Banks backing away from apartment projects

Supply is outpacing demand

TRD New York /
Feb.February 21, 2017 09:50 AM

A construction laborer working on the site of a new residential building in Hudson Yards (Credit: Getty Images)

Banks are shying away from financing new apartment projects as supply starts to outpace demand.

This year more than 378,000 new apartments are expected to be completed nationwide, according to real estate researcher Axiometrics Inc. But only 50,000 of the 88,000 apartments completed in the fourth quarter of last year were rented out, the Wall Street Journal reported.

Developers are increasingly turning to non-traditional lenders and small regional banks, like the Arkansas-based Bank of the Ozarks, to fill out their capital stacks. Bank of the Ozarks has been one of the most visible lenders in New York City in recent years, with about $2 billion in loans as of July 2016.

“Our business has radically changed,” Toby Bozzuto, president and chief executive of the Bozzuto Group, which has about eight buildings in New York City, told the newspaper. “I haven’t seen anything this seismically different since 2008, when credit dried up.”

Meanwhile rent growth has slowed. In New York, San Francisco and Houston, rents dropped roughly 1 percent from 2015 to 2016.

Last month, 31 percent of all new leases in Manhattan included some form of concessions, nearly double what it was a year ago, according to a Douglas Elliman report. In Brooklyn, 18 percent of leases had concessions, compared to just 5 percent last year. [WSJ] — Kathryn Brenzel 

Related Articles


Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Joel Schreiber (Credit: Shir Stein and Wikipedia)

WeWork’s first investor used his stock as collateral. Now his lenders are suing him

Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio

163 North 6th Street and the Tel Aviv Stock Exchange Bull (Credit: Google Maps, Wikipedia)

Joel Gluck’s Israeli bond issuance falls through as Williamsburg rental project faces financing crunch

NYC’s foreign investment landscape in the era of trade wars and heightened nationalism

Larry Silverstein and the Tel Aviv Stock Exchange (Credit: Getty Images)

Institutional investors swarm Silverstein’s new TASE bonds

Real estate firms get (green) thumbs down as they jump into climate bonds