new york

Office Crisis: WeWork Files for Bankruptcy as the US Market Struggles with Space Reduction

By Columbus International,25 November 2023

Transforming the office landscape with an injection of flexibility is a challenge faced with courage. However, it is the burdensome rigidity of lease agreements with major property owners that has led WeWork, the American giant of shared office spaces, to file for bankruptcy under Chapter 11. Since the onset of the pandemic, the office market in the United States has failed to recover. A scenario of vacant square meters and declining rents, which WeWork’s case threatens to exacerbate. The leadership of WeWork assures that this situation is confined to the US and Canada market (the company has 777 locations in about 40 countries and does not affect Italy), but, as stated in the application filed by the company, it will result in the termination of over 40 lease contracts in New York alone.

According to the latest Jll Office Report Q3 – source: Sole 24 Ore – office leasing in the US has decreased by 35% since 2019, with rents falling by 6%. In September, compared to the same month in 2022, defaults on loans for office buildings tripled to around 6%. The net absorption of office spaces decreased by 1.7 million square meters in the third quarter, bringing the total loss of office space to over 4.7 million square meters in just one year. On a quarterly basis, the vacancy rate increased by 39 basis points to 21%, and in just one year, construction began on only 730,000 square meters of new office space, which, in perspective, will mean a lower supply of new and high-quality products compared to demand (with corresponding price pressure). “WeWork – as George Schultze, founder of Schultze Asset Management Llp, wrote in Forbes – is an extreme example, but there is now much concern in the commercial real estate market in general. Banks and insurance companies have financed loans to investors who used a minimal share of their own capital when interest rates were very low, expecting them to remain low for a long time. Now that short-term rates are above 5%, many investors are in trouble, and many lending institutions will take a hard hit when buildings are revalued under current market conditions.”

According to Moody’s, this will have a negative impact on cash flows and market office values, increasing negative sentiment and making refinancing more difficult in the next 12-18 months. According to Nareit (the American Association of Real Estate Investment Trusts), compared to 2015, the market value of offices in publicly traded real estate investment trusts has dropped from 14% to 4%. Although fund managers, as shown by Jll data, note that demand for prime offices, i.e., new high-end spaces (strategic locations, zero emissions, innovative materials and spaces, services such as green areas, restaurants, gyms), remains healthy, albeit subdued. Rents have also increased by an average of 4% since 2019. However, as emphasized by Nareit, these are indeed innovative but “traditional” offices: “Coworking will remain, but it will be a niche.” Perhaps. But opinions diverge here. “Post-pandemic hybrid work is prompting tenants to reduce spaces,” explains Jose Pellicer, Global Head of Investment Strategy at M&G Real Estate, “but the situation in the US is different from in Europe. In the United States, the return rate is 50%, in Europe, it’s 75%, driven by factors such as smaller homes and shorter commuting times.”

“The case of WeWork has raised questions about the future of flexible offices,” wrote Julie Whelan, Global Head of Occupier Thought Leadership at Cbre. However, our recent survey among companies using them indicates a growing demand for flexible lease agreements to meet increasingly relevant space planning scenarios. Therefore, we believe that WeWork’s difficulties are largely attributable to its business model, which tied it to long-term lease commitments made before the pandemic, while simultaneously facing significant costs in a context of sharply rising interest rates. In the latest Bloomberg Market Live Pulse survey, 65% of investors believe that the US office market will only begin to recover after hitting rock bottom; two out of three expect this recovery to occur in the second half of 2024.

Lawsuit Alleges Conspiracy to Inflate Real Estate Commissions in Manhattan

By Columbus International,20 November 2023

On Monday, a legal action was initiated, accusing the Real Estate Board of New York (REBNY), along with over two dozen brokerages and companies, of collaborating to artificially boost commissions paid to agents involved in the sale of residential real estate in Manhattan. This proposed class action against the REBNY trade group, the Corcoran Group (HOUS.N), Douglas Elliman (DOUG.N), and others, comes in the wake of an October 31 verdict by a federal jury in Missouri, awarding home sellers $1.78 billion in a parallel case against the National Association of Realtors and multiple brokerages. The potential impact of this verdict, which a judge could triple to exceed $5.3 billion, has the potential to disrupt long-standing practices mandating sellers to pay commissions to buyers’ brokers.

