CityRealty spoke with New York City real estate experts—everyone from developers to architects to contractors to brokers—on their predictions for the upcoming year in the city’s ever-changing real estate market. From the presidential election of real estate magnate Donald Trump to the likely return of 421A tax incentives, 2017 promises big changes ahead. And yes, renters can look forward to more apartment concessions from landlords coming next year.
President Donald Trump will have big effects on NYC real estate
Stephen DeNardo, CEO of RiverOak Investment Corp. The day after the election, Crain’s New York Business ran the headline: “President-elect Trump unlikely to hurt real estate industry that made him.” This is likely putting it mildly. As of this writing, it appears that President-Elect Trump’s proposed cabinet and broader administration will be flush with names and faces from New York City, including industry friendly politicians, bankers, private equity moguls and real estate magnates.
The implications for New York City real estate markets are significant… President-Elect Trump’s primary impacts on New York City real estate will likely manifest themselves through: foreign capital flows; sanctuary city dynamics; and costs of construction.
Stuart M. Saft, partner at real estate law firm Holland & Knight My prediction for 2017 is that the residential real estate market will strengthen as a result of Donald Trump’s election, which no one could have seen happening prior to the election, for two reasons. First, although NYC has been a global financial and entertainment center for most of the 20th century, the Trump election and his obvious desire to remain in NYC rather than moving to Washington has made NYC almost a second political center in the US. Interestingly, just as Brexit will reduce London’s global presence, a combination of the weakness of the EU, London’s withdrawal, and President-elect Trumps plan to spend as much time in NYC as possible, will further support NYC as the place to be. Moreover, President-elect Trump’s indication that the US will no longer play the role of global police in every situation and the further softening of the Russian, European and Chinese economies, will trigger more flight to safety to the US, in general, and NYC real estate in particular because of the knowledge that it is a safe haven and real estate can always be sold and the money withdrawn. Obviously, I am very optimistic on the NYC real estate market.
Anthony Hitt, CEO of Engel & Völkers North America Like many in the real estate industry, I am closely watching the transition into the Trump presidency. If President-Elect Trump can deliver on his campaign promise of job growth, that could be a positive thing for the housing market and consumer confidence. Right now, I'm focused on immigration policies and visa reform and their effects on foreign buyers in domestic markets, as well as mortgage regulations and the impact they'll have on interest rates.
International investment will remain prevalent
Victoria Shtainer, broker with Compass We anticipate that international buyers will return in a stronger force than recent years and there will be a renewed strength of the “banker” client as salaries and bonuses are expected to see an uptick in this industry. Trump could be view as a friend of investors, and his proposed policies seem to be positives for the real estate market.
Edward Mermelstein, managing partner of the law firm Rheem Bell & Mermelstein The regular international players who have contributed in this market have continued to show interest. In the Middle East, there was an expectation that policy toward the Middle East might change [post Donald Trump]. That looks like it is heading instead in a positive direction, and we’re starting to see quite a bit of investment activity from the Middle East markets, which have been for the last couple of years fairly subdued. It looks like that has started to shift.
Housing prices will stay strong and steady, while ultra-luxury prices will struggle
Andrew Barrocas, CEO of MNS The sales market will remain, as is for pricing, in the $500,000 to $2 million category for Brooklyn and Long Island City. NYC will remain as is under the $4 million category. I feel like the $1-2 million price point has demand. The high-end condo and ultra-luxury market will drop.
Joshua Silverbush, Director of Market Insights at The Marketing Directors Despite what some may believe, demand for condo product at $3,500 per square foot and $10 million and higher is solid—the number of Manhattan closings through the first three quarters of 2016 has already surpassed all of 2015. However, there is, and in 2017 will continue to be, an oversupply which means buyers in this price range have a number of choices, can take more time to make decisions, and this will spell slower velocity for developments priced in what is considered to be more of a “super luxury” price range. On the bright side: well-designed and well-located product that deserves the price tag will sell.
