real estate New York

New York Remains Global Wealth Capital Despite Millionaire Migration

By Columbus International,10 May 2024

While some wealthy residents have left New York City for lower-tax destinations like Florida, the Big Apple still reigns supreme as the world’s wealthiest metro area. A new report by immigration consultancy Henley & Partners reveals that New York has a staggering $3 trillion in total private wealth held by its citizens. The city boasts nearly 350,000 millionaires, up 48% over the last decade, giving it the highest millionaire population of any city globally. Approximately one in every 24 New York residents is a millionaire, compared to just one in 36 a decade ago. The city’s concentration of ultra-high-net-worth individuals is also unmatched – it has 60 billionaires and 744 people worth over $100 million.

This wealth has been bolstered by strong gains in financial markets in recent years. Global equities surged 20% in 2022 and are up nearly 7% so far this year, benefiting New York’s position as the U.S. financial capital. However, the city has seen some of its wealthiest residents decamp to lower-tax states like Florida during and after the COVID-19 pandemic. Over 91,000 New York residents relocated to Florida in 2022 alone as part of a larger migration of over 545,000 people leaving the state that year.

This trend has fueled a rise of “Wall Street South” in Florida, with major hedge funds like billionaire Carl Icahn’s and Paul Singer’s Elliott Management relocating headquarters to the Miami and West Palm Beach areas since 2020. In total, 160 Wall Street firms have moved out of New York in recent years, 56 of them to Florida, taking a combined $1 trillion in assets under management. The impact has been felt in South Florida’s luxury real estate and clubs, with golf memberships doubling or tripling in price. Miami now ranks 33rd globally for its millionaire population, up 78% over 10 years. Still, New York’s position at the top remains unmatched for now. Following it are the Silicon Valley region with 305,700 millionaires, Tokyo, Singapore, a fading London, Los Angeles, Paris, Sydney, Hong Kong and fast-growing Beijing.

Kim Kardashian’s Skims Scores Prime Fifth Avenue Retail Space at Bargain Rates (The Real Deal)

By Columbus International,25 March 2024

In a strategic move that underscores shifting dynamics in New York City’s retail real estate landscape, Kim Kardashian‘s apparel empire, Skims Body, has secured a coveted lease for a sprawling 20,000-square-foot space on Fifth Avenue. This development comes at a fraction of the cost compared to its predecessor, signaling a savvy business maneuver amidst a changing market. According to reports from The Real Deal and Crain’s, Skims Body inked a deal with Oxford Properties and Crown Acquisitions for at least 75 percent below the previous tenant’s lease rates. The stark difference in pricing was highlighted in a recent report by Fitch Ratings, which also noted adjustments in the mortgage structure backing the Skims space and other properties in the vicinity. While specific lease details remain undisclosed, industry experts speculate that Skims Body’s rental rates could be well below the $770 per square foot paid by Versace, the former occupant, as reported by KBRA in 2022.

This suggests that Skims Body is likely paying under $200 per square foot—a substantial reduction reflective of evolving market dynamics. Kim Kardashian’s multifaceted entrepreneurial prowess likely played a pivotal role in securing such advantageous terms, especially as neighboring retailers recalibrate their strategies and vacate Fifth Avenue addresses. This vacancy trend has empowered companies like Skims Body to negotiate from a position of strength, capitalizing on prime retail spaces in iconic locales. Oxford Properties reports full occupancy for Olympic Tower’s retail segment, constituting 28 percent of the property but contributing over 60 percent of total rental revenue. Negotiations are also underway for office space within the same complex, showcasing sustained investor interest despite recent market adjustments. Institutional investors, who have held the mortgage since 2017, recently witnessed Fitch downgrading seven classes associated with the $760 million loan, due for maturity in 2027. The transition in tenant occupancy has coincided with a 13 percent dip in cash flow, now at $56 million annually, since the mortgage’s initial sale. Skims Body is gearing up for a grand opening slated for February, enhancing its brand presence with a high-profile physical retail outlet.

The company’s meteoric rise is mirrored in its valuation, which surged to $4 billion last year—a staggering $800 million leap from 2022 figures. Versace’s gradual exit from the space since 2018, initially signaled by its subleasing efforts, underscores the dynamic shifts reshaping New York’s retail real estate narrative. As Kim Kardashian’s entrepreneurial ventures continue to make waves across industries, Skims Body’s strategic real estate play exemplifies a nuanced understanding of market opportunities amid evolving consumer preferences and economic landscapes. This move not only solidifies the brand’s physical footprint but also underscores the enduring allure of iconic retail addresses amidst transformative market forces.

Photo credit: Skims

Record number of cash offers show New York property is only for the rich

By Columbus International,7 March 2024

The latest data reveals a striking trend in Manhattan’s real estate landscape: a surge in cash purchases accounting for over two-thirds of home sales last quarter, marking a record high. The driving force behind this shift is the soaring mortgage rates, which have soared to around 6 per cent, dissuading all but the wealthiest buyers from taking on loans.

Pamela Liebman, CEO of Corcoran, a prominent real estate brokerage, highlighted this phenomenon, stating that nearly 70 per cent of Manhattan properties were acquired without mortgages in the final quarter of 2023, a significant leap from the 55 per cent seen in the same period in 2022. High mortgage rates are creating a significant barrier for potential buyers without substantial financial resources, leading many to opt for renting instead. Corcoran’s report further underscores this trend, indicating a 4 per cent increase in new leases in Manhattan and Brooklyn in January 2024 compared to the previous year, alongside a record median rent of $3,950.

The reluctance to incur mortgage debt has led to a “void in the middle” of the property market, with affluent buyers dominating while those unable to pay cash face challenges amid escalating rents. The median sales price for Manhattan apartments reached $1.15 million in the fourth quarter, up 5 per cent from a year earlier, approaching the record high of $1.25 million set in the second quarter of 2022. However, the pace of buying has slowed, with prime properties lingering on the market for extended periods, contrasting with more affordable markets like Charlotte, North Carolina, where homes sell rapidly.

Despite a slight uptick in transactions in January, Thomas Ryan, a property economist at Capital Economics, notes that the US housing market remains stagnant, with transactions significantly below the 2010s average. Erin Sykes, a real estate agent and economist, attributes the surge in cash purchases to buyers seizing opportunities amid rising mortgage rates, viewing them as an advantageous time to strike deals. The challenges facing buyers in New York are further compounded by a severe housing shortage attributed to regulations limiting rent increases and the expiration of tax incentives for new construction projects. Mayor Eric Adams has proposed converting obsolete office buildings into residential towers as a potential solution, although this presents technical and cost-related hurdles.

The supply crunch has significantly reduced vacancy rates, plummeting from nearly 4.5 per cent in 2021 to 1.4 per cent, exacerbating affordability concerns and pricing many out of the market. As Liebman aptly summarizes, New York’s housing market is currently facing rough terrain, posing significant challenges for aspiring buyers.

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