Investors have been scooping up rental buildings in Brooklyn at record prices, but the trend could be reaching its inflection point, according to the New York Times. The strict lending standards are continuing to force many would-be buyers into the rental market and rents are ticking ever higher as a result. Rents in Brooklyn increased 10 percent in 2010, 7 percent last year and are expected to rise another 5 percent to 10 percent over the next 18 months, according to TerraCRG.
These figures are compelling investors to pay record prices for rental buildings in the Brooklyn. In the last year Invesco bought 75 Clinton Street and 150 Fourth Avenue for well over $600,000 per unit, Equity Residential bought 175 Kent Avenue for $673,000 a unit, and as The Real Deal first reported, American Realty Advisors paid a non-Manhattan record $895,000 per unit at 111 Kent Avenue.
But the supply of such buildings is beginning to wane. Many of the stalled condominium sites that made for perfect rental conversions have already been scooped up and those that remain may eventually hit the sales market. Recovering sales prices and escalating land costs are beginning to make condo development appear more financially sound than rental development. [NYT]