On November 15, 2016 Eastern Consolidated held its 8th Annual New York Multifamily Summit at the InterContinental Hotel. Topics ranged from Development Strategies without 421-a to Capital Source Trends for Multifamily Deals and Blowing your Marketing Budget to Emerging New York City Neighborhoods. The last panel looked at the current State of the New York City Market with an Eye to the Future. Berdon LLP tax partner Meyer Mintz, CPA, J.D., LL.M., moderated a panel of developers and real estate brokers, among them:
Mintz began by asking if the rising costs of development and the preferences of millennials were impacting the rental market. The panel agreed that the rental market is shifting due to changes in renter lifestyles and demands. With an average turnover rate of approximately 35%, developers have been responding to these changes by focusing on price point and amenity-rich units. The goal is to provide more amenities, proximity to public transportation, and other conveniences. There is a push to develop a culture and community within a building or area in hopes of maintaining occupancy rates.
Jared Della Valle used the terms "make a home" and "make units more sticky" to describe the effort. There is an abundance of available units and millennials are willing to jump to new buildings to find the right mix of convenience and amenities suitable for their needs.
David Von Spreckelsen stated "we had buildings with a common area of a couple of thousand square. feet, now we have buildings with common areas exceeding 5,000 sq. ft. to keep up with the demand for amenities." These amenities include a gym, laundry, dog wash, playroom, package room, and a residents' lounges, which have been converted to resident work spaces to accommodate working from home.
These amenities can be seen as income producers to the developers or as Andrew Barrocas, stated they are "pouring" the charges back into the amenity spaces to throw special events such as a "Monday Night Football Party" or "cookie day".
Alan Klein agreed that "amenities are very important if moving to the West Side and where areas do not have the established community to support the needs." The buildings with the good mix of amenities are demanding and receiving the best rental rates in New York City according to the panelists.
Following up, Mintz asked if panelists have noticed renters and condo buyers getting priced out of certain areas within the 5 boroughs. The panelists all noted that some were "pushing out" of the city or going "one stop out" from their original destination.
Barrocas mentioned that offices have started to relocate to areas such as Long Island City and Astoria, Queens to accommodate millennial's lifestyle changes and to allow employees to "walk or ride a bike to work". These emerging areas are more suited for the rental market as the risk is much greater for condo development.
The rental developments are "neighborhood based developments" according to Della Valle, whereas the rental markets are building around established areas.
Looking to the future of the NY multifamily real estate market, the panelists agreed that without a 421-a deal, we would likely see a softening of rents in certain parts of the market.
With the current cost of land and construction costs remaining high, new residential developments do not make sense to developers and, without incentives from New York State, these deals will not be completed. Absorption of new inventory within a one to two-year period for rental units could create a softening of the rental market in certain hot areas.
Overall, the panelists were optimistic that the NYC multifamily market would remain steady with a hope for more opportunities.