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New York City Subway Ridership Highest in 65 Years

This week we’re highlighting the jump in subway ridership and plans for an expanded ferry service, the increase in tech jobs, and other trends in the real estate industry.

More than 1.75 billion people rode the subway in 2014, a 2.6 percent annual increase and the highest level since the post-World War II boom more than 65 years ago, according to the MTA. There were 5.6 million riders on an average weekday, and 6 million riders on an average weekend last year. The L line in Brooklyn saw average weekday ridership rise by 5,600 customers, a 4.7 percent increase. On an average weekday on the L line, the Bedford Avenue station in Williamsburg had 27,224 riders, more than any other station on the L, and ridership increased by 11.5 percent at the Bushwick Avenue-Aberdeen station, by 9.9 percent at the Wilson Avenue station, and 9.3 percent on the Jefferson Street station. Ridership on the M line was up 6.2 percent at the stations between Marcy and Metropolitan Avenues; in Queens, at the Vernon-Jackson Avenue 7 station, weekly ridership grew by 12 percent or 1,500 customers a day, and at the Court Square E, G, M, and 7 station ridership rose by 9.7 percent or 2,000 customers. In the Bronx, the 2 and 5 lines grew by 3.7 percent or nearly 4,800 riders a day, and the Lenox Avenue 2 and 3 lines in Harlem increased by 3.7 percent, or more than 2,100 customers a day.

The NYC Economic Development Corporation has issued an RFP for an operator to expand the existing East River ferry routes and provide service to new landings in Astoria and the Rockaways in Queens, South Brooklyn, the Lower East Side, and the Soundview section of the Bronx. The Citywide Ferry Service will build on the success of the existing East River Ferry, and support growth across the city by improving the infrastructure. Following the large-scale roll out of expanded service in 2017 and 2018, the city will revisit other route options, such as a route to Stapleton and Coney Island. Since its inception as a pilot program in 2011, East River Ferry service has exceeded initial ridership projections, hitting its total three-year ridership goal of 1.2 million in its first 18 months of service, and continuing to grow in popularity since. To date, over 4.3 million passengers have taken trips on the East River Ferry.

Between March 2014 and March 2015, companies like Google, Yahoo, and LinkedIn helped New York City gain more than 5,000 tech jobs, a 9.2 percent year-over-year jump, Crain’s reports. The tech sector, which has grown from 37,000 jobs in 2006 to 67,400 jobs in 2015, was the fastest growing industry in the city last year behind construction, arts and sports, and home services. Tech employees are among the city’s highest paid workers with average salaries second only to Wall Street.

More than 88,000 people have applied for 55 affordable units at Extell Development Company’s building at 470 West 62nd Street on the Upper West Side, the NY Times reports. Applicants with household incomes of $30,240 to $50,340 are eligible for the apartments that will rent for $1,082 for a two-bedroom, $895 for a one-bedroom, and $833 for a studio. The city will begin screening applicants next month, the top applications will be reviewed, about 2,000 interviews will the conducted, and 55 households will be selected to move in beginning in August. The project has been criticized because Extell designed an entrance for the lower-cost units that was separate from the high-priced condo building, which is subsidizing the cost of the affordable apartments. So far 219 luxury condos have sold at 50 Riverside Boulevard, with some going for as much as $25 million. Extell’s Gary Barnett said the demand for the affordable units shows that the so-called poor door issue was a “made-up controversy.”

Private equity firms with real estate funds of more than $1 billion accounted for 64 percent of all the capital raised so far this year, while midsize funds between $500 million and $1 billion accounted for 17 percent, the WSJ reports. The shift reflects that pension funds, endowments, and other large institutional investors are seeking higher returns by putting more cash into a core group of larger, high-performing funds. Blackstone Group LP raised $14.5 billion for its recent fund, Starwood Capital Group raised $5.6 billion, and Lone Star Funds raised $5.5 billion. Global closed-end funds have more than doubled from $46.8 billion in 2010 to $97.7 billion in 2014, but are still below the 2008 peak of $137.5 billion.