The National Association of Realtors (NAR) is currently facing at least two other similar proposed class actions. In the federal court lawsuit filed on Monday in Manhattan, Monty March, the plaintiff, asserted that commissions on Manhattan residential sales persist at a stable 5% to 6%, even as home prices skyrocket, reaching an average apartment price exceeding $2 million by early 2022. March argued that sellers using REBNY’s listing service should not be obligated to pay 2.5% to 3% commissions to buyers’ brokers, especially when compared to lower commissions in “fully competitive” markets such as Brooklyn, where negotiations occur separately and average around 1%. REBNY’s General Counsel, Carl Hum, stated that the group is currently reviewing the complaint with its legal team and expressed confidence that the practices and procedures of its listing service “abide by all relevant laws.”

As of now, Corcoran and Douglas Elliman have not responded to requests for comments. March claimed to have paid inflated commissions when he recently sold property on Manhattan’s Upper East Side, with property records revealing the sale of an apartment for $5.6 million in July 2022. Commencing January 1, REBNY will mandate sellers, rather than their brokers, to directly remit any commissions to buyers’ brokers, aiming to enhance “transparency and consumer confidence in the residential marketplace.” March expressed uncertainty about whether this change would lead to lower commissions or potentially cause delays in sales as buyers’ brokers negotiate with sellers. The lawsuit seeks damages for sellers of Manhattan residential property over the past four years who paid buyer brokers’ commissions under REBNY rules.

Source: Reuters

Appartamenti quartiere Financial District | New York

Financial District Resurgence: Converting Office Spaces into Homes

By Columbus International,17 November 2023

In the ongoing discussions about repurposing New York City‘s stagnant office buildings into residential spaces, it’s the Financial District that has taken the lead in this transformative endeavor on a significant scale. This trend, as reported by The New York Times, showcases a remarkable shift in the landscape of the Financial District, challenging its traditional image as a purely business-centric area. In recent years, the Financial District has seen the conversion of prominent structures into luxury apartments. Notable examples include the transformation of a 1907 office tower at 84 William Street and an Art Deco skyscraper at 1 Wall Street, the former headquarters of the Bank of New York.

This wave of change extends beyond high-rise conversions, encompassing various modifications that began decades ago with the renovation of low-rise buildings and continues today with the construction of towering glass and steel structures. The Financial District, once criticized as a deserted expanse after the bankers’ departure, has now evolved into a thriving residential enclave at the southernmost tip of Manhattan. The demographic landscape of the area has witnessed a substantial increase, with the resident count soaring from 13,700 in 1990 to the current 66,000. The boundaries of this burgeoning community stretch from Chambers Street and the Brooklyn Bridge to the north, extending to the West Side Highway on the west. Notably, even a new Whole Foods establishment has become part of this revitalized neighborhood. The transformation of the Financial District serves as a potential roadmap and a source of optimism for other neighborhoods in Lower to Midtown Manhattan grappling with a surplus of vacant offices. As companies continue to reduce office space in the aftermath of the pandemic, real estate analysts anticipate that a significant number of buildings, particularly outdated offices with inefficient layouts, may remain unattractive to most companies, necessitating alternative uses. Both Mayor Eric Adams and Governor Kathy Hochul have endorsed residential conversions as a solution to address both the office surplus and the city’s housing shortage. However, the adoption of such conversions faces challenges, given their expense and the impracticality of transforming dark, deep interiors into light-filled residences.

The Financial District’s metamorphosis traces back to two pivotal events—the migration of banks and insurance companies from Lower Manhattan to Midtown and the impact of the September 11 attack. These setbacks led to a transformation in the district’s demographics, gradually replacing suited 9-to-5 workers with families and parents pushing strollers. The compact lots in the area facilitated the conversion process, resulting in a prevalence of slender buildings with high ceilings and large windows. Since the onset of the pandemic, the neighborhood has witnessed the addition of nearly 1,500 residences in new constructions and conversions, with thousands more expected in the coming years. Among these, the largest conversion in the country involves the creation of 1,300 apartments in an office tower vacated by JPMorgan Chase in early 2021. The article also features the perspective of a resident, Cory Levy, who highlights the Financial District’s unique charm, its historical roots, and the evolving residential character that offers a distinct advantage over other neighborhoods.

