Note: Correction appended.
As condominium sales slow, more developers are changing their
buildings from sales to rentals — but that’s not always as easy as just
changing the sign on the door, experts say.
Changing gears
from condo to rental not only involves adjusting expectations of how
quickly project costs will be recouped and profits will come in, it
also requires delivering a different product — one that’s tailor-made
for the rental market.
David Maundrell, president of
Brooklyn-based brokerage Aptsandlofts.com, said his firm is currently
handling marketing for four buildings under construction in
Williamsburg and East Williamsburg that were originally going to be
condos and are now going to be rentals, including 250 North 10th Street
and 95 Bedford Avenue.
Maundrell said “95 percent” of the
developers he works with in the area originally purchased their land
with the intention of building condos, but with shovels in the ground
in today’s market, a large number are now building rentals.
He
said the buildings’ developers are spending “hundreds of thousands of
dollars” to re-tool layouts and make them more rental-friendly. Changes
often involve rethinking costly amenities.
More than anything,
however, it means thinking smaller, said Maundrell. “In rentals, you
generally don’t want to exceed around 700 square feet per unit,” he
said.
That’s the size of most two-bedroom units at 924
Metropolitan, a new 32-unit Williamsburg rental that Maundrell said
Aptsandlofts.com almost completely filled up with tenants within a
month this summer.
He wouldn’t say exactly when the decision
was made to go rental, but he said that like most developers who bought
land in the past few years, the developer of 924 Metropolitan — David
Schwartz of Rush Brook Partners — initially envisioned a condo there,
too.
Maundrell said 924 Metropolitan’s success was tied to the
fact that there’s an enormous appetite for rentals in the neighborhood.
“We had a reserve list of almost 30 people waiting to see the
apartments the first day it hit the market,” said Maundrell. “The units
are so small, and it’s a fringe area with nothing glamorous about
it, but renters only look at the total price. We were renting for an
average of $47 a foot, which is extremely high for that area.”
The
other key to renting at 924 Metropolitan was the unit layout, said
Maundrell. “A lot of times, condos have bedrooms right next to each
other,” he said. “But there we have two bedrooms on opposite sides of
the living room, and the bedrooms are the same size, which makes them
good for shares.”
Despite today’s softer market, condo-to-rental conversions haven’t yet become a significant trend in Manhattan.
However,
in the case of the Bridges in East Harlem, a two-building project
planned as a condo, one building was switched to rentals. Since
construction was already complete, the layouts weren’t changed.
Unlike
in the Brooklyn market, the large size of the Bridges’ rental
apartments, which range from 1,200 to 1,700 square feet, has turned out
to be a plus for rentals, said the development’s leasing and sales
director, Halstead Property’s Leo Muñoz.
“People are coming to me for value,” said Muñoz. “I’m having a lot of people that
in tougher economic times are looking to save some money on rental
spaces but don’t want to spend between $6,000 and $9,000, which is what
it would cost to rent apartments this big in most areas of Manhattan.
“Manhattanites are always starving for space,” he added.
As
of late last month, five of the Bridges’ 14 apartments had been rented,
and the remaining units were going for between $3,600 and $5,200 a
month.
When it comes to the differences in amenities between
condos and rentals, Michael Waldman, the developer of the Bridges, said
there’s not a huge chasm in terms of what developers can bring to
market nowadays.
“The level of the appliances may go down a
notch,” Waldman said. “But I still used the same cabinets, the same
granite countertops. You can’t fool people.”
Muñoz said the development’s condo-style amenities have been particularly
attractive to renters who are considering buying.
“The
renters benefit from what was originally intended as a for-sale
product,” he noted. “They get things like free parking and a virtual
doorman, and they get to test-drive an apartment in a neighborhood they
might consider buying in.”
Maundrell, from Aptsandlofts.com, said the developers he works with often rethink the type of amenities they’ll offer if they decide to go rental rather than condo, such as eliminating costly children’s playrooms.
Amenities
can almost be considered an afterthought for Williamsburg rentals, it
seems. According to Maundrell, “unrealistic prices are the only reason
rentals don’t move” in the neighborhood.
Whether or not the same would be true in most of Manhattan will probably remain an open question, say brokers and developers.
“There are so few rental projects right now,” said Eric Anton, an executive director at Eastern Consolidated. “Banks say they really only want to lend for rental projects now, but what that basically means is that they don’t want to lend. It’s very hard to buy land in Manhattan and make a rental work.”
Bridges
developer Waldman concurred. “If you buy land in most of Manhattan,
there’s no way you can make a rental work,” he said.
“You’d have to give it back to the bank.
That’s why I’ve kept moving north — I always want to buy at a price per
square foot where I know I can rent if I have to.”