Commercial market report

From Queens being the sole bright spot in New York’s multifamily market to Blackstone’s response to rental reforms, a look at the biggest trends

Aug.August 01, 2019 10:00 AM

Multifamily market hits 8-year low

A tepid multifamily sector in New York City continued to plague the real estate industry through the first half of 2019 with the number of deals hitting the lowest point since 2011, according to Ariel Property Advisors. Overall, the city had about $3.4 billion worth of sales across 169 deals and 238 buildings from January through June, respective declines of 47, 24 and 50 percent when compared to the second half of 2018. Ariel President Shimon Shkury said he expects pricing for most multifamily properties to drop, but some, such as free market buildings and old 421a properties, will likely be unaffected by new rent reforms, which he blamed for the downturn. “In light of the new laws, we have revisited our underwriting methods for every type of multifamily asset and have been advising sellers of these buildings on a daily basis about our view of the current climate,” Shkury said. Numbers were down in the first half for every submarket except Queens, which had 25 deals across 34 buildings worth $393 million, per Ariel’s analysis. — Eddie Small

Developers lobby for city drones

Did the city ban drones in 1948? Yes, according to an interpretation of a 71-year-old law that restricts the take off and landing of “aircraft” to certain locations, such as airports. As the commercial drone industry has taken flight in other cities in the wake of a 2016 rule change from the Federal Aviation Administration, real estate leaders claim the rule is holding back New York developers. “The laws on the books are not written for these new, disruptive technologies,” New York Building Congress president and CEO Carlo Scissura told the Wall Street Journal. “The cities that are doing this will always have a leg up on us.” One way drones could benefit the real estate industry is reducing the cost of inspections. New York building owners are required to conduct façade inspections every five years, which typically requires scaffolding to be erected around an entire building. Drones equipped with cameras could save hundreds of thousands of dollars in such costs, as well as months of time. Still, some engineers are skeptical, noting that visual inspection is not often sufficient to detect structural issues. — Kevin Sun

Blackstone balks at improvements

In the most significant step taken by a landlord in reaction to New York’s new rent laws, the Blackstone Group has halted all improvement work at the 11,000-unit Stuyvesant Town and Peter Cooper Village complexes. The new laws eliminate multiple controls given to landlords to increase rent, including a vacancy decontrol provision that allowed a landlord to raise rents by as much as 20 percent when a tenant left an apartment. Blackstone, which played a key role in lobbying against the regulatory changes prior to their introduction, bought Stuy Town for $5.3 billion in late 2015 from Ivanhoé Cambridge. Sources told Crain’s that urgent fixes, such as leaks and hot water service, will continue at the 80-acre site, but larger construction projects by Blackstone will end. The buyout giant saw its overall net income slip to $305.8 million in the second quarter, thanks to a 24 percent drop in distributable earnings from its real estate segment. — David Jeans and Kevin Sun

Solar glow shines in Brooklyn

Brooklyn is becoming a new market for solar power in New York as local residents look to reduce their carbon footprint — and their electric bills. Brooklyn is now catching up to Queens and Staten Island in the number of solar installations, which numbered 3,100 over the last few years, according to the New York Times. In brownstone-heavy Park Slope, a solar energy equipment company called Brookyn SolarWorks completed 58 such installations over the last year, up from 23 in 2017 and 13 in 2016. Brooklyn SolarWorks offers a canopy-style system with tilted solar panels for flat-roof residents in Brooklyn, whose architecture differs from Queens and Staten Island. The city’s solar panel leaders have an abundance of homes with sloped roofs — such an angular structure helps gather the most light — as the flat-roofed buildings that prevail in Brooklyn and Manhattan are usually not conducive for solar panels to collect enough energy to be profitable. But while company’s like Brooklyn SolarWorks hope to solve that problem by offering canopy-style systems, the city’s Landmarks Preservation Commission has nixed some solar designs.  — Mike Seemuth