Four New York City firms have been named to Affordable Housing Finance’s list of Top 50 Affordable Housing Developers of 2014. The firms include Dunn Development Corp., No. 19 with 358 starts and 221 completions; L+M Development Partners, No. 26 with 239 starts and 553 completions; Omni New York, No. 35 with 176 starts; and the Arker Cos, No. 41 with 156 starts and 65 completions.

City Council Speaker Melissa Mark-Viverito’s office is considering legislation that would decriminalize public consumption of alcohol, public urination, bicycling on the sidewalk, being in a park after dark, failure to obey a park sign, littering, and unreasonable noise, making them civil charges like a parking ticket instead, the Daily News reports. Tickets would be issued for an appearance in one of the administrative courts but police officers could not make arrests. Police Commissioner Bill Bratton has previously said he didn’t support civil summonses for quality of life violations because he thought they would be ignored. The police commissioner has argued that that the broken windows policing, which focuses on quality of life violations, contributes to a safer city and helps deter serious crime.

City officials celebrated the grand opening of the Morris Court Apartments, two connected six-story buildings with 201 affordable units at 253 East 142nd Street and 250 East 144th Street in the Mott Haven section of the Bronx, Multi-Housing News reports. Residents will include families earning up to 60 percent and 80 percent of the Area Median Income as well as formerly homeless individuals and families. Morris Court is the first completed affordable housing project made possible by the 2009 Lower Concourse Rezoning, which allowed housing development in the area, which was formerly zoned for industrial use and included a mix of four to 12 story loft buildings and lower-rise industrial and automotive properties.

Long Island City condo prices averaged $1,000 per square foot in the first quarter with the highest price reaching $1,153 per square foot, according to Modern Spaces’ LIC and Astoria Report. The average price of a one bedroom in Long Island City is above $800,000 and the average price of a two bedroom is above $1.1 million. As the supply of rental apartments in Long Island City increases, prices are leveling out with luxury rentals averaging $52 per square foot and $4,029; walk-ups averaging $42 per square foot and $2,458; and elevator rentals averaging $43 per square foot and $2,963.

Only 10,243 Manhattan apartments were available for sale in the first quarter, a record low, and inventory remains tight, StreetEasy reports. Although inventory generally increases slightly in the first quarter of the year from the previous quarter, this year the supply was 0.6 percent less than last quarter and 2.3 percent lower than the first quarter last year. Year-over-year, sales volume for condos and co-ops rose 2.6 percent, and the median sales price increased 5.2 percent year-over-year to $946,000.

New York City Multifamily Trading Light In February

New York City multifamily trading was light in February compared to the previous month and the previous year, but preliminary figures for March are strong and the first quarter volume should be in line with last year’s activity, according to Ariel Property Advisors’ Multifamily Month in Review for February.

Multifamily Month In Review

In February 2015, New York City saw 56 transactions comprised of 83 buildings totaling $580.822 million in gross consideration, this represents a 19 percent decrease in transactions, a 13 percent decrease in the number of buildings traded, and a 25 percent decrease in dollar volume, compared to the previous month, which saw 69 transactions, 95 buildings trade, and dollar volume of $778.596 million. February activity also fell below February 2014, which saw 54 transactions, 152 buildings trade, and dollar volume of over $1 billion.

“The lack of large, institutional level multifamily deals in February resulted in a decline in dollar volume during the month,” said Shimon Shkury, president of Ariel Property Advisors. “However, since we’ve already seen several nine-figure multifamily portfolio sales in March, we expect this pause in the market to be short-lived.”

The following is a breakdown of the February 2015 volume by submarket:

Manhattan. Manhattan saw light trading for the month with nine buildings trade across seven transactions totaling $282.8 million in gross consideration. One notable trade was a 92-unit elevatored rental building located at 330 East 63rd Street that sold for $58 million, or $721 per square foot. Following a common trend seen throughout Manhattan, the new ownership plans to convert the units to condominiums.