The Financial District’s makeover began in the mid-1990s, driven by tax incentives for developers converting office towers into residences. This initiative resulted in a building boom, creating nearly 13,000 units by the time the incentives expired in 2006. Despite the expiration of incentives, the conversion of offices into residences continued, albeit at a slower pace. Real estate experts, such as Joey Chilelli from Vanbarton Group, anticipate that the recent challenges in the office market will likely accelerate more conversions in the Financial District, given its status as having the highest office vacancy rate in Manhattan. Vanbarton Group is actively involved in the latest conversion project, transforming 160 Water Street into 588 apartments. The high office vacancy rate in the neighborhood, now standing at nearly 27 percent, up from 11 percent before the pandemic, underscores the potential for further transformations. The article concludes by highlighting examples of former skyscrapers, including 15 Park Row, and modern office buildings that have successfully transitioned into residential spaces. The stories of residents like Ruth Cheng, who chose to stay in the Financial District for its evolving amenities, schools, and community offerings, further emphasize the neighborhood’s growing appeal.

Valentino’s latest boutique has just landed at 654 Madison Avenue (Source: V Magazine)

By Columbus International,10 November 20239 November 2024

Valentino‘s latest boutique has just landed at 654 Madison Avenue. After introducing their innovative global retail concept in 2022, which revolves around creating distinctive spaces based on a reinterpretation of the building’s structure through various sales experiences and approaches to interior architecture, the new flagship store in Manhattan is now a pivotal destination for Valentino enthusiasts. Boasting a selling space of 1142 sqm, the new establishment is situated on the corner of Madison Avenue and 60th Street. The building spans three floors, including a basement, a ground floor, a mezzanine, and a second floor. Adorned with iconic columns and tall windows, the space is meticulously designed to provide a glimpse into the materials and architectural silhouettes that define the essence of the boutique’s interiors.

Each floor narrates a unique visual story through chromatic compositions and thoughtfully curated materials palettes, incorporating the maison’s signature red tone. Upon entering, customers are welcomed by grand double doors featuring sculptural marble handles, inspired by the work of artisans whose creations are showcased in Valentino stores worldwide. These handles, crafted in ceramic by the artist Massimiliano Pipolo, are also incorporated within the store. Visitors can explore the grand features of the building, including seven-meter-high ceilings, exposed steel columns (spanning all floors), and a rough concrete finish around the perimeter, highlighted by illuminated shelving dedicated to Valentino Garavani Accessories.

The space is intelligently divided into functional zones through bespoke elements, such as a commanding green onyx display unit at the center, and diverse materials like marble carpets and concrete on the floors that delineate specific areas and functions. Towards the rear of the store, various interpretations of the iconic Rosso Valentino are displayed, along with a dedicated area for footwear featuring floors and seating in contrasting travertine red against the luminous onyx and concrete shelving. On the second floor, the Valentino Women Ready-to-Wear collection is showcased in oversized red lacquered wardrobe structures and matching seating, complemented by chequered floors in white Botticino and black Nero Marquina marbles. La nuova boutique di Valentino è appena sbarcata al 654 di Madison Avenue

Source: V Magazine

Top 50 Priciest New York Neighborhoods in Q3 2023: Brooklyn Breaks into the Top 3 for the Second Time This Year

By Columbus International,8 November 2023

In the third quarter of 2023, residential property sales in New York City continued to experience a gradual decline, with both sales numbers and median prices dropping compared to the same period the previous year. By the end of September, the median sale price in NYC stood at $750,000, which was a 1% decrease from the third quarter of 2022. However, the most significant decline was seen in the number of sales, as there were 24% fewer residential transactions in the city compared to the previous year, resulting in approximately 2,400 fewer closed deals in the third quarter of this year.

