Never say die when it comes to New York real estate.
All that national jabber about a housing-market meltdown fell flat in Manhattan, said Dottie Herman, president and CEO for Prudential Douglas Elliman, a Manhattan real estate brokerage firm.
A crash? Not even close, Herman said. “I would just say that we might have blinked.”
Herman and other Manhattan real estate luminaries detailed the real estate industry’s growth and progress and praised the city’s leadership during a session at Real Estate Connect NYC this week that focused on future trends in area real estate.
“Most of the reporters are reporting very negative things because they ‘cookie-cuttered’ the whole country,” Herman said. New York isn’t like the rest of the country, though, and the market there is doing just fine, she said. Million-dollar bonuses on Wall Street, an influx of foreign purchasers and city leadership have contributed to the strength of the industry, she said.
World Trade Center site developer Larry A. Silverstein, another panelist, noted that areas around Wall Street that were formerly dominated by office buildings are converting in rapid succession to residential buildings. “We can see the effects of the gentrification — the different parts of the different neighborhoods coming alive all over again,” he said, adding that transportation systems have been improving to accommodate the population growth in the area. The expansion and enhancements, he said, “is just nothing short of remarkable.”
He is definitely putting his money where his mouth is. Lots of it. Silverstein is paying $8 billion to rebuild office space at the World Trade Center site, and the total development of the site will cost $16 billion — or $1 billion an acre, Silverstein said.
“People don’t fully appreciate what is about to transpire down in Lower Manhattan. We’re going to see massive amounts of new housing created in that part of town. (It is) coming alive such that it hasn’t been for many years. At the end of five years we’re all going to look back and say, ‘This is really extraordinary,’ ” Silverstein said.
While new housing units are coming online closer to job centers, he said affordable rental housing is sorely lacking. “There’s a terrible need for rental housing in the city today, especially for middle-income people.”
Steven Spinola, president of the Real Estate Board of New York, the largest real estate trade group in the city, said construction costs are at an all-time high, though there are programs that provide incentives to developers who build middle-income and low-income housing. Those programs don’t always work, though, in a city with escalating prices. “Developers feel that they can get more from the market rate than they can from middle-income and low-income (projects),” he said.
“The reason for not building enough middle-income housing is because the return isn’t there.” Land costs alone can range from $100 per square foot in the outer boroughs to $200 to $400 per square foot in Manhattan, he said. “So the numbers are extraordinary.”
But the industry is not moving to New Jersey anytime soon, he added — “we’re not going to pick up buildings and move to a less expensive place.”
Spinola offered a pitch for the public benefits of eminent domain — which has been a hot topic since the U.S. Supreme Court’s controversial decision on the Kelo v. City of New London case in 2005. “The issue of eminent domain, which has been blasted around the country as something terrible — you would not have Lincoln Center today if you did not have eminent domain, you would not have the new Times Square … if it were not for the ability by government to act reasonably and professionally in helping to change neighborhoods and to have growth take place.”
He added, “It is not just that some little old lady is losing her home — usually it is very much tied to significant benefits for the city and for lots of people.”
Despite affordability problems, there is still demand, Spinola said, as the city is growing in population and expected to add another 1 million residents by 2020. “The real estate industry in New York City is tied to how well the city is doing. The city has never been doing better than it is right now, and as an industry (we’ve) really never done any better.” The city and its leaders have proved that the city is manageable and controllable, he said.
Growth is carrying the city’s residents in new directions, and neighborhood boundaries and the way people think about neighborhoods is fundamentally changing, said Diane M. Ramirez, president of Halstead Property LLC, a Manhattan brokerage firm. The company and its real estate salespersons have likewise expanded their boundaries, she noted.
In past times, prospect buyers “would give you a six or eight-square-block area that they want to live in — now the customer says, ‘I’ll live anywhere in Manhattan,’ ” she said. “The thought of neighborhoods is just totally changing. Whole boroughs are going to be neighborhoods. It’s like Manhattan, in my opinion, is a neighborhood now. It’s no longer little sections.”
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