3 Biggest Threats That Could Derail NYC Mulifamily
"Out of control" construction costs and astronomical land prices are having a negative impact on development, said Continuum chairman Bruce Eichner at Bisnow's 6th Annual Multifamily Summit at the New World Stage yesterday. It's one of three key issues threatening the bull market.
1. High Barrrier to Entry
As construction costs—up 20% to 30% from last year and climbing—and other costs rise, the end result is apartment sales prices that are $2k/SF, says Bruce (Bruce is bookended by Witkoff Group president Scott Alper and TOWN Real Estate SVP Anna Zarro). And for the first time, over 50% of construction jobs in the city are non-union, he says, noting that he thinks JDS managing partner Michael Stern (also a panelist) had the right idea by running an open shop at 111 West 57th St. (That idea didn't sit well with the Building and Construction Trades Council, whose members protested outside our event and from the audience.)
2. Uncertainty Over Regulations
Uncertainty around the 421a tax abatement, however, is the biggest threat to development right now, according to Michael (snapped with Lightstone Group president Mitchell Hochberg). Developers can adjust to any regulatory climate but they need to know what they’re in for, Scott agrees. “Until they figure it out you sort of can’t underwrite a deal,” he says. Right now the program requires 20% affordable units for most projects, but Scott says not knowing whether that number’s going to jump to 30% or some other number adds up to a logjam in the development pipeline. Bruce says he thinks uncertainty over regulations will cost the city hundreds of millions in development money from China because understanding the regs and what could happen with them is so tough.
3. Middle-class Housing
Within the next year, Bruce says, he wants to see someone figure out a way to house the middle-class workforce, which is priced out of market-rate housing. Scott (pictured) points out that land costs so much that the city may have to allow some of its land to be used in order for the dollars and cents to add up for a developer. But Mitchell says the plan for how to do it won’t be cooked up by the city. “It’s coming from someone in this room,” he says.
Here we snapped event sponsor Caesarstone’s Eric Heywood, Charline Madnik, Danniel Fuchs and Eric Heywood.
Left to right: event sponsor Besen & Associates’ Ron Cohen, Jared Rehberg, Marci Soifer and Joanna Choinska.
Event sponsor Cybex business development director Brad McLam with Gym Source’s Thomas Jackowski.