On a positive note, quarter-over-quarter sales numbers showed an increase of 418 transactions, indicating a seasonal trend similar to 2022 and 2021, where third-quarter sales surpassed those of the second quarter. During the same period, the median sale price remained relatively stable. Nevertheless, the year-to-date data through September revealed a 28% decrease in the number of closed residential deals in NYC compared to the same timeframe in the previous year, with a total of 20,833 sales recorded. Notably, among the top 50 neighborhoods (which included 56 neighborhoods due to some ties), 24 were from Manhattan, 23 from Brooklyn, and nine from Queens. Notably, none of the Bronx neighborhoods made it to the list this quarter, despite the Bronx’s historic appearance in the top 50 during the first quarter of the year. The median sale price in the Bronx was $362,000, marking a 6% decrease from the previous year, which was the most significant year-over-year decline in median sale price among the four boroughs. Across all four boroughs, median sale prices experienced slight declines compared to the previous year, with Queens following the Bronx with a 2% drop, and Brooklyn and Manhattan both seeing 1% decreases. Similarly, overall sales activity decreased in each borough, with Brooklyn experiencing a 26% drop, Manhattan and Queens both recording 24% decreases, and the Bronx seeing a 22% decrease compared to the third quarter of 2022.

Unsurprisingly, Manhattan continued to host some of the most expensive neighborhoods in New York City, with seven out of the top 10 spots. Brooklyn also made its presence felt in the top three, securing two spots. Among the top 10 neighborhoods, seven saw an increase in the median sale price, while sales activity decreased in seven of them. Hudson Yards remained the most expensive neighborhood in NYC with a median sale price of $8,150,000, marking a substantial 39% increase from the previous year. This increase can be attributed to the larger average square footage of properties sold in the third quarter of 2023 compared to the previous year. However, Hudson Yards saw an 8% year-over-year decline in the number of residential deals during the quarter. SoHo secured the second spot with a median sale price of $4.2 million, surpassing TriBeCa in the second quarter of 2023. The median sale price in SoHo was 77% higher than in the third quarter of 2022, although the number of sales decreased significantly by 48% during the same period. Brooklyn’s DUMBO took the third position, with a 60% year-over-year increase in its median sale price, rising from $1,775,000 in the third quarter of 2022 to $2,833,000 in the third quarter of 2023. Hudson Square, TriBeCa, Flatiron District, Red Hook, Little Italy, Theatre District-Times Square, and Greenwood Heights completed the top 10. Manhattan’s median sale price was $1,125,000, while Brooklyn’s median reached $805,000 by the end of the third quarter, with more than half of Brooklyn’s neighborhoods experiencing a drop in median sale prices compared to the previous year.

Notably, DUMBO’s 60% increase in median sale price made it one of the top three neighborhoods, marking the second time a Brooklyn neighborhood achieved this since the first quarter of 2023 when Vinegar Hill held the position. DUMBO’s success can be attributed to 15 of its 33 sales taking place at Olympia, a condo building that significantly influenced the median sale price, with condos at Olympia selling for a median price of $4.95 million. Red Hook returned to the rankings after a year, recording nine residential sales above the $2 million median price threshold. Its median sale price also increased by 30% on a quarter-over-quarter basis. Greenwood Heights, previously ranked #23, climbed to the 10th position this year, experiencing the fourth-highest increase in median sale price year-over-year in the third quarter among the top 50 neighborhoods.

The neighborhood also saw a 6% increase in sales activity. In addition to these three neighborhoods, nine more neighborhoods had medians above $1 million, including Cobble Hill and Gowanus, which ranked 11th and 12th, respectively. Both neighborhoods experienced declines in medians and sales activity. Cobble Hill recorded the second-largest decline in year-over-year sales activity, falling by 58%, while Gowanus saw a 35% decrease in sales compared to the previous year. The most significant increase in sales activity was recorded in Manhattan Beach, up 25% year-over-year. Despite the increase in the number of transactions, the median sale price in Manhattan Beach dropped by 5% from the third quarter of 2022 to the third quarter of 2023, standing just below $1 million. Queens saw the sharpest increase in median sale price, with Little Neck experiencing a remarkable 121% year-over-year surge in the third quarter. Little Neck’s median sale price rose from $370,000 in the third quarter of 2022 to $818,000 in the third quarter of 2023, securing its place among the top 50 priciest neighborhoods in NYC. This increase occurred despite a notable drop in sales activity. Among the 50 most expensive neighborhoods, Queens also recorded the most significant decline in sales activity, with Queensboro Hill seeing a 61% decrease in the number of transactions. The most expensive neighborhood in Queens was Hunters Point, with a median sale price of $1,205,000, which was a 14% increase compared to the previous year, although sales activity fell by 21%. Auburndale was the next-priciest neighborhood, with a median sale price of $958,000, marking a 9% year-over-year increase.

