Nothing beats free stuff.
That may be the lesson learned from Larry Silverstein’s Silver Towers at 42nd Street and 11th Avenue, which is leasing up faster than expected after offering two months of free rent to new tenants.
When the two 60-story glass towers began renting in May, Silverstein wondered aloud in the New York Times how he would lease up the largest and tallest rental project in the history of New York in the midst of a deep real estate slump.
“I’d be lying if I said I wasn’t scared when we opened,” Clifford Finn, the managing director of new development marketing at Citi Habitats, who is heading up leasing at the project, told The Real Deal. “You open it when the market is declining, and have to wonder how we’re going to fill 935 market-rate apartments.”
The still-under-construction project is located in a not-so-well established neighborhood on the far West Side and has a total of 1,275 units, including 234 affordable units previously available through a housing lottery, and 106 corporate suites.
Moreover, Finn said he was nervous because Silver Towers, at 600 West 42nd Street, is a “much higher-end building” than other rentals in the city, with studios starting at $2,300 per month, one-bedrooms at $3,200 and two-bedrooms at $4,300.
“The intention of the design was to deliver something that had more of a condo standard, but do it as a rental,” Finn said.
He wasn’t sure how that would play in a recession, where bargain-hunting is the name of the game. But the project is doing surprisingly well, he said.
Since May, some 250 Silver Towers market-rate units have been rented, and 100 of those residents have moved in. While that’s slower than the lightning-fast lease-ups of the boom years, it’s better than he expected in the current market, with rental transactions way down.
“Surprisingly, the audience we hoped was out there, was out there,” he said. “Everything we had for September and October is pretty much absorbed.”
Units below the 36th floor are ready for move-in, he said.
How did they do it?
For starters, the developer has been offering two months free rent for leases signed before Oct. 1. The technique appears to be working so well at Silver Towers that the team is considering extending the program beyond its original endpoint, he said.
“Absorption has been so good, we may leave it,” Finn said.
This indicates that New Yorkers are still drawn to offers of free rent, even though that incentive is now being offered all over town.
In addition, he said, the project seems to be helped rather than hurt by its condo-style finishes. During the boom years, he said, consumers developed a taste for Bosch appliances and marble countertops and are reluctant to give them up, even as they look for a good deal on rent.
“So many people who are choosing to rent, they just have a tough time accepting the typical generic rental,” he said. “They want views, they want luxury, they want nicer finishes. The bar has been raised.”
That’s due in part to the fact that many renters are former condo owners who are waiting for the market to improve before buying again.
“Now that sales have slowed down, there’s more of that pool in the rental market,” Finn said.
The project also has an advantage over the recent spate of condos turning rental in the midst of slow sales.
Because Silver Towers was planned and financed as a rental, it’s more affordable than many condo-turned-rentals, he said. And its finishes — including Afromosia wood floors and Fisher & Paykel cook tops — look and feel high-end, but they’re less expensive than those used in your average $1 million condo.
“There are so many more options today, you can achieve the same look without spending the money,” he said.
Silver Towers is slated for completion around the beginning of 2010, Finn said.
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