Real Deal: "Brooklyn's inventory balloon" suggests residential glut; this adds doubts to Pacific Park progress

Wait a second, maybe the forecast for Atlantic Yards/Pacific Park--at least the market-rate units--is a little more grim that I suggested in my 2019 preview. 

An article in the January 2019 issue of The Real Deal, Brooklyn's inventory balloon, cites a glut of inventory in the borough, which is leading to creative and/or aggressive sales tactics. (One example: a purported one-day 20% sale at 550 Vanderbilt, as I reported for The Bridge.)

From the article:

And over the next three years another large wave of residential projects is slated to come online, including Two Trees’ Domino Sugar project; Greenland USA’s 810-unit rental 18 Sixth Avenue, which is part of the Pacific Park megadevelopment; RedSky Capital’s 470-unit 18 India Street in Greenpoint; and 9 DeKalb, a supertall tower with 400-plus apartments that JDS is also developing. Those projects join large developments that are already selling, like Extell Development’s 458-unit Brooklyn Point project and Tishman Speyer’s 481-unit 11 Hoyt.

And that means it could take three years to fill a building with tenants or owners. Note that 18 Sixth should be at least 25% affordable, with the level of affordability unclear.

What's next? Can 2025 deadline be met?

Remember, two other developers leased parcels from Greenland Forest City Partners (essentially Greenland USA). If the Brodsky Organization does start their building (B15) this  year, the glut suggests that TF Cornerstone, developer of the other two buildings planned, B12 and B13, might plausibly wait a bit. (Here's a map of the project site.)

If they need time, Greenland should be glad they have until 2035 to finish the full project, which involves six parcels over the railyard, plus Site 5.

But the deadline for another 1,468 affordable units is 2025.

But if affordable units are going to come as 25% or 30% of buildings with otherwise market-rate units, how do the numbers work? That's a question we haven't heard answered.

In the near term, the rental market is particularly tough, with some 26,581 units in the pipeline, part of an estimated 35,450 units by 2021, according to The Real Deal.

Note: I'm assuming most, if not all of these, are market-rate. In other words, the cost of the land and construction is such that the apartments would be affordable to only a fraction of people, even as there's a huge need for many more lower-cost units.

And land prices are rising. According to the article:

In 2017, the average price per buildable square foot in Downtown Brooklyn was $390 for residential projects. The surrounding area — which includes Park Slope and Clinton Hill — averaged $387, according to TerraCRG.