Source: Property Shark

Exploring the $9.4 Million New York Residence in Proximity to Carrie Bradshaw’s Iconic Fictional Apartment

By Columbus International,18 October 2023

New York’s West Village is famed for its assortment of iconic fictional properties, such as the Friends’ apartment and Carrie Bradshaw‘s residence from Sex and the City. Presently, you have the opportunity to possess a residence in close proximity to some of the city’s most renowned TV dwellings with this $9.4 million abode at 70 Perry Street—a mere stone’s throw from Bradshaw’s TV abode. This spectacular property was once the abode, individually, of three celebrities and prominent figures: renowned chef and restaurateur Jeffrey Zakarian, comedian Louis C.K., and the esteemed Associated Press reporter and editor Charlie Grumich.

All, at one juncture, were occupants within the edifice. It also served as the backdrop for The Back-Up Plan featuring Jennifer Lopez and The Brothers McMullen starring Edward Burns. This townhouse, measuring 20 feet in width, is a multi-family building encompassing four units and was constructed in 1867 by Walter Jones, who fashioned the structure in the French Second Empire style. This style is distinguished by ornamental elements, such as the mansard roofs adorning this edifice, along with iron frameworks and glass skylights. The four units are interlinked by means of a centralized staircase, and the owner’s unit, comprised of seven rooms, occupies the initial two floors of the building. The owner’s unit incorporates one bedroom, two bathrooms, a parlor adorned with ornate ceilings and a library, a living room, a formal dining room, a spacious kitchen, and a garden. The kitchen, designed in a country-style, offers an expanse with one of four fireplaces and opens up to the landscaped garden—a verdant oasis in the heart of the city. There’s a paver patio, a stone brick wall, latticework, and ample space for outdoor furnishings. The parlor room showcases exquisite molding, with ornamental 12-foot ceilings and pocket doors that lead to the library, affording views over the charming, tree-lined Perry Street.

The owner’s unit additionally features an office/study, a laundry area, and an expansive pantry. The entire building uniquely accommodates three distinct one-bedroom apartments, each equipped with kitchens, a living area, a dining space, in-unit laundry facilities, and an office. Alternatively, the building can be transformed into a unified family residence, rendering it a multi-bedroom private townhome. There are a total of four fireplaces, and each room exudes the quintessential charm of pre-war New York City.

This townhouse, designated as a landmark within the Historic District, has been affectionately preserved and boasts lofty ceilings, broad-plank floors, and expansive windows that flood sections of the residence with natural illumination. This marks the first instance in 45 years that the townhouse has been placed on the market. It is positioned in one of the most sought-after neighborhoods in New York, with picturesque, leafy avenues: West Village is renowned for its enchanting streets, upscale dining establishments, luxury boutiques, and quaint cafes. Bradshaw’s fictitious apartment is situated at 66 Perry Street, merely a stone’s throw away, and the exterior was utilized for filming scenes outside the residence—even though Bradshaw purportedly resided on the Upper East Side in the series. West Village is distinguished for its opulent real estate offerings, celebrity inhabitants, and artistic legacy.

Source: Forbes

Crackdown on Airbnb Listings Creates “Black Market” for Short-Term Rentals in New York City (Source: WIRED)

By Columbus International,11 October 2023

New York City’s new law banning most short-term Airbnb rentals, which came into effect in early September, has had a significant impact on the market. As few as 2 percent of the city’s previous 22,000 short-term rentals have been registered with the city. Many illegal listings have moved to social media and lesser-known platforms, with some still appearing on Airbnb itself. The number of short-term Airbnb listings in the city has dropped by more than 80 percent, going from 22,434 in August to just 3,227 by October 1, as reported by Inside Airbnb, a watchdog group monitoring the platform. However, only 417 properties have been officially registered with the city, indicating that very few short-term rentals have received permission to continue operating. This crackdown has given rise to a “black market” for short-term rentals in the city, according to Lisa Grossman, a spokesperson for Restore Homeowner Autonomy and Rights (RHOAR), a local group that opposed the law. Grossman notes that since the ban, the short-term rental market has gained traction on platforms like Facebook. She says, “People are going underground.”

