As reported by Bloomberg, what began as a softening of the luxury real estate market in New York has expanded to lower-tier properties. The top 20 percent of apartments are now experiencing price cuts.
Changes in real estate values tend to make investors and homeowners break out in a cold sweat, much like swings in the stock market. But, the current trend in New York isn’t anything to panic about. 2016 wasn’t anything like the crash of 2007-2008.
According to Bloomberg, the luxury market and the tier just under that market (again, the top 20 percent of properties) saw price drops in the 5 to ten percent range.
The definition of a stock market correction is a ten percent drop. The drop, unlike real estate, is often hard to predict, but it’s still considered business-as-usual and not a crash.
In order to keep perspective, it’s important to understand why the real estate market is softening. What’s causing the current dip in New York property prices?
First, 2015 was a “record year for residential building permits in New York City”, according to Slate.
In December 2016, the magazine ran an article that stated, “With developers pressed by expiring loopholes, the city authorized nearly 35,000 new units in the second quarter and nearly 10,000 more in the fourth. Total permits topped 50,000—more than any year since the early 1960s. And many of them aren’t done yet—according to the U.S. Census Bureau, about half of all multi-unit projects take more than 13 months from the permitting date to be completed.”
Translation: the permits issued in 2015 created projects that were being finished in 2016 and early 2017. With those units on the market (or soon to be there), basic supply and demand theory indicates that residential real estate prices will drop.
Yet, New York is still an expensive place to live. Even with the building boom, finding affordable living options is still a challenge.
According to Fortune, “more younger folks are finding themselves attracted to medium-sized cities, which may not have the same professional opportunities as their larger counterparts, but provide housing affordability. Cities like Raleigh, N.C., and Fort Collins, Colo., have seen building permit issuance soar over the past six years as they attract younger adults seeking cheap rents and lower asking prices. Expect the trend to continue in 2017.”
Younger professionals whose wages haven’t kept up with the cost of living are moving to smaller, more affordable cities. So, when they do get to a point that they can afford to buy, they’re not buying in New York. Ironically, that could drive down the housing prices. Fewer buyers and potential buyers means more competition for the buyers that are still in New York.
Finally, there are truly only so many people who can afford high end, luxury, housing, even in New York.
Curbed’s sales market report states, “In 2016, contracts to buy Manhattan houses priced at over $4 million were 21 percent fewer than in the same period in 2015. And the properties that sold sat on the market an average of 291 days, or 54 more days than in the same time last year.”
A $4 million home, with a 20 percent down payment ($1 million) has a monthly mortgage of $21,099. According to the Bureau of Labor and Statistics, in the first quarter of 2016 Manhattan’s average weekly wage was $2,783.
Not nearly enough to cover the mortgage on a luxury home. So, maybe it is time for a little bit of market correction?
Although New York City is always changing, it’s hard to imagine to imagine it as anything other than what it is. But change is part of New York’s identity. It is manifest in the crowds of people swept up and spilled out of the island metropolis. Even evidence of New York’s history–in the recreated apartments of the Tenement Museum, for example, and the old City Hall subway station–still feel folded up in this vision. New York has endless layers: you can ascend seventy floors in an elevator to get to your office or descend four stories on the escalator to ride the subway.
To imagine another New York–a different New York, rather than one that has previously existed or secretly exists–is a different matter. It rings of an alternate timeline, so anchored is this city’s iconic skyline in its urban identity. Sam Lubell and Greg Goldin have documented just that, though, in their book Never Built New York. By canvassing architectural firms and archives when available, the authors have unearthed designs and plans for a New York that might have been. Not only could these designs have become a reality, but they might have taken the place of other now iconic architecture in the city.
Some projects were closer to inception than others, but many would have radically altered the cityscape. A gigantic dome over Midtown and a floating airport on the Hudson seem some of the more far-fetched ideas, as does an ambitious extension of downtown Manhattan into New York Bay. As the authors point out, however, these ideas may not have seemed so extreme when first proposed. “’It was a time when people really believed in the power of technology,” Lubell says. ‘And they thought, you know, we can do kind of anything. … We’re building spaceships that go to the moon, why can’t we build a dome over Manhattan to get rid of all this pollution, get rid of all the problems of weather?’”
Credit: Stanford University Libraries va pri.org
That’s all well and good, but what about Frank Lloyd Wright’s proposal to transform Ellis Island into a bubble city? And his plan might have been preferable to the immediate alternatives: a prison or a resort. Ellis Island wasn’t in use for long after WWII, so it makes sense the city would want to develop it. No landmark is sacred, as proved by the demolished old Penn Station. And Grand Central Station isn’t still standing for lack of trying.
Many city landmarks might have looked very different if, for example, City Hall had been rebuilt as a “neo-Egyptian pile” in the style of Scottish architect George Ashdown Audsley around the turn of the turn of the twentieth century. And the Federal Reserve Bank could have been made of glass and elevated many stories above the ground via steel columns! Speaking of columns, residential towers were once considered for use as supports of bridges spanning city rivers.
