The Stoler Report with Robin Schneiderman of Brown Harris Stevens.

0:00 Speaker 1 Good morning. This is Mike Stola for the Stolar Real Estate Report on the CATS round Table. What’s really happening in the development of new rentals condos in the City of New York. I have the honor of having Robin Schneidman, who’s a managing principle of Brown Harris Stevens Development Marketing, to tell us what’s really happening. Robin, thanks for being.

0:21 Speaker 2 Here, Michael, always great to have.

0:23 Speaker 1 So, what’s happening in the inventory of condos?

0:27 Speaker 2 So, for the first time in several years, the Manhattan new development market is starting to thin out. And what I mean by that is the inventory levels are about it three years of real supply, and that means that we have about forty seven hundred units in New York City Manhattan New Development, and we sell about sixteen hundred

0:53 units per year. That’s for the first time in a long time, we don’t see a lot of cranes in the air, and inventory is starting to decline. Pricing is stable, and I think they’re going to start to see prices start to escalate again.

1:08 Speaker 1 Now you were saying to me, there are like five buildings that make up most of the market of these units available correct.

1:15 Speaker 2 That’s right. So thirty percent of that forty eight hundred units fall within one Wall Street downtown, which is a five hundred unit plus behemoth by Harry Macklow. One twenty five Granitch Street, which was stalled for a while but now is finishing construction, and they have commend sales two hundred and seventy units. One Manhattan Square, which was Extel’s

1:38 project on the Lower east Side waterfront, they had eight hundred, there’s about two hundred left, the Waldorf Astoria five hundred units, and one thirty five is forty seventh Street, which is about two hundred units between Third and Les. So if you if you just simple math you add all those up, you’re about thirty percent of the forty eight hundred. So

1:59 you have about three two thousand units left to sell, and we’re selling fifteen hundred to eighteen hundred units per year, so we’re really if you if you take those five buildings out of that sub out of the calculation, we’re almost a two years supply. In our opinion right now is a tremendous opportunity in New York City to put

2:18 a hole in the ground and start to go vertical. Usually projects delivered you know, two three, four years out and there really is a thin pipeline in the future.

2:27 Speaker 1 So who’s who’s going in the ground to build today? Kind of the names?

2:32 Speaker 2 So enough, Tali Group is active, right, They’ve got a development on seventy seventh and Second Avenue coming out of the ground. Eighty fourth and Broadway they just topped out. You have a few more in the planning stages on the Upper east Side, and our team is doing a couple of projects on the Upper west Side, one in

2:55 Midtown West on fifty second between eighth and ninth Avenue and another one on eighty six extend Third on the Upper east Side. But really, you know, besides those two neighborhoods, you really really don’t have tremendous new projects in the in the pipeline.

3:11 Speaker 1 Where are the players from? Are they local or do we have out of town players coming in there?

3:16 Speaker 2 Mostly local players? You know, I think that the out of town ers are still not really comfortable with New York City. So it’s you know, it’s the people have done it many times over. They’re comfortable, They understand the you know, what the outlook is in the city, and they can certainly get their arms around construction costs.

3:37 Speaker 1 Now what are these units selling for?

3:40 Speaker 2 So you know, it’s it’s really all across the board. You know, you could be as low as seventeen hundred dollars a square foot, and then for the highest end, you know, condo developments, you could be as high as five thousand dollars a foot sl Green successfully and you’re still twelve units at the Armani building on Madison Avenue

4:00 and they blended at five thousand dollars a square foot even you know, prior to completion of the project. So there’s you know, there’s you really have to look at, you know, building by building. If you just look at the average price per square foot of all buildings across New York City, it’s just it’s just below two thousand

4:16 per square foot.

4:17 Speaker 1 What about billionaires row So.

4:22 Speaker 2 Believe it or not. If you if you look at the the absorption rate of all those units over the last you know, ten years since that started, still remaining inventory left to sell within those buildings, it’s probably over ten years. And the way we look at that is how many units within those buildings sell on an annualized basis,

4:43 And then you’re just divided by the number of units left to sell. So yes, these buildings have achieved tremendous dollars per square foot on average, but the absorption rate really is taking, you know, more time, I think than anybody expected.

4:57 Speaker 1 Now, what about kind of developments in the bar Brooklyn on City.

5:02 Speaker 2 Brooklyn as tight as could be. It would be interesting to see.

5:07 Speaker 1 How Brooklyn Point is so out.

5:09 Speaker 2 Brooklyn Points about ninety percent sold. And you know, unfortunately everybody read the news about Silverstein had to take back nine to cob from GDS. So I’m sure they’re you know, getting the building completed and I’ll bring that back to the market probably the end of the year, maybe sometime next year. And then besides that, the waterfront in Williamsburg,

5:29 you have Wilentus, you know, just launched sales at the Domino, the last parcel there and ed White Price it’s blending it around two thousand dollars a square foot. So you know, for Brooklyn Waterfront, you go back, you know, ten plus years it was it was it was one thousand dollars of score foot. So it’s it’s tremendous how far that

5:48 market has come.

