Source: http://www.nytimes.com/2010/01/24/realestate/24cov.html
SCORES of stalled construction projects can be found scattered around New York City, but one category of building that doesn’t seem to have been sidetracked by the recession is the luxury apartment rental.
At least 16 new rental buildings are expected to open in Manhattan in coming months, ranging from small buildings to 500-unit high-rises, for a total of more than 3,500 apartments. Brooklyn will get an additional 3,500 new apartments as well, including units in some buildings that opened in late 2009.
While 7,000 new apartments is a relatively small number for a city where 70 percent of 8 million residents live in rentals, many of the new buildings are concentrated in just three neighborhoods: Manhattan’s Hudson Yards area, downtown Brooklyn and Williamsburg.
These apartments are becoming available at a time when average rents are down by about 25 percent from the market’s height in early 2008; vacancy is close to 2 percent, compared with just under 1 percent in 2007 and 2006; and the city is still losing jobs. As a result, the new buildings are offering a range of incentives to lure tenants, including one to five months of free rent, free gym memberships, American Express gift cards and even free iPods.
The new buildings, with all their enticements, will most likely set off another round of apartment musical chairs — first seen in 2009 — in which many renters with leases coming up will try to move to fancier buildings or better deals.
Rents have already dropped to the levels they reached in 2000, and the influx of apartments is expected to keep them there. New studios in the Hudson Yards area could start at $2,000.
“The opening of new buildings is really going to be the keynote of 2010,” said David J. Wine, a vice chairman at the Related Companies, which owns and manages about 5,000 rental units in New York City, but does not have a building opening this year. He said that Manhattan had not had to absorb this many new market-rate apartments in more than a decade.
But after the surge of new buildings in 2010, Mr. Wine and other rental developers said, rental construction in the city will hit a lull. “After these buildings are completed, there’s going to be nothing, because banks stopped financing,” he said, referring to the credit crunch that started in late 2008 and has hit developers and home buyers equally hard.
“Nothing” may be a slight exaggeration, since Related hopes to open a new building on 10th Avenue and 42nd Street in 2011 and has eventual plans to build some 5,000 units directly over the Hudson Yards. Developers and brokers say that rental activity has been strong at buildings that opened in late 2009. But some community leaders are skeptical.
The new buildings have amenities meant to appeal to 20- and 30-somethings — swimming pools, expansive gyms, screening rooms, large roof decks, game rooms with pool tables or arcade games. For incentives, landlords are paying brokers’ fees and offering one or two months’ free rent on 14-month leases, and as much as five free months on two-year leases.
Developers generally have already reduced their original projected monthly rents by a minimum of 10 percent. But the sales pitch often revolves around “net effective rent,” which takes free rent into account to bring the number down further. That could mean net rent for a studio starting at $2,000 in the Hudson Yards area and about $1,400 in downtown Brooklyn. The average rent for Manhattan studios in the last quarter of 2009 was $2,253, according to Prudential Douglas Elliman.
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