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So long, new condos
With more wealthy New Yorkers looking to lease, not buy, development market tips toward rentals
Evan Stein, president of J.D. Carlisle Development Corp.
“Fleeing new(ish) buildings”
The Related Companies’ Susan De Franca
New development marketer Nancy Packes
Just as The Real Deal was going to press, the New York Post reported that the Knicks’ Amar’e Stoudemire rented a $37,500-a-month, five-bedroom penthouse at 99 Jane Street in the West Village. There’s no denying it: Rentals are hot right now, at least at the very high end of the market. While overall rents are still down from the peak of the market and concessions — like one or two months free — are reappearing as the slow winter months approach, “there is a kind of mini-boom in high-end rentals in terms of activity,” said real estate appraiser Jonathan Miller, the CEO and president of Miller Samuel.
His firm found that there were 77 rental transactions priced over $15,000 per month in the third quarter of 2010, up from 32 in the same period of last year and up from 59 in the third quarter of 2008.
Experts attribute the uptick to very wealthy New Yorkers choosing to rent rather than buy in an uncertain sales market.
“Those are people who maybe would have been buying high-end properties, but are choosing to wait,” Miller said.
This month, The Real Deal explored that phenomenon in a series of stories about new development rentals. According to brokers and developers, units at new rental projects like Beatrice and 2 Cooper Square are renting quickly, and fetching surprisingly high rents for these tenuous economic times. And while condo developers have revamped their layouts and pared back amenities to make them more recession-friendly, new rental buildings, such as the Frank Gehry-designed 8 Spruce Street, are pricier and more luxurious than ever before.
That’s due in part to a change of attitude regarding rentals, which has prompted developers to create more rental hybrids — combinations of rentals and condos or other types of projects.
One reason these new buildings are leasing up quickly is because they often offer generous incentives to their renters. However, brokers said that for some of the rental buildings that hit the market a year or two ago, that strategy is starting to backfire for landlords. Indeed, at some newish rental buildings that offered generous concessions during their initial lease-ups, tenants are getting hit with sticker shock when it’s time for renewal because they aren’t being offered similar deals. In response, many renters are choosing to leave rather than renew, and some say landlords may soon find that they have to offer concessions again in order to control vacancies.
To navigate these difficult times, many developers turn to Nancy Packes. One of the city’s experts on new development rentals, Packes has long stayed out of public view, preferring to work on projects in the background. But she’s stepping into the spotlight now that she’s winding down her association with Brown Harris Stevens and focusing more attention on her own company.
For more on the rental development renaissance, check out the following stories: