Welcome to the newest New York Real Estate Update from Brooklyn Made.
This month’s roundup holds big news on new record-setting sales and developments. As well as the scoop on who might be suffering from failing to find buyers for their product. Find out the challenges, and the big movers this month and get ready for an exciting year ahead.
In the commercial real estate headlines…
One of the biggest news bites this month is the new record sale of a residential unit for $238M. The Manhattan penthouse was purchased by hedge fund manager Ken Griffin. Ken’s property spree also includes a new decade record high $122M for a unit in London and a $58.5M unit in Chicago in November 2018. The penthouse at 220 Central Park South boasts an amazing 24,000 square feet. This unit was originally listed for $250M.
While this new record is certainly encouraging, we’ve simultaneously seen the New York condo market run into challenges. Unsold, vacant new construction units have mounted up. This is especially true for companies like Extell. While builders are typically restricted in their ability to reduce public asking prices by lenders, big discounts could be on their way.
Extell’s One57 building just saw a unit sell at a 24% discount. That’s after having run a campaign offering three years of common charges paid for buyers. Savvy investors may find even deeper discounts available on bulk purchases to cash developers out of their projects.
Extell has even tapped a new outside CEO. Sush Torgalkar will take over the lead position effective immediately.
Despite the struggles, Extell has continued its buying spree, paying $63M for a parcel in the Diamond District. Other nearby parcels were acquired for $40M and $85M.
In fact, overall we’ve continued to see a huge boom in development. There were 42 million square feet of new development in NYC last year. That’s even a further 36% rise over 2017. Extell alone was responsible for around a quarter of that, with over 10 million square feet in new projects. Almost two-thirds were residential construction, spread over almost 2,000 projects, and adding 30,000 new units to the city. Brooklyn actually led the pack with almost 9,500 new units.
2019 could be an even bigger year for new construction in NYC. New York YIMBY reports there has been a massive 70% rise in multifamily house filings.
When it comes to amenities that are being put into these new buildings we’ve seen Studio Gang put a cinema and music studio into a Downtown Brooklyn condo project. There is also a Sky Club and room for virtual golf and gaming. Focuses on health and wellness see other buildings getting yoga studios, meditation rooms, and infrared saunas. Make sure to check out our monthly rental market reports to see which amenities are actually leading to faster leasing, the highest rent premiums and return on investment. There is no question that finding the right product-market fit will be one of the biggest differentiators between the inventory that collects dust on the market and gets heavily discounted, and units which are snapped up fast for record amounts.
Some of the top office leases inked in January 2019 included:
The Union Carbide Building will become the tallest NYC building to be voluntarily demolished in our history. Probably the tallest in the world. Deals are already being cut for space and air rights. It will be replaced by a 70 story skyscraper.
Some of the biggest developments this coming year could be in opportunity zone development and massive investments in new commercial real estate tech as venture capital catches onto these spaces.
However, investors may also face more pushback from building authorities and in taxes as we move toward 2020. NY has already announced it will be pushing hard to seize buildings where landlords push tenants out, or who fail to maintain good living conditions.
Nassau County has also carved out a dangerous new path in assessing every residential and commercial property, and potentially increasing effective property tax bills by over 50%.
For Brooklyn Real Estate News
Brooklyn continues to concrete its position against Manhattan this year. One major video and television equipment company has announced it is relocating across the river to Brooklyn. It just signed the lease for 25,000 square feet in Industry City. A further nod to how hot this borough is becoming for the film and entertainment industry.
The new 38 stories Brooklyn Heights Library Tower is bringing a new library and 133 apartments to town. Sales prices are starting just around $1M to over $5M.
Investors should be encouraged that year over year data in our monthly rental market report remains positive. Though there are clear signs that some growth may be skewed by many competitive deals being offered by landlords.
In other boroughs
Unfortunately, the Manhattan condo market clearly isn’t faring as well. On the bright side, Manhattan could soon be getting its own public beach.
Still, Crain’s reports the borough is suffering the worst decline in five years. Inventory has risen 11.8%, and many developers have reportedly been taking units off the market. However, townhouses appear to be moving faster, with sales prices rising by over 6.5%.
One big company that is still bullish on Manhattan appears to be tech giant Google. New plans have been announced for a $1B expansion at the St. John’s Terminal. Google Hudson Square will host a 1.7M square feet campus, enabling it to double the number of employees it has in the city.
Despite finally coming to market at a crowded time, the first Hudson Yard Tower is opening its doors. $800M in sales have been clocked, with 60% of units sold. Amenities include a children’s imagination center, beauty bar and much more spread across 40,000 square feet.
Midtown is getting a new super tall, which is planned to clock in at 1,776 feet. And if you aren’t afraid of heights, the Tower Fifth office building will boast a glass bottom slide from the observation deck.
For those looking for the most fashionable real estate, Armani and SL Green are partnering on a new Madison Avenue development. The 97,000 square foot building will become the new Armani flagship, with 19 luxury residences on offer, which are to be designed by Giorgio Armani himself.
Over in Long Island City, another developer has acquired a $40M rental property in an attempt to cash in on Amazon’s HQ2.
A big issue for developers now is facing new regulations and deed restrictions. Extell faces losing its permits for an Upper West Side skyscraper for trying to squeeze in far too much space between floors to boost the building’s height. Most notably this includes fitting in a 160 foot ‘mechanical’ space.
Down on the Lower East Side another development has run into trouble for trying to get around a deed restriction which preserves the site for low income, elderly and disabled residents.
For Landlords and Investors
Don’t get too dug into business to forget Valentine’s Day. Here some ideas to make it special and check out a new part of New York City you may not have visited in a while.
Leasing specials have been greatly responsible for helping New York City landlords speedily lease vacant units, and keep up rental rates. It’s very important for investors to be alert to competitors deals.
Among those on the market now are:
There is already a lot happening just one month into the new year. While Manhattan continues to deal with rising inventory and slow condo sales, there are sweet spots. Townhouses seem to be performing better. The very top of the luxury market continues to see new records being set. Developers still have their sights on raising skyline changing buildings with ever new amenities.
Brooklyn seems to be gaining more and more of what Manhattan is losing. New construction is active, but year over year rentals still seems to be performing well for landlords willing to market their units well and who are being competitive.
We could quote likely see these diverging trends continue to play out through the year.
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.
Thanks again to our sponsors, The Ratner Team, and SpartanRenovations.com for making these reports and delivering this valuable information possible!
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.