Although some of the designs may sound impossible, some would have undoubtedly complemented the city, like Edward Larrabee Barnes’s 1974 biosphere. Some might have improved the skyline, like a Columbus Circle building for ABC designed in 1963 to take the shape of a flower. There’s also the proposed 2004 Olympic Village, situated on the now booming Queens waterfront…
To help New Yorkers and visitors imagine a Big Apple that might have been, the authors are working with the Queens Museum to reconstruct atop the museum’s existing model of the city. The exhibit will open later in 2017.
Featured image: American Weekly via pri.org
For all of Central Park, Prospect Park, and the many other parks scattered throughout the city’s boroughs, green space still feels scarce in New York City. Living in a city ironically nicknamed the Big Apple, people all too easily become disconnected from nature and forget that their food–particularly fresh food–must be imported from outside the city limits. How can a city renowned for its cuisine maintain its reputation with such limited access to green space? Farm-to-table takes on a new meaning when the nearest farm is miles and miles away.
Luckily, city dwellers are celebrated for making the most out of small spaces. New Yorkers are famous for it, living as they do in one of the densest cities in the world. But even making the most of space does not guarantee that green things will grow when and where you want them to, particularly in polluted urban conditions. Sustainable rooftops are in development throughout in the city; vertical growing and gardening is also a popular green space saver.
Urban agriculture and green space expansion are increasingly popular investments with offices and residential complexes. They can add significant, long-term value to a real estate holding and heighten the appeal for other investors and buyers. Developing urban agriculture in the form of sustainable rooftops, vertical plant walls, and other designs is also planting a stake in a community, essentially underwriting people and their connection to nature and to each other.
Curbed profiled Gwen Schantz, who fell into the New York urban agriculture landscaping scene as it gained popularity over the past decade. Schantz points out that the disconnect between city dwellers, food sources, and green space makes environmental education even more urgent. “’It can be very difficult for New Yorkers to make connections between themselves and the source of their food,’ Schantz explains. ‘We don’t really connect a lot with nature, we don’t connect a lot with farming, but it’s really important for people to know where food comes from.’”
Urban Land Magazine quotes Sibella Kraus, head of Sustainable Agriculture Education (SAGE) in Berkeley, saying that “urban agriculture is not just a way to grow vegetables, but also a way to strengthen communities.” Kraus points to cities developing “greenprints” for urban agriculture growth as a strong sign of people’s priorities.
In addition to fresher food, urban agriculture can teach urbanites about the environment and how to better preserve it. “Out of sight, out of mind” cannot hold sway in an age when more people than ever are gravitating toward cities, but the environment is simultaneously suffering a decline caused by human intervention. Now, when we can appreciate fresh food more than ever, we need to take steps to ensure our access and implement sustainable environmental measures. Recognizing urban agriculture as an asset to real estate development aligns business interests and conservation efforts.
Ridesharing and carsharing services like Uber, Lyft, and Zipcar are already decreasing the need for car ownership, particularly for people living in crowded urban areas. Uber and Lyft are also simultaneously building an autonomous fleet of self-driving cars, further reducing the car requirement. Taken together, these trends will drastically change the face of transportation and commuting in a country currently heavily reliant on cars. If both ridesharing and driverless cars seriously undercut the once unquestioned obligation of car ownership, what impact will this lifestyle shift have on the real estate market?
Transportation historically triggers growth. Cities have grown up around major ports of call, with transportation extensions unfurling outwards from these hubs. People have organized their lives around access (to work, school, food, entertainment, nightlife, etc.), but time and convenience have borne the cost. So once the issue of access has been addressed in favor of time and convenience, what options open up for commuters?
The availability and affordability of ridesharing, combined with driverless cars, will likely lead to expanded urban sprawl. Workers will no longer need to invest in expensive urban real estate when they can simply move farther away. The accessibility of remote working technology can even monetize their commute. Rush hour is no longer a threat, since you can capitalize on the extra time in the car by working, communicating, organizing–even eating, sleeping, or exercising!
Ridesharing and driverless vehicles may eventually be preferable and economical in terms of comfort, efficiency and even the environment, compared to urban and regional public transit options. This Chicago Tribune editorial compares the outcome of driverless cars to the evolution of the smartphone, extending that analogy beyond providing a digital footprint to solving for in-person appearance.
Once commuters arrive at work, they surely will not miss the extra hassle of parking their car–it will either park itself or pick up another fare. This means parking lot space and restrictions will be drastically reduced, freeing up real estate–especially expensive urban real estate–and precipitating development. Businesses and apartment tenants will also be off the hook for financing parking levels in their buildings. Real estate development will, likewise, have less to worry about once building codes reflect minimized parking requirements.
Even homeowners will directly feel the effects, as ridesharing and self-driving cars free up garage space for storing, living, redecorating, and renting. TechCrunch predicts the self-storage industry could take a hit and Airbnb could see more business, as homeowners reclaim an estimated 15% of living space.
