After Years Of Brooklyn Apartment Oversupply, Construction Is Down And Rents Are Up
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The Brooklyn rental market, which has seen a record influx of new rentals in recent years, is starting to stabilize.
Facing stiff competition, many landlords were offering free rent and other concessions to get leases signed. But the number of new units becoming available started to slow down last year, and this year has seen a sharp decline, according to Nancy Packes Data Services.
“It’s welcome news to everyone that we were able to absorb what was a 50-year high in supply and keep rents growing — it’s a testament to the strength of the market,” said company President Nancy Packes. “We think the majority of supply is now behind us, so it’s very favorable for the rental market.”
More than 3,000 new market-rate Brooklyn rental units became available in 2015, according to Packes’ data, and that figure climbed to hit almost 6,000 in 2017.
Last year, that number decreased to slightly more than 4,600. During the first eight months of 2019, just over 1,600 new units have come onto the market in the borough, Packes said in an interview. The company predicts another 574 market-rate units will be added by the end of the year.
“We’ve been saying this for a long time … The big glut of supply is behind us,” she said.
Brooklyn's apartment market, as well as other big issues like rezoning and office leasing, will be discussed at Bisnow’s Brooklyn State of the Market event Sept. 10.
The median rent in Brooklyn hit $3K per month in July, which is a record, according to figures from appraisal firm Miller Samuel. The rate of concessions also went down: 34% of leases in July featured some form of incentives, which was down from 41% in July last year.
“It’s been a great summer,” said Andrew Barrocas, the CEO of residential brokerage MNS, who will be speaking at the Brooklyn event next month. “There is still a lot rental product, but there is still a lot of demand.”
For some, the billowing supply of Brooklyn rental product, and the headlines that documented it, were unsettling. In 2016, there were 19 residential towers just finished or being built along a 10-block section of Flatbush Avenue from Barclays Center north to Myrtle Avenue, The New York Times reported at the time.
“We were all concerned,” said Steve Kliegerman, the president of Halstead Property Development Marketing.
Data from his firm shows there are nearly 12,000 rental units in the pipeline in the borough, which Kliegerman believes will be absorbed over the next two years.
“The developers were on the right side, and rents are going up," he said. "It’s a bit of a surprise for some of us.”
Not everyone was taken aback. Doug Steiner, whose Steiner NYC developed the Hub, a 55-story rental tower at 333 Schermerhorn St., said he was never worried about an oversaturated market.
Steiner said the Hub, which started leasing in spring 2017, is almost totally full. A one-bedroom there is now on the market for $4,156 a month and no broker fee, according to StreetEasy.
“If we were the only building in the market, I would be more worried because it would not be an established location for people to live in,” Steiner said of competition, though he believes when he started development on the building, institutional capital was still wary of Brooklyn.
“The pipeline of development when we started was not a surprise or anything I was worried about,” he said. “The concessions [at the building] were half of the competition, and our rents were higher.”
Steiner, who owns Steiner Studios at the Brooklyn Navy Yard and has also developed the first Wegmans supermarket in New York City, said the borough will be a good place to develop for “decades to come.”
The jump in rental development in Brooklyn came from a culmination of factors, experts said: rising land prices in Manhattan, the expiring 421a program (which later became Affordable New York) and a pullback on banks' willingness to lend on condominiums projects.
New York added 820,400 jobs from 2009 to 2018, according to the New York State Comptroller, and advocates of the borough say Brooklyn's residential market will benefit from the city's increasing population.
While there is still a significant development pipeline in the borough, each neighborhood has its own set of supply and demand dynamics.
“There is a lot of supply coming to the market, but I feel it is generally in a few areas,” Moinian Group Director of Residential Properties Jacob Entel said.
Moinian has joined with Bushburg Properties for its first development in Brooklyn, a 467-unit building at 123 Linden Blvd. in Prospect Lefferts Gardens, known as PLG. Rents will start at $2,300 for a studio, Entel said, and the building will launch its leasing efforts next month.
While he acknowledged the building will face competition, Entel believes PLG’s point of difference will be a suite of amenities in an area where there has been little ground-up rental development: a Downtown Brooklyn building, he said, without the Downtown Brooklyn price tag.
“Williamsburg doesn’t have great transport, Downtown Brooklyn is pricey,” he said. "When we built [Manhattan luxury rental building] Sky, people were saying the same thing — but we filled it up. And when you build a nice product, people are willing to pay for it. New York is always growing.”