Brooklyn. Brooklyn saw 20 transactions comprised of 31 buildings totaling $136.258 million in gross consideration, making it February’s most transactional borough. The largest transaction took place in East Flatbush, where Clarendon Gardens, a seven-building complex totaling 195,000 square feet, sold for $33 million. The site also offers almost 24,000 square feet of additional air rights. Also of note was the sale of 142-44 Decatur Street, a 22-unit, mixed-use walk-up in Bed-Stuy, which traded for $8 million or $536 per square foot. This is double the $4 million price paid in 2013, a testament to Brooklyn’s continued growth and the seller’s successful repositioning strategy.

Queens. Queens had a relatively active month with 18 buildings trading across eight transactions totaling $63.755 million in gross consideration. Two sales demonstrate the strength of the Queens market going beyond Astoria and Long Island City. First, 71-13 60th Lane, a new construction elevatored building located in Ridgewood, sold for $21 million, or $390 per square foot. In Woodside, a 42-unit walk-up building located at 43-05 65th Street sold for $8.4 million, which translates to an impressive 3.64 percent cap rate.

Northern Manhattan. Northern Manhattan had a quiet month consisting solely of single transactions as eight buildings traded across eight transactions totaling $54.575 million in gross consideration. A mixed-use elevatored building located on the corner of 126th Street and Lexington Avenue sold for $12.6 million or $358 per square foot. Up in Hamilton Heights, a mixed-use walk-up building located at 1774-1776 Amsterdam Avenue sold for $9.95 million, or $465 per square foot.

The Bronx. The Bronx saw 13 transactions consisting of 17 buildings totaling $43.435 million in gross consideration. A mixed-use building located on the corner of Sedgwick Avenue and Fordham Road sold for $10.5 million, or $153 per square foot. In Crotona Park, a walk-up building consisting of 25 units located at 1468 Bryant Avenue sold for $3.15 million, or $190 per square foot – demonstrating the South Bronx’s hot market.

For the six months ended February 2015, the average monthly transaction volume remained steady at 66 transactions per month. The average monthly dollar volume also remained relatively steady at $1.234 billion.

The multifamily transactions included in the analysis occurred at a minimum sales price of $1 million, with a minimum gross area of 5,000 square feet, and with a minimum of 10 units.

More information is available from Mr. Shkury at 212-544-9500, ext. 11, or sshkury@arielpa.com. For a copy of the report, please see http://arielpa.com/newsroom/report-MFMIR-Feb-2015.

Our Observations For the Week

Landmark districts have created barriers to the construction of new housing, including affordable apartments, in all five boroughs, a REBNY study concludes. The study reviewed a 10-year-period and found that less than one half of one percent of the new housing created in the city was in landmark districts. Out of the 206,819 total new housing units constructed citywide from 2003 to 2012, 17 percent, or nearly 35,000 units, were affordable. Only 0.29 percent (100 units) of the affordable units were built on landmarked properties. Of the 100 units, 95 were built in one project at Cedars/Fox Hall in the Bronx. The other five units were part of a project on Historic Front Street, built on land sold by the city. There were no new units of affordable housing constructed on landmarked properties in Brooklyn, Queens, or Staten Island.

City officials announced the launch of the Jamaica Now Action Plan, which outlines 21 strategic actions to revitalize Jamaica, Queens, and transform it into a thriving residential and commercial neighborhood. Queens Borough President Melinda Katz said, “The city cannot be clearer about our strong commitment to revitalize Jamaica’s downtown core and make it even more attractive to investors, even more livable for existing residents and businesses. It truly is one of the most strategically positioned, lowest-priced real estate left in town.”

New Yorkers are discovering Staten Island and developers are following with plans for rentals, condos, and retail stores, according to a NY Times profile of the borough. Most recently, developer BFC broke ground on the 340,000-square-foot Empire Outlets, an outlet mall and entertainment development that is scheduled to open next year in the St. George section of Staten Island. Also planned for St. George, a 630-foot-tall Ferris wheel called the New York Wheel, and Lighthouse Point, a mixed-use development on the former Lighthouse Service Depot campus. On the waterfront in the Stapleton section of Staten Island, 571 units in the first phase of a $250 million mixed-use project that will have a total of 900 rental apartments is scheduled to open this fall.