The short-term rental landscape in New York has dramatically shifted due to this law. Individuals are turning to platforms like Craigslist, Facebook, Houfy, and others, where they can search for guests or properties without the oversight of Airbnb-like booking platforms. The increase in demand for such rentals is expected to drive hotel prices higher. A search for short-term stays on Airbnb reveals a limited number of listings across the city. Many previous listings have transitioned into stays of 30 days or longer, thus avoiding the need for city registration. AirDNA, a short-term rental intelligence firm, found just 2,300 short-term Airbnb rentals in New York City by late September. AirDNA’s data shows that long-term rentals now make up 94 percent of Airbnb’s listings in the city, reflecting the stricter requirements for short-term rentals. Hosts must meet stringent criteria to be approved for short-term rentals, such as allowing only two guests and the host being present during the stay. However, some hosts are attempting to work around these rules. Many Airbnb listings include an option for hosts to enter a registration number or claim an exemption. Despite these efforts, some entire units still appear to be available for short stays and do not seem to qualify as hotels or exempt units.

Inside Airbnb’s data shows that approximately 2,300 short-term properties have labeled themselves as exempt from registration on Airbnb, with several more not specifying their status. Another 35,000 are designated as long-term rentals. These numbers were not confirmed by Airbnb. The Mayor’s Office of Special Enforcement in New York, responsible for the registration program, has not provided an update on the total number of registered short-term rentals or whether violations have been issued for illegal listings. The law in New York City is just one example of how cities are responding to the growth of short-term rentals. Supporters of the rule argue that it will free up apartments for local residents facing high rents and housing shortages. However, some, including small landlords, believe it will eliminate a flexible source of income without significantly addressing the housing crisis. Smaller landlords are lobbying New York City councilors to revise the rules to allow them to continue renting out their units. RHOAR represents hosts who own and occupy single-family homes or homes with two dwelling units. They argue that they have been unfairly grouped with larger landlords.

Grossman states that RHOAR has met with city councilors in an attempt to change the law to permit smaller hosts to legally offer short-term rentals. Beyond Airbnb, people are posting listings and seeking short-term rentals on Facebook groups. Craigslist advertisements for rentals include weekly or nightly prices. These off-platform rentals pose risks to both guests and hosts who may not have the protection of larger companies like Airbnb. As for Airbnb, it is turning its focus away from New York City, which was once its largest market. Airbnb CEO Brian Chesky has mentioned that the company is exploring longer rentals, as well as car rentals and dining pop-ups. The company is also looking to expand its presence in Paris, its largest market and the host of the 2024 Summer Olympics. “I was always hopeful that New York City would lead the way—that we would find a solution in New York, and people would say, ‘If they can make it in New York, they can make it anywhere,'” Chesky said in September. “I think, unfortunately, New York is no longer leading the way—it’s probably a cautionary tale.”

Source: WIRED

It’s a Good Time to Make a Deal in New York Real Estate, Forbes Reports

By Columbus International,11 October 2023

New York City’s real estate market has responded robustly to the economic uncertainties of the first half of 2023. Many potential buyers in our market initially postponed their plans following the 50 basis point increase in the Federal Reserve rate in December (which came after several 75 basis point increases). As mortgage rates continued to rise and the stock market declined, transaction volume, which had been steadily declining throughout the second half of 2022, remained sluggish in January.

Surprisingly, February saw a turnaround, and March brought further improvements. However, the successful deals were strongly linked to price reductions or setting highly realistic listing prices. There is no room for overly optimistic pricing in 2023. The high-end market (homes priced at $10 million and above) has borne the brunt of this correction year.