The revolution doesn’t stop at recovering precious time and square footage: former car owners will also save a tremendous amount once they eliminate insurance premiums, car repairs, and maintenance costs. This increased spending capacity will certainly influence other industries in unforeseen ways.
However, the revolution is still a decade or two in the future. The rate of urban versus rural transition will certainly vary, determined by infrastructure, regulation, and demand. And self-driving cars have a ways to go, to account for safety, economy, reliability, and availability. But when all the pieces align, the real estate market will inevitably be stimulated, and people may finally regain that most elusive commodity: time.
We are all aware that the way of shopping is changing: more people are opting to shop online and sales in brick-and-mortar stores are suffering. Closures of JCPenney and Sears have threatened to close entire malls, since these anchors – otherwise known as key tenants — tend to drive traffic to the rest of the mall.
Surprisingly, even Macy’s flagship store in New York City considered selling its space. Although e-commerce may be driving consumers away from malls and shopping centers, food is reeling them back in.
From Necessity to Obsession
This growth may have something to do with the newfound food obsession taking over social media. Just think about the number of “food porn” posts, enticing recipe videos from BuzzFeed’s Tasty, and the unique “how it’s made” videos from INSIDER food you see daily. In addition, millennials now value experiences — such as eating interesting and unique foods – over owning material items. And according to The Pew Research Center, millennials have surpassed Baby Boomers as the nation’s largest living generation, meaning this is the core group advertisers want to appeal to the most.
So, what type of food is bringing people back to shopping centers? You would expect that it might be trendy fast-casual restaurants like Shake Shack or Panera that are bringing people in. However, it’s the fast-changing and diverse population of food trucks that are bringing crowds back to these shopping locations.
Why Food Trucks?
“Food trucks are basically the pop-ups of the restaurant business,” said Melina Cordero, CBRE’s head of retail research in the Americas. “They come in, they can set up, they’re low cost, and they’re constantly changing.”
Today’s consumers are craving diverse options of specialty ethnic foods that are prepared and served quickly. However, food trends change so rapidly that it’s hard for brick-and-mortar restaurants to keep up. This is a perfect storm for food trucks. It’s a low-cost and fast way to give consumers what they want, and restaurateurs who don’t want to take a big risk can still cash in on the restaurant business. The trends and trucks change and move so frequently in fact, that this website tracks where food trucks are based on your zip code or the type of cuisine you’re looking for.
With all these amazing “blink-if-you-miss-it” opportunities to experience a diverse array of food, people want to try it as soon as they can so they don’t miss out. So let them focus on eating at a specialty food truck that’s parked outside your store – because these customers might wander in to take a look at, and maybe even purchase, your merchandise.
What This Means for Real Estate
Let the food trucks do the work for you to bring sales to your stores. If the truck is extremely popular and lines are always long, you can almost guarantee there will be a lot foot traffic – to both the food truck AND your store.
While people are waiting in line, they’ll look around at their surroundings. If they happen to be standing in front on your store, they might want to purchase the warm fleece jacket on display in the window. If you get enough people who plan to buy your merchandise while waiting in a food truck line, you’ll make a profit without having to put out any money yourself.
Although it might seem like a large crowd outside of your store can be a nuisance, this might be a sure-fire way to bring more foot traffic into your store, which will bring more money into your company’s pocket.
When it comes to New York City real estate, most residents wish they had more space: to open up a wall and discover a whole extra room would be nothing short of a dream come true. But in a city with 27,000 people per square mile — the highest population density of any major US city — what you see is what you get, and usually what you pay for too.
But the idea of hidden rooms and passageways, even in New York City, is more than just the subject of millennial imaginations. A recent New York Times article tackled just that: hidden spaces, both new and old.
The older hidden spaces, surveyed by the Times, served practical purposes. In one Brooklyn church, for example, a stairway leads to a secret basement the size of a city block, once part of the Underground Railroad. Inside the Brooklyn Bridge, there’s a hidden Cold War bunker. Though you might enjoy the idea of secret passages for the novelty, many people have relied on them historically to stay safe.
That’s not to say secret rooms can only be bunkers. One couple in Brooklyn, for example, discovered a crawl space large enough to transform into a quirky playroom for their young daughter. Others pay contractors like Creative Home Engineering as much as $25,000 to build secret rooms into their homes for aesthetic or personal reasons.
In her three-bedroom apartment on 15th Street and Fifth Avenue, finance worker Sara Nainzadeh had a secret entrance built, opening up to a private office by a tug on a Shel Silverstein book. Asides from storing her safe, the room acts as a retreat from the world.
A couple in TriBeCa, the Watsons, have a secret room built entirely for books: a secret library that doubles as a guest room. Their Duplex on Warren Street is selling for $19.5 million.
Still, others have them implemented as a sort of long-term investment in an uncertain future. With the growing state of technological and government surveillance, many think a private escape is more than worthwhile. If there were needs in the past for such safe spaces, who is to say, 30 years down the line, they won’t be useful again?
Hopefully most of us will never need secret rooms for life or death reasons. But if such spaces do come back in style, why not run with it? A little intrigue in real estate is never a bad thing.