Expect rental prices to stay soft across the city
Eric Benaim, CEO of Modern Spaces Tens of thousands of units are hitting the market in the outer boroughs, creating fierce competition. Manhattan residents will find cheaper alternatives, which will in turn soften the Manhattan market… Neighborhoods like Downtown Brooklyn and Long Island City will also see competition and softening prices. Developers will change their business plans and convert their small rental projects to condos, or sell them altogether.
Robert Nelson, president of Nelson Management Group I think we’re already seeing a market correction. We’re at a time of the year that’s a slow season for the rental market, but I think what we’ve already started seeing at the end of last season—which ends around September—is that rental prices were trending downward. But as far as NYC is concerned, there’s always more demand than there is supply. With an additional 400,000 residents that have entered the population over the last five years, you haven’t come close to building enough residential housing to house those incoming people. As far as supply and demand equation, I think NYC will be fine.
Gary Malin, president of Citi Habitats What’s been happening for some time is that incomes are not rising as fast as rents are rising. So people have been very pressed to afford the prices that have been out there. It started last summer, when you saw the vacancy rate rise every month over the summer, and it continued through this year and this summer with high concessions during the summer months. Tenants are getting pushed to their breaking point in many instances and looking to be creative with living solutions more in line of what their salaries are. So I think that will likely continue. There’s always demand, it’s just a matter that the demand has been muted or forced to look in new locations because pricing has been a little farther up for them.
Developers are ready to pounce on the return of 421a
Joshua Silverbush, Director of Market Insights at The Marketing Directors Legislators will renew 421a within the first quarter of 2017. This will cause an increase in the residential development pipeline, which has seen a slow year—however, there is not a shortage of overall pipeline considering the 2015 increase, which saw a particularly large surge in permits issued due to the impending 421a expiration at the end of 2015.
David Hill, Partner at Goldstein, Hill & West Rental housing will continue to appear in more far flung areas of the Outer Boroughs including Bronx, Queens and Staten Island, particularly once 421a gets re-enacted. The buildings will be amenity-rich with small units catering to working people, commuters, local professionals, millennials and empty-nesters.
Construction won’t slow… from residential buildings to large-scale infrastructure projects
Donal O’Sullivan, president of Navillus Contracting Navillus Contracting is seeing robust activity in the New York City construction industry and we expect this trend to continue in 2017 thanks to investments in residential and commercial properties. We’ve seen this up close, with Navillus currently involved in major projects like Manhattan West and One Vanderbilt, soon-to-be midtown Manhattan’s tallest office building.
Across the region, public infrastructure projects are also seeing a dramatic injection of dollars. From Penn Station to LaGuardia and Kennedy Airports to the Tappan Zee Bridge, public work on the city and state level will continue in 2017 (and beyond), and possibly on the federal level as well given the national infrastructure plan proposed by the incoming president.
Stephen DeNardo, CEO of RiverOak Investment Corp. Increasingly, President-Elect Trump has made clear that he plans to put Americans back to work with a massive national infrastructure plan. His proposals already have broad bipartisan support. The form and scale have yet to take shape, but they are already being touted as unprecedented since the New Deal, and likely to involve significant tax credits and public-private partnerships. The implications for regional markets are not as clear as for the broader economy, as there may be some displacement of capital, and these developments deserve close watch.
Rendering of the rooftop infinity pool coming to the American Copper Buildings, a new rental designed by SHoP Architects and developed by JDS
...And neither will those crazy amenities packages
Gayle Kennedy, property manager at Broad Street Development Looking ahead to 2017, we believe renters will be seeking more amenities that will make their residential communities feel trendier and more luxurious. NYC renters are not only looking for doormen, they are seeking landscaped roof decks, fitness centers, in-unit laundry, on-site parking, resident perk programs and more. They are seeking the sophisticated urban lifestyle. BSD recently upgraded our 298 Mulberry Street property in NoHo to meet these rising expectations and to offer brand new renovations.