5:49 Speaker 1 What about green Point.

5:51 Speaker 2 Green Point, there’s one condo development that’s about seventy percent sold on the waterfront, but everything else is rental. You know Brookfield work with the Klein family where you have all those towers that have been developed over the last ten to fifteen year rent fifteen years, rents are you know, north of ninety dollars per square foot. It’s it’s really

6:14 tremendous how much rents have grown in the in the in the boroughs.

6:17 Speaker 1 Let’s talk about rents in the city.

6:20 Speaker 2 So ground up new construction almost impossible right to develop rentals based upon the cost of land. There’s been you know, a few, you know, partnerships with existing landowners. For example, Alchemy did twenty third and eighth Avenue on the north east corner. They just finished leasing and average one hundred and twenty five dollars per square foot.

6:45 Speaker 1 So from my audience, what does that come out for a studio? One bedroom is two.

6:51 Speaker 2 Bedroom studio four thousand a month, one bedrooms six thousand a month, two bedrooms over ten thousand dollars a month. So yes, these units types are units are tight and they’re efficiently designed to maximize dollar per square foot. But this is the highest rents have ever been in the in the City of New York.

7:10 Speaker 1 Okay, well let’s talk about office buildings being converted to residential rental or condo.

7:16 Speaker 2 Sure, you’re starting to see, you know, more of these buildings converted to to rentals. You know, our team does a lot of evaluation with landlords and some of their banks to understand what some of these buildings can achieve.

7:30 What I can tell you is, you know, we we go through you know, ten of them, and you know, maybe one works. You know, then very quickly, you know, the the core, which is where the elevator is, is really the biggest factor. Right, So if you have a side core versus a center core, the building is super inefficient.

7:49 It’s hard to lay it out. So really what you want is as as a smaller floorplate. You want to be on a corner, and you want to be in a you know, obviously a prime residential neighborhood. But we’re starting to see some announced I think you will start to hear about more. Most have been rental to date

8:08 very recently.

8:09 Speaker 1 Are these renting at one hundred tow one hundred and twenty five dollars a foot? No?

8:13 Speaker 2 No, So you know that and that’s that’s comes to the sort of the inefficiency right of of working with an existing building versus a ground up development where you can design more efficient correct correct, So you know, ninety dollars a square foot in some cases maybe one hundred.

8:29 But you know, I would say, you know, a typical office to REZI is probably twenty percent.

8:34 Speaker 1 What’s happening in Lower Manhattan.

8:37 Speaker 2 That’s you know where you’re starting to see most of these office to residential conversions and their rentals. One hundred Wall Street Van Barton just finished one and our team is going to be working on one in the coming year.

8:54 Speaker 1 What about the flat Iron building?

8:57 Speaker 2 So the flat Iron Building is proceeding right, It’s going to be a luxury condominium. They I would assume have finished their design plans and started construction.

9:08 Speaker 1 I think it’s like twenty four units. It’s not too many units.

9:11 Speaker 2 No, it’s not too many units. So I think, you know, as we end twenty four and look to twenty five, I think it’s it’s it’s about opportunity in office to REZI land pricing is believe it or not, starting to trickle back up. I think the lowest trades were, you know, in the two hundred to three hundred range and I’m

9:31 hearing about some land now trading as high as five hundred dollars a foot again, so I think that, you know, the bottom is gone, and you know the future is hopefully rates start to come down and people can start to make sense of deals again.

9:46 Speaker 1 Now many of these people are buying these properties without mortgages, right.

9:51 Speaker 2 Yeah, So we did an analysis over the last twelve months, believe it or not, in Manhattan new development, over sixty percent of the d we’re done all cash buyers.

10:03 Speaker 1 And where are these buyers coming from? Do we have foreign buyers?

10:07 Speaker 2 Yes, there’s you know, there’s definitely plenty of buyers from China. We see a lot of parents buying for children that are attending universities around Manhattan, you know, looking at one in two bedrooms, not really any of sort of what I would call like trophy apartments, but you know, smaller homes below three million dollars.

10:26 Speaker 1 And what do you think of the apartments near the Hudson Yards new developments, you.

10:33 Speaker 2 Know, the first condo towers by Related which started probably you know, ten years ago or now almost sold out. And you know we’ll start to see some you know, rental development happening again. Our team is working with Gotham on a five hundred unit lease up on forty fourth and tenth Avenue, which we’ll start renting apartments in the fall.

10:56 Speaker 1 So basically it sounds like the market is good, it’s strong. I’d say it’s healthy.

11:02 Speaker 2 I think the supplied demand metrics as it relates to inventory or finally in balance, we were we were definitely in an oversupplied market on the island of Manhattan for many years. So the biggest challenge today, I think for any developer UH is raising equity, and that that I think is what what what’s holding back more deal flow

11:27 is trying to find capital to to go forward. But we’re starting to see more and more opportunity.

11:33 Speaker 1 I’d like to thank Robin Schneiderman for being here and I’ll see you next week.