Residential real estate market still booming

Real Estate Weekly, Feb 24, 1999 by Igal J. Feibush

The economic boom in New York City and the United States has drastically improved the state of residential real estate in New York City and the Tri-State region. With corporations moving into and expanding in New York City, employees transferring here by the thousands, and with commercial real estate surging, residential real estate is soaring to new heights.

For the past eight months, residential vacancy rates have stayed at an all-time low of less than one percent, with no signs of change on the horizon. Average asking rents experienced tremendous growth in 1997 and the beginning of 1998, rising as much as 30 percent in some neighborhoods. Although we will continue to see asking rents rise inch higher, it will be at a much slower pace than we have seen in the previous 18 months.

On the sales front, the real surge has yet to begin. Interest rates continue to drop, making ownership more desirable than renting for many people. While many buyers will be driven out to the suburbs and surrounding regions because of the price increases in Manhattan, we still expect that for every person moving out of the City, four people will move in.

Acquisitions of residential real estate parcels have risen substantially, as more and more developers get into the act. All areas of residential construction are hot, including office to residential conversions, major upgrades and new construction. In line with this activity, construction costs on large-scale projects have increased. With only a handful of major construction firms able to handle large projects, construction costs have jumped. Two years ago, these same construction firms might have had only two projects in the works. Now, with every developer vying to build, the same firms may have dozens of projects on line and are in the position to ask and receive higher fees. However, on smaller scale construction projects, costs have dropped as more and more small construction firms vie for business, making small-scale upgrades extremely profitable to developers.

Although almost every area in the City should see some type of residential development in the coming months, Manhattan's "Wild West" - the West 30's and 40's - will be the recipient of most major development. With the huge success of new residential buildings, such as The Lofts at Infinity Court at 545 West 34 Street and The New Gotham at 520 West 43rd Street, and the continued improvement of existing residential buildings, the West Side is ripe for development. With developers such as Larry Silverstein scheduled to build large residential projects and the continued revitalization of Times square, smaller tenements will be torn down and built anew in the mad rush to develop the area. In about three years, the West Side will be indistinguishable from Midtown East neighborhoods such as Murray Hill and Gramercy Park, and will reap all of the benefits of a residential neighborhood, including restaurants, theaters and retail shops.