By Elaine Pofeldt
Many industry professionals expect 2016 to be an exciting year for New York City real estate, despite developments like the recent hike in interest rates, a softening in new office leasing, and the ripple effect of China’s economic slowdown
“This has been a fantastic year for real estate in New York City,” said John H. Banks III, president of the Real Estate Board of New York (REBNY). “There have been mega deals that have gone through, both in terms of large properties and Stuy Town. There have been individual buildings that have broken records for sale. There is so much positive about what is happening in real estate, and not just in the traditional Manhattan central business district. The growing strength of the real estate industry in the other boroughs is a relatively new phenomenon see continue to grow in the year to come and in the future.”
Here’s a look at some of the key trends New York City real estate professionals are watching in 2016.
Queens has its moment
From the growth of trendy lodgings like the Paper Factory Hotel to the Falchi building’s full occupancy by commercial tenants, all signs point to a strong year for Queens real estate, say local brokers. And hot neighborhoods like Long Island City and Astoria aren’t the only ones percolating.
“You’re seeing pockets of strength in Flushing, Sunnyside and other markets,” said David Brause, president of Brause Reality, which specializes in the long-term ownership, management and development of commercial real estate assets. Brause is also chairman of both the Long Island City Business Improvement District and the Queens commercial division of REBNY.
One draw for Long Island City is its accessibility to Manhattan, with abundant subway lines, ferry service into Manhattan and 11 new bikeshare docking stations, Brause notes.
Local real estate experts say that one up-and-coming neighborhood to watch is Jamaica. New residential developments include The Dermot Company’s Moda, which has brought 346 residential units to 153-30 89th Avenue, according to a report by Ariel Property Advisors. Currently in the pipeline is The Crossing at Jamaica Station, BRP Development’s 584-unit mixed-use project which will include affordable housing, the report adds. There are also two commercial centers under construction, a strong attraction for many business people who appreciate the neighborhood’s accessibility to John F. Kennedy Airport and other parts of the city. “It’s very close to express trains to Manhattan,” noted Shimon Shkury, founder and president of Ariel Property Advisors and member of REBNYs new Commercial Brokerage Upper Manhattan and Bronx Committee.
The Bronx continues to percolate
The Bronx, where Fresh Direct broke ground on a new 423,530-square-foot headquarters in 2014, should continue to attract interest from both businesses and developers in 2016, brokers say.
Technology firms, searching for more affordable space than they can find in Brooklyn and Manhattan, are starting to poke around the northern borough for office space, according to local real estate professionals.
Meanwhile, government agencies, nonprofits and schools are also on the hunt for space. The BankNote Building, a 414,000-square-foot, Class B office building located in the Hunts Point section is almost full, noted Ellen Israel, managing director at JRT Realty Group, a full-service commercial real estate firm in Manhattan. JRT was the leasing agent for the property. One tenant is a city agency that occupies 200,000 square feet, she said.
“That area is heating up,” said Israel. “There are some buildings around there that have decent bones. They have subway access.”
Also noted in Ariel’s report is the addition of three new hotels. One is a 69-room Holiday Inn Express slated for completion in 2016 at 500 Exterior Street.
The Bronx has seen an influx of investors developing vacant land, especially in the South Bronx and the Mott Haven sections, noted Shkury. “You have the second wave of smaller developers going there mostly to build commercial but also residential rentals,” he said.
If the borough is to attract new residents, it will need to add more and better retail, according to Israel. “You can go for blocks and blocks without a coffee shop,” she said, adding that the Bronx also needs more drugstores, clothing stores, restaurants and supermarkets. Said Israel, “In order to fill your building, you need to bring things people are going to want.” She believes that landlords who are willing to offer attractive rents to such businesses will find themselves in a strong position.
Brooklyn gets even hipper
Peter Hauspurg, chairman and CEO at real estate investment services firm Eastern Consolidated, expects to see Brooklyn expand to its outer edges. “We’re going to see the continuation of the transformation of Brooklyn as it reaches into areas like Gowanus, East New York, and Bedford Stuyvesant—areas that have not previously seen the kind of development
we’ve seen in Williamsburg, the Heights and downtown Brooklyn,” said Hauspurg.
Affordable housing remains a concern
As rents in many neighborhoods skyrocket, the demand for affordable housing will increase. “It’s interesting to see the city is allowing smaller units—or micro units—which might start to pick up steam,” said Shkury.
The proposed extension of the 421-a, tax abatement program for affordable housing within otherwise marketrate buildings will help fuel the growth, particularly in boroughs outside of Manhattan where it is more feasible to build residential units, said Hauspurg. But even for pricier boroughs, Hauspurg says that change is afoot. “In Manhattan and Brooklyn and the luxury areas, you are seeing a switch from larger, more expensive units to price points that are more affordable,” he said. But in Manhattan, he added, that means “sub-$5 million.”