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2013 proved to be a historic year for real estate in New York City, as prices for both residential and commercial real estate broke record highs. Here is a look at what The Real Deal predicts is ahead for NYC real estate in 2014, as the city prepares to inaugurate new mayor, Bill de Blasio.
Nervousness about Interest Rates:
With the possibility of the Federal Reserve closing its signature easy-money program, buyers have begun to feel a sense of urgency to take advantage of signature low interest rates. However, President Obama’s nomination of Janet Yellen for head of the Federal Reserve helped to alleviate some fears as Yellen has been a vocal proponent of the easy buying program and many hope that her taking the position will help keep interest rates down.
However, an uptick in employment rates stirred fears that the stronger economy may lead to the possibility that the government will think that homebuyers are ready to return to higher interest rates, going from around the 4% to a higher 6% rate.
When the new year begins, brokers, developers and buyers will begin keeping a sharp eye out for changes in interest rates.
According to Jordan Roth, a senior branch manager at GFI Mortgage Bankers, a residential mortgage provider in Manhattan, the past few months have already seen an uptick in buying, despite an increase in interest rates and the small amount of available residential inventory.
Roth says that if interest rates had stayed the same all year, buyers might have been less interested. But with an increase in rates, there will be some creative deals going and buyers may look at properties they would have previously passed over.
Despite this relative good news, some suspect that an increase in interest rates will have a negative effect on the market in the long-term, by slowing the growth of home prices and hampering the ability of commercial investors to refinance property.
Still, not everyone agrees that the Fed will put an end to the buying program. This isn’t the first time that there has been a rumor that the program will be ending, so there is still hope that it will continue for a while in order to keep buying going.
Roth explains that in order for the current program to end, another would have to take its place.
And other experts say that the economy would have to see a huge boom before interest rates could increase so dramatically.
A New Mayor:
Mayor-elect de Blasio takes the reins at City Hall next month and experts are already waiting to see which campaign real estate promises he will tackle first.
Seth Pinsky, executive vice president at RXR Realty and the former president of the NYC Economic Development Corporation under Mayor Michael Bloomberg explains that a new administration is always met with some concern, but with new change also comes new possibility.
At the top of the list is de Blasio’s pledge to push for mandatory inclusionary zoning, which changes current rules on affordable housing for developers.
Among the leading concerns is a change to the current 80/20 standard in which developers receive tax-exempt financing in exchange for making 20 percent of their units affordable. If the ratio were to change to 70/30 or 60/40 without tax incentives, Pinksy says it is possible that new development will become more challenging, but not necessarily impossible.
The Rezoning of Midtown East
Citing a lack of City Council support, the Bloomberg administration withdrew its support for the rezoning of Midtown East. Supported by the industry, the proposal was designed to ease up air zoning restrictions, allowing for taller, bigger buildings to be built.
Now the rezoning will be left to de Blasio, who has said he will provide an updated proposal by the end of 2014 to help make the area more competitive with other global neighborhoods and make the much-needed upgrades to the office buildings in the area.
“It needs to be done right,” de Blasio said in a statement last month. “We need to address the many unanswered questions about this plan, including how to build the infrastructure needed to accommodate the additional density created by the rezoning, and how to ensure that new development rights are appropriately priced to create the best possible value for the city.”
In the short-term, area rents won’t be affected because a proposal won’t really affect anything until 2019.
Concern About Condos
Extell Development’s One57 and Macklowe Properties’ 432 Park Avenue made big progress for luxury condo development. But the full impact of the luxury condos on the market won’t really be seen until the coming year. The new year will really show whether developers can expect to see the prices for properties justify the high costs to build.
As land prices increase, experts will be watching to see whether building condos for higher prices than ever will allow for profits or whether the new dwellings will linger on the market.
New buildings that will be the ultimate test include highly anticipated projects set to go up in Midtown, JDS’ “skinny” tower at 107 West 57th Street, and the glassy skyscraper Extell is building at 225 West 57th Street.
South Street Seaport’s Redevelopment
The area known as South Street Seaport has for many years been known as strictly for tourists, but the Howard Hughes Corporation is betting that it can get New Yorkers to call the area home.
A new new $200 million, 300,000-square-foot retail complex at Pier 17 in Lower Manhattan will also have rooftop event space and is meant to compete with similar buildings such as Brookfield Place (formerly known as the World Financial Center) and the World Trade Center. Similar retailers and international companies can be found in all three buildings, but Howard Hughes is hoping to make the South Street Seaport as much a destination as the other two landmarks.
To help encourage retailers, the rents will be lower than at the other buildings to make the place truly meant for New Yorkers, rather than tourists.
Seward Park Renewal
2014 will be a year for the Lower East Side, thanks to a $1.1 billion dollar investment being made by a partnership between L+M Development Partners, BFC Partners and Taconic Investment Partners.
The first step is the construct of a 1.65-million-square-foot, mixed-use project in and around Seward Park, a park and playground. The six acre site is amongst the largest undeveloped areas of the city and will eventually include 1,000 units of housing (half of which must be permanently affordable) as well as a 15,000-square-foot open space, a school, a community center, 250,000 square feet of office property, and a mix of retail spaces.
The project will close a gap between Delancey Street and Grand Street and will hopefully also spur landlords to upgrade their properties to bring more traffic to the streets and fewer empty lots.
Legislative Real Estate Issues
These issues aren’t much talked about, but real estate insiders will be following them closely as they have the potential to impact NYC real estate in 2014.
– Terrorism Risk Insurance Act is about to expire, but provides landlords with affordable insurance in the event of a terrorist attack
– Marketplace Fairness Act means that web-based retailers would have to collect sales tax on purchases in states even where there is no physical store. This means that stores like Amazon and the like may have a bigger interest in having actual stores.
For more details on what to expect in NYC real estate trends for the upcoming year, read the original article here.