During the first two months of the year, few high-end listings found buyers, and the ones that did either possessed unique features or were fortunate to connect with that one buyer whose needs aligned perfectly with the property. Owners who purchased their properties since 2014 or 2015 have had to accept significant losses to make a sale. In the $4 million to $10 million market, the Olshan Luxury Market Report, which tracks contract activity at $4 million and above, saw a notable increase from just over 16 deals per week in January to an average of 25 deals per week in February, and nearly 32 deals per week for the first three weeks of March. Nevertheless, many luxury properties with seven, eight, or nine rooms can still linger on the market for extended periods, primarily due to pricing.

Since January, half of the emails received by New York agents have announced price reductions! Arguably, the most active market in the city is for lower-priced units, especially those priced at $2,500,000 and below. The rental market remains exceedingly strong, currently at its highest point in recent memory (though somewhat weaker than six months ago). Properties in the $2 million and below range tend to favor buying over renting, especially on an after-tax basis. Inventory remains limited at this level. Despite disruptions caused by the collapses of Silicon Valley Bank and Signature Bank, the New York market has experienced increased activity as spring approaches.

The Federal Reserve’s decision to raise its target rate by only 25 basis points, a repeat of its late January decision, suggests a halt to the more substantial increases that took the Fed rate from 0.25% to just under 5% within a year. Although the correlation between the Fed rate and mortgage rates is not perfect (mortgage rates are more influenced by the bond market), it’s clear that the considerable increase in the Fed rates has driven mortgage rates upward, impacting buyer confidence as monthly purchase costs rise.

Especially for younger buyers who’ve grown accustomed to the artificially low rates prevailing since the 2008 recession, a mortgage rate of 5% or 6% remains low by historical standards. The gradual acceptance of this reality by buyers has played a role in the real estate market’s gradual recovery. Several factors make it challenging to predict the second quarter accurately. The stability of regional banks remains uncertain, and the Credit Suisse merger with UBS signals that the banking crisis is not confined to the United States. Meanwhile, inventory remains tight in various segments of the New York market, and even cautious buyers often struggle to find suitable listings. Stock market volatility and inflation may continue, but the worst of the significant price declines seems to be behind us, and property costs have stabilized. Forbes reports that it’s an opportune time to strike a deal!

New York Real Estate Market: Co-ops Struggle, New Developments Forced, Brooklyn Triumphs

By Columbus International,11 October 202311 October 2023

The decline in New York home sales has left virtually no one in the real estate industry unscathed, with particular areas of the city’s market experiencing the most acute pain. Despite the seasonal increase in property listings this fall, the market won’t escape the grip of the low-supply environment that has kept prices high, even as mortgage rates have surged, further dissuading potential buyers. For instance, on Staten Island, new property listings in August saw a 17 percent drop, and inventory plummeted by 37 percent compared to the previous year. Simultaneously, the median price rose by 3 percent, and the days a property spent on the market increased by a staggering 50 percent, as reported by the Staten Island Board of Realtors. “These are challenging times for the real estate market,” stated Sandy Krueger, CEO of the organization. “But challenges also create opportunities for those who remain attentive to the market’s signals.”

Here are three key signals to watch as the fall selling season gets underway:

Co-ops: The Losers
Co-op properties were already facing difficulties before the increase in mortgage rates impacted sales. Cheaper co-ops have been particularly affected by the rising rates. Buyers in recent years had become increasingly discouraged by the antiquated rules and bureaucracy of co-op boards. Now, with higher mortgage rates, homebuyers on the lower end of the income spectrum find themselves priced out due to co-ops’ stringent debt-to-income and post-close liquidity requirements. Just a year earlier, a couple earning $240,000 annually could borrow $600,000 for a co-op valued at $750,000 and successfully pass a board application. However, in today’s market, this is no longer possible. This situation is striking, considering that $240,000 is roughly three times the area’s median income in New York City, and $750,000 often represents the starting point for homes in many neighborhoods. Monthly charges are also rising in many co-op buildings due to Local Law 97, which caps greenhouse gas emissions in larger buildings, and Local Law 11, which mandates facade inspections and repairs for buildings taller than six stories every five years. This, in addition to rising rents, makes it increasingly challenging for lower-end and first-time buyers to enter the market.