Stephen Kliegerman, President of Halstead Property Development Marketing In 2017, developers will continue to raise the bar on the level of finishes and amenities packages. We are seeing more custom, branded kitchens and more robust amenities like pools, which appeal to the international buyer. Developers are upping their game. Appliance packages with brand names we typically associate with the high end of the market are being used in apartments within the range of $1.5 to $3 million.
Robert Goodwin, principal and architectural design director at Perkins+Will New York Developers are differentiating the brands of residential properties through architecture and design. Amenities are no longer secondary – they are becoming expressed in the architecture to create distinctive features, like shared social spaces throughout residential buildings, not just the ground floor.
Brooklyn: tons of new development, a likely rental glut, and declining prices in Williamsburg
Ali Esmaeilzadeh, Senior VP of Commercial Development at Forest City Ratner Companies In 2017, I predict the Brooklyn real estate market will continue to grow, but not at the same velocity. Instead of moving at 100 miles per hour, it will likely slow to 40 or 50 miles per hour—still moving forward, but at a far more measured pace, which in the long-term is a healthier growth trajectory.
Trish Martin, Managing Director of Sales, Brooklyn at Halstead Properties There will certainly be plenty of new development coming to market. There’s a lot of people looking in anticipation at what lies in the year ahead, but our experience is that buyers who seek to live in the middle of a classic Brooklyn neighborhood have made it their priority. They will be more open to more traditional Brooklyn rentals, which are in older buildings, and may not offer all the amenities you’d find in the ground-up developments. For those who are amenity driven, then they’ll specifically be looking at new units. That said, there will likely be competition between those two offerings because there will be so many rentals available. Whether you’re a developer or private landlord, you’ll have to look with a more competitive eye in order to move your product.
Ryan S. Jackson, vice president at Stellar Management In 2017 we’re going to see a continuation of aggressive development in Brooklyn, both commercial and residential, especially in the areas that are accessible by trains other than the L, outside of the Williamsburg area... Rents in Brooklyn are on the rise and will continue on this path, and I believe that tenants loyal to the borough will move into less-developed neighborhoods while others may move to popular Queens areas like Astoria, LIC, Jamaica and into upper Manhattan.
Eric Benaim, CEO of Modern Spaces Rental and condo prices will dip in Williamsburg because of the L train shutdown. 2017 would be a good time to buy in the neighborhood, as prices will rebound afterward.
Neighborhoods to keep tabs on
Joshua Silverbush, Director of Market Insights at The Marketing Directors Astoria, with its waterfront, convenient proximity/transportation to Manhattan, and neighborhood feel, will see more demand for both condo and rental—though that demand will not yet be met with enough development. LIC will begin to see more of the commercial/retail development that it desperately needs as more and more residential properties are built. On the other side of Queens, Flushing will keep quietly growing— primarily in the form of condominiums.
[In Brooklyn], a number of rental properties will come to market in Downtown Brooklyn— they will offer competitive incentives but they will do well in the end. Meanwhile, look for Clinton Hill, Fort Greene and Boerum Hill to see more demand. Brooklyn fever will continue to spread, with areas further from Manhattan gaining more attention, such as Sunset Park and Crown Heights.
Downtown (Financial District) will continue to flourish as a destination and see increasing prices, with various types of development powering on all cylinders—both commercial and residential in and around the World Trade Center and the Seaport. As developments like 50 West Street commence closings, the area will become more established residentially.
Increased development on all the outer edges of Manhattan as these are the areas where land prices have been more reasonable—everywhere from Two Bridges to the Far West Side to Yorkville. And this is especially with the 2nd Avenue subway coming—if it actually, finally happens! The first phase at least.
Jersey City will continue to see high demand as new properties hit the market, prices remain high in Manhattan, and more New Yorkers seek out other areas to live. Journal Square will begin to be established as a residential area.
In the Bronx, developers will buy up land but there will not be much new development coming to market.