for landlords and making it more convenient for renters to apartment shop on their own schedules.
For Brooklyn Real Estate News
A part of the latest NYC budget calls for more taxes on those selling properties $25M and above. The new mansion tax can be as high as 4%, making it even more challenging for sellers.
The Domino Sugar factory project is moving along, with the second residential tower recently topping out. The waterfront tower in Williamsburg is now 42 stories. One South First will have 660 residential apartment units, 150k square feet of office space and 15k square feet of retail.
Something new is coming to Bedford Ave. RedSky Capital has amassed a line of properties along Bedford, and rumors are that a new big-box retailer could soon make it home. Current short term small tenants can pay as much as $36,000 per month for space here. A fraction of what might be charged to a large international retailer. RedSky is known for bringing top brands to Brooklyn, including Apple.
In case you missed it, the Brooklyn rental market had an amazing month in March, with a 40% surge in new leases being signed. That’s almost double the rate in Manhattan and Queens. Rents were up 5.8%, with the most leases signed in a single month over the previous 15 months. Bloomberg and National Real Estate Investor credit some of this activity to renters jumping to new buildings, rather than paying the rent increases being demanded by current landlords. 75% of new developments were offering an average special worth 1.6 month’s of free rent.
In other boroughs
Lots of new buildings have been launching sales this month, with more permits coming behind them. Even Queens and the Bronx have been quite active.
While not approved yet, the Bronx could get its own massive 5M square foot mixed-use waterfront project, ‘The Fordham Landing Project’.
The Rockefeller Group has opened sales for Rose Hill, it’s first condo development in Manhattan. The 600-foot tall building offers condos starting around $1.2M.
JP Morgan aims to revitalize East Midtown in one swoop with its newly approved HQ. The new 70 story tower is planned to replace the old Union Carbide Building.
Following a similar development in Downtown Brooklyn, Macy’s is reportedly planning a new 800-foot tower on top of its flagship store in Midtown Manhattan. A move that shifts the company away from relying on the ailing retail industry.
This month’s New York real estate news roundup is positive overall. In spite of rising inventory levels in luxury condominiums and retail spaces and some defaults, the demand from residential tenants and major firms appears to be there. World class developers, architects, and innovators continue unveiling progressive new buildings and communities. If you have the right product, in the right place, at the right price, and it is marketed well, investors can still expect great successes.
Well, that’s it for this month’s roundup. 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.