Tuesday, August 30, 2016

A glut in Brooklyn rentals means... some impact on both market-rate and (more expensive) affordable AY/PP units

Well, we've heard executives from Forest City Ratner parent Forest City Realty Trust acknowledge that the glut of new market-rate units in areas like Brooklyn say that new units "will take time to absorb."

Still, CEO David LaRue said earlier this month, mixed-used projects such as Pacific Park Brooklyn offer assets and, given that the peak of delivery will be this year, additional supply will be absorbed, and the balance will "return to the norm."

That raises a question, though, about how easy it will be to rent market-rate units in 461 Dean Street, the troubled modular building, as well as higher-end affordable units in both 461 Dean and the "100% affordable" 535 Carlton building, both of which are opening in less than six months.

The overview

In ‘The Market Is Saturated’: Brooklyn’s Rental Boom May Turn Into a Glut, the New York Times's Charles Bagli reports today:
There are 19 residential towers either under construction or recently completed along the 10-block section of Flatbush stretching from Barclays Center north to Myrtle Avenue. When all of them are finished, they will have added more than 6,500 apartments — overwhelmingly rentals — to New York City’s housing stock. Another four buildings on Myrtle Avenue will add almost 1,000 more units.
There are so many new apartments in the neighborhood — roughly one-fifth of all rental units expected to become available in the city in 2016 and 2017, according to Nancy Packes Data Services, a research firm — that the Brooklyn rental market seems poised to zoom right past boom, to glut.
“The market is saturated,” said Sofia Estevez, executive vice president at the developer TF Cornerstone, which will begin offering apartments in a 25-story, 714-unit rental building at 33 Bond Street next spring. “I think it’ll take a couple years to stabilize.”
That means effective rents, with discounts, at $3,375/month for a one-bedroom, which is hardly cheap but below market.

The Pacific Park comparisons
Rents at 535 Carlton

The most expensive affordable units at 535 Carlton--half the building--will rent at $2,680/month for a one-bedroom, with smaller and larger apartments at commensurate rents.

The most expensive affordable apartments at 461 Dean--10% of the building, or 20% of the subsidized units--will rent at $2,504 for a one-bedroom. (Actually, there's a disproportionate number of two-bedroom units in that upper-affordable cohort.)

LaRue said regarding affordable units that demand "is not an issue, so we see that being absorbed very quickly."

I think it may be more complicated, at least for the higher-end affordable units. Still, they haven't started advertising the way the developers of upper-end affordable units at Hunters Point South did.

The bigger question, in my mind, regards the market-rate units at 461 Dean, given the building's history of leaks and mold, as well as its proximity to the Barclays Center (which brings idling trucks and arena crowd surges). Will they rent at the same rates as the other new buildings up Flatbush Avenue?

The larger context and the AY/PP comparison

Bagli quotes appraiser Jonathan J. Miller as saying the supply is skewed to upper-end units of the new supply is coming.”

And Batli gets to affordable units, albeit broadly:
But nearly one-quarter of the apartments — a total of 1,654 units — in the Flatbush corridor are reserved for low-, moderate- and middle-income tenants under the city’s 421-a housing program, which offered developers generous property tax breaks for setting aside 20 percent of a project’s apartments for such tenants.
...Roughly half of the subsidized apartments are connected to the first four buildings now under construction at the vast Pacific Park project next to Barclays Center and just south of Atlantic Terminal. That complex benefits from an enormous public investment.
Some housing advocates, however, say there are still not enough apartments for the low-income tenants being driven out of the area by gentrification. They point out that the developer Forest City Ratner got 80,000 applications for 181 subsidized apartments at 461 Dean Street in Pacific Park.
(Emphasis added)

There's no doubt there are not enough low-income units, but the better context for that is the fact that the "100% affordable" 535 Carlton has 65% middle-income units. Any building with affordable units these days gets huge numbers of applications, because it's simple for those already in the city's Housing Connect system to reapply to the next building for which they might qualify.

The spur to the building?

Bagli writes:
The boom in this corner of Brooklyn, which has one of the biggest transit centers in the city, owes a lot to the city’s 2004 rezoning of the downtown area to encourage the development of office towers and some residential buildings that could compete with Jersey City for back office operations. At first, there was little activity because the city was offering tenants and developers enormous subsidies to rebuild and move to Lower Manhattan after the Sept. 11 terrorist attacks. But the creation of an arts district around the Brooklyn Academy of Music and the Barclays arena at Flatbush and Atlantic Avenues, and the adjoining Atlantic Yards development, now known as Pacific Park, inspired interest in the area.
I don't think so. The boom began well before then 2012 opening of the arena, of course, and the arts district didn't really bloom until this decade. Meanwhile, the Brooklyn Paper was writing 8/19/06, before Atlantic Yards was even approved:
“We are transferring what we are doing in Manhattan to Brooklyn,” said the New York-based architect [Ismael Leyva], who is the designer of adjacent twin luxury towers on Gold Street, which will stand 40 and 35 stories, and “two or three” other buildings already in the works for the short stretch from the Manhattan Bridge to DeKalb Avenue.
The area was upzoned two years ago to encourage the kind of development that Leyva and others are rushing to begin. As The Brooklyn Papers reported last month, there are at least eight towers — some office buildings, some residential, but none of them inexpensive — in various stages of development.
“This whole area is going to feel like Manhattan,” Leyva said. “The aesthetics are changing. Everything is changing. It’s new.”

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