New Development: The Losers
Developers who had been waiting for a more favorable economic climate before launching their projects may now be compelled by their loan terms to list properties this fall. Projects with units lingering on the market may be forced to offer price reductions. Developers have pre-payment milestones with their lenders and can no longer delay their projects. While some units were overpriced for the current rate environment, others missed the post-lockdown market boom due to supply and labor shortages. For instance, the last available penthouse at One Clinton Street in Brooklyn Heights recently sold for $8 million, down from the original asking price of $10.2 million. An opportunistic buyer’s broker can search for older properties that may have been overlooked, presenting an excellent investment opportunity in the city.

Brooklyn: The Winner
Brooklyn’s real estate market has remained strong throughout the year, a trend that is expected to continue into the fall. Brooklyn has been outperforming Manhattan in terms of market expediency, primarily due to the demand for more space and outdoor living. Brooklyn has been growing into a primary market for years, a trend that accelerated during the lockdown period of the pandemic. Buyers sought to avoid high-rise elevators, subways, and crowded streets. Although transit use has mostly recovered, the shift towards Brooklyn shows no signs of slowing down. “The trend for Brooklyn has been on fire,” remarked UrbanDigs founder John Walkup.

Source: TRD

Repurposing Office Buildings: American Universities’ Novel Approach to Campus Expansion

By Columbus International,11 October 2023

In an unexpected trend, colleges and universities across the United States have found a unique solution to their campus expansion needs by repurposing vacant office buildings. This innovative approach allows educational institutions to acquire office spaces at attractive prices in a sluggish real estate market and subsequently adapt them for academic use. However, while it effectively addresses their need for additional facilities, it doesn’t alleviate the broader problem of empty office spaces, which has been exacerbated by the shift to remote work during the pandemic.

A New Approach to Campus Expansion
For colleges and universities in the United States, acquiring office buildings has become an increasingly popular means of expanding their campuses. The availability of such spaces at bargain prices, attributed to a sluggish office market, makes this approach particularly appealing. The renovations required to adapt these structures for academic use are typically less costly and time-consuming than constructing new buildings from the ground up.

A Sluggish Office Market
While this creative approach serves the purpose of academic expansion, it doesn’t mitigate the underlying issue of a sluggish office market. The COVID-19 pandemic has drastically reduced the demand for office spaces, with the nationwide office availability rate exceeding 24%. This increase from 17% before the pandemic reflects the reduced demand for leased office space, forcing property owners to grapple with this surplus. Some office buildings have lost so much value that mortgage-holding banks have taken control of them.

Government Initiatives
In light of the current environment, there is growing interest in converting office buildings into residential spaces to address the national housing shortage. However, this transition involves overcoming various regulatory and architectural hurdles, such as rezoning for residential use, kitchen and bathroom installations, and ensuring access to natural light.

College Diversification
Colleges and universities have explored a range of real estate diversification options. In response to the increasing demand for on-campus accommodation and the limited availability of dorm space, some institutions have even ventured into acquiring hotels. However, the low costs of office buildings have proven particularly attractive to many institutions, even when they do not have an immediate use for the space.

Various Case Studies
Several institutions have embarked on this novel approach to acquiring office buildings. For instance, the University of Southern California purchased an office building in Washington, D.C., to serve as an immediate satellite campus. The University of Louisville was even offered an office building for free by Humana, a health insurance company. While these acquisitions benefit the institutions, they can also have implications for towns and cities, as colleges and universities typically do not pay taxes on their academic buildings and dorms, effectively removing these properties from tax rolls.

Overcoming Challenges
Repurposing office buildings for academic use comes with its own set of challenges. For example, buildings designed for office work may not have sufficient ceiling height to accommodate the ductwork required for improved ventilation, and large floor plans can make ensuring natural light in every classroom a challenge. This transformative approach to campus expansion showcases the ability of educational institutions to adapt and evolve within a changing real estate landscape. These creative solutions help universities grow while providing opportunities for towns and cities to revitalize downtown areas and bring life to quiet districts that have suffered due to remote work trends.

Please note that the information provided is based on The New York Times article.

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