Chinese immigrants will soon overtake Dominicans as the largest foreign-born group in New York City, the NY Times reports. From 2000 to 2013, the city’s foreign-born Chinese population jumped 35 percent to 353,000, from about 262,000. During the same period the foreign-born Chinese population in Brooklyn increased 49 percent to 128,000, from 86,000. Although Sunset Park was Brooklyn’s first Chinatown, Bensonhurst with a Chinese-born population of 31,658 now has the largest number of Chinese immigrants of any neighborhood in the city. Satellite Chinatowns also can be found in the Brooklyn neighborhoods of Bay Ridge, Borough Park, Coney Island, Dyker Heights, Gravesend, Homecrest, and Marine Park.

Sites in Queens and the Bronx Targeted for State Economic Development Program

This week we’re highlighting Governor Cuomo’s announcement designating sites in Queens and the Bronx as Brownfield Opportunity Areas, the latest office and residential reports, and neighborhood news.

Governor Andrew M. Cuomo announced that areas along the Harlem River waterfront in the South Bronx, and near the rail station in Jamaica, Queens, have been designated Brownfield Opportunity Areas. The 200-acre Harlem River waterfront in the Port Morris section of the Bronx contains 10 brownfields and the goal is to redevelop the former industrial corridor for mixed-income housing and commercial development; remove environmentally hazardous substances; and increase waterfront access to the Harlem River. Mayor Bill de Blasio has pledged $200 million for infrastructure improvements in the area, which is already attracting the interest of major developers. The Jamaica Brownfield Opportunity Area consists of about 132-acres with 224 potential brownfield sites and will be targeted for mixed-use and sustainable transit-oriented development in the LIRR AirTrain Station Area. Developers, property owners, and others with projects and properties located within a designated Brownfield Opportunity Area will be eligible to access additional Brownfield Cleanup Program tax incentives and receive priority and preference for state grants to develop projects aimed at transforming dormant and blighted areas.

The Department of City Planning is reviewing changes to the city’s air rights policy that could benefit landmarked structures like St. Patrick’s Cathedral, which has an estimated 1 million square feet of air rights, the WSJ reports. The current policy only allows property owners to sell rights to developers building taller structures on or across the street, which has left St. Patrick’s few opportunities to sell air because it is surrounded by office towers. As a result, The Archdiocese of New York, Central Synagogue, and St. Bartholomew’s Episcopal Church are seeking new rules that would allow them to sell their unused air rights to developers whose properties are blocks away. Revised air rights rules were part of the proposed 2013 rezoning plan for Midtown East, which was withdrawn in the waning days of the Bloomberg administration.

For the eighth consecutive quarter, average asking rents in Manhattan office buildings increased, rising 6.3 percent year-over-year to $67.62 per square foot in the first quarter, the Real Deal reports. Referring to a research report by Colliers International, the article noted that the availability rate fell to 10.7 percent, and that lease deals signed in the quarter declined 30 percent to about 8.3 million square feet.

In the first quarter, developers filed more applications for projects in the Bedford Stuyvesant section of Brooklyn, than any other neighborhood in New York City, the Real Deal reports. The 33 proposed Bed Stuy developments include a 188-unit rental at 21 Kane Place, while other projects are planned for smaller vacant lots between existing buildings and homes. The analysis found at least 103 applications for projects with 3,311 units in Brooklyn; at least 36 applications for buildings with 2,381 units in Queens; and at least 18 applications for developments with 2,089 units in Manhattan.

Community Board 8, which includes the Brooklyn neighborhoods of Prospect Heights and northern Crown Heights, voted to request that the Department of City Planning conduct a land-use study of a six-block manufacturing district between Grand and Franklin Avenues, south of Atlantic Avenue, DNAinfo reports. The board proposes changing the zoning to allow the development of denser, affordable residential buildings up to 100 feet. Currently the district includes auto shops, storage facilities, parking lots, and junkyards.

The median sales price of a home in Brooklyn increased 17.5 percent to $610,894, and the average sales price rose 10 percent to $749,269 in the first quarter of 2015 compared to the first quarter of 2014, according to the Elliman Report: Quarterly Survey of Residential Sales for Brooklyn. Year-over-year, the number of sales fell 4.1 percent to 1,507 in the first quarter, and the listing inventory rose 5.8 percent to 4,331.

In the first quarter of 2015, the median sales price of a home in Queens jumped 20.7 percent to $446,434, and the average sales price rose 14.6 percent to $492,340 compared to the first quarter 2014, according to the Elliman Report: Quarterly Survey of Residential Sales for Queens. The number of sales declined 18.7 percent to 2,567, and the listing inventory also declined to 4,695.

The median price of a Manhattan rental apartment rose 6.1 percent to $3,395 in March compared to the previous year, while the average rental price rose 4 percent to $4,126, according to the Elliman report. Year-over-year, Manhattan’s listing inventory fell 5.6 percent in March to 5,117, and the vacancy rate rose to 2.38 percent. In Brooklyn, the median rental price declined a slight 0.2 percent to $2,893, and the average rental price declined a modest 0.7 percent to $3,231 in March compared to the previous year, and the listing inventory jumped 23.9 percent to 1,852. In Queens, the median rent rose 3.7 percent to $2,952, while the average rental price declined 3.0 percent to $2,989. The listing inventory in Queens totaled 309 in March.

The historic uptown neighborhood of Sugar Hill, which was home to prominent African-American professionals, political leaders, artists, musicians, and writers during the Harlem Renaissance, has seen an influx of newcomers since 2000, according to a NY Times profile. About 12,000 people live in the area which boasts three historic districts from 145th to 155th Streets between Edgecombe and Amsterdam Avenues. Prices for the neighborhood’s four- and five-story townhouses, prewar co-op buildings, and newer condos increased by about 15 percent to 18 percent from 2013 to 2014. Studios range from $120,000 to the low $200,000s; one-bedrooms, $150,000 to $350,000; two-bedrooms, $300,000 to $425,000; and three-plus bedrooms $450,000 to nearly $800,000. Studio rentals start at $1,350; one bedrooms start at $1,500; two-bedrooms start at $1,800; and three-bedrooms start in the low $2,000s.

New York City’s Population Growing Faster than Expected

This week we’re highlighting New York City’s growing population, the Planning Department’s revised zoning proposal, updates on new developments, the latest U.S. jobs report, and sales reports for Manhattan and Brownstone Brooklyn.

New York City welcomed 52,700 new residents in 2014 and if the population continues to grow at the same pace this year, the city will meet its 2020 estimate of 8,550,971 people nearly five years early, NY YIMBY reports. In the four years between 2010 and July 1, 2014, the census shows that the city gained 315,946 new residents, bringing the population to 8,491,079. During that same period, the Department of Buildings approved only 50,000 permits for new housing units. The fact that New York City is growing faster than expected is putting even greater pressure on the housing market.

In calendar year 2014, the Department of Housing Preservation and Development financed (built or preserved) 17,376 units of affordable housing, Capital reports. Of the units financed, 11,185 were to preserve affordable housing while 6,191 units were new construction. In the Bronx, the city financed 5,518 units (3,873 preservation and 1,645 new construction); in Brooklyn, the city financed 5,191 units (2,390 preservation and 2,801 new construction); the city financed 5,021 units in Manhattan (3,555 preservation and 1,466 new construction); and financed 1,044 units in Queens (803 preservation and 241 new construction).

Speakers at a Department of City Planning hearing on a proposal to update the city’s zoning regulations accused the de Blasio administration of being influenced by REBNY and “working to make things easier for developers while demanding too little in exchange,” DNAinfo reports. The proposed zoning changes would increase the allowed building height for senior and inclusionary housing; improve exterior and interior building design, which would raise ceiling heights to 10 feet; and reduce the parking space requirement in affordable buildings. Additional written testimony about the changes may be submitted before April 6 and the public review process is expected to begin in May.

The City Planning Commission voted to rezone the Vanderbilt corridor adjacent to Grand Central Terminal and approve SL Green Realty Corporation’s application to build a 64-story office tower at 1 Vanderbilt, the Commercial Observer reports. Planning Commission Chairman Carl Weisbrod said the approval is the first phase in the plan “to revitalize East Midtown as a world-class 21st century commercial district, attract more quality jobs to New York City, and deliver vital infrastructure improvements.” As part of the agreement, SL Green will invest $210 million in infrastructure projects, including transportation upgrades. The City Council is expected to vote on the project in May.

The Whitney Museum of American Art, which is scheduled to open on May 1 along the High Line in the Meatpacking District, is just one of the new projects transforming the neighborhood, the NY Times reports. “The district’s association estimates that 600,000 square feet of commercial space will be added within three to five years, including a hotel, retail, and office space and an expansion of the Chelsea Market,” the article said. Ground floor retail space at a new 10-story retail/office tower under development at 860 Washington Street will be leased for $600 a square foot, and Samsung has leased the entire six-story building at 837 Washington Street. Construction may begin as early as next year on Pier 55, a $130 million park and performance venue on the Hudson River at West 14th Street.

Governor Andrew Cuomo announced that the 2015-16 budget passed includes support for four new Metro-North stations in the Bronx. The cost of the new line and stations is less than $1 billion, with the State investing $250 million of that funding. The new stations at Co-op City, Morris Park, Parkchester, and Hunts Point will extend rail access to over 93,000 residents living near the stations. The project also will serve one of the largest concentrations of medical facilities in the United States at the Morris Park station.

The 18-hole Trump Golf Links at Ferry Point has opened in the Throggs Neck section of the Bronx near the Bronx-Whitestone Bridge. The 192-acre, $127 million golf course was designed by Jack Nicklaus and John Sanford “in the Scottish style-without trees,” the NY Times reports. The course will be operated by the Trump Organization, which plans to start construction on a $10 million clubhouse. An official opening ceremony is planned for May.

The U.S. economy created 126,000 jobs in March, the smallest increase since December 2013, the WSJ reports. Analysts were expecting 248,000 new jobs in March, and some attributed the lower than expected number to a variety of factors-the severe winter, a temporary blip, the plunge in oil prices, which contributed to the loss of 11,000 jobs, strong dollar, and weak global economy. Average hourly earnings in the private sector rose to $24.86, and in a separate survey, the unemployment rate was unchanged at 5.5 percent.

The median sales price of co-ops and condos in Manhattan declined by 0.2 percent to $970,000 in the first quarter of 2015 compared to the same quarter last year, while the average sales price declined by 2.3 percent to $1,732,989, according to the Elliman Report. Year-over-year, the number of sales dropped 19.5 percent to 2,661, and the average price per square foot fell 7.3 percent to $1,263. In the luxury market, the median sales price fell 10.6 percent to $5,142,162, while the average sales price dropped a slight 1.6 percent to $7,270,961. Overall, luxury sales declined by 19.6 percent to 266, and listing inventory jumped 14.1 percent to 1,575. “The Manhattan housing market took a breather after two years of robust sales and price growth,” the report states, adding that pent-up demand has largely been absorbed, and that the strengthening of the dollar may “temper” international demand.

Median sales price of all residential asset classes in Brownstone Brooklyn increased 15.2 percent to $972,000 in the first quarter of 2015 compared to the first quarter of 2014, while the average sales price increased 21.6 percent to over $1.37 million during this period, according to Ideal Properties Group First Quarter 2015 Report. Year-over-year, the average sales price jumped 19.9 percent to $2,643,259, or $892 per square foot, for one- to three-family townhouses; increased 22.5 percent to $790,360, or $909 per square foot, for co-ops; and rose 14.3 percent to $981,661, or $1,006 per square foot, for condos. Of the neighborhoods analyzed, Park Slope accounted for 22 percent of all completed sales in the first quarter, more than any other neighborhood, while Williamsburg accounted for the second highest number of sales, 16 percent.

Report Examines the Economics of Mandatory Inclusionary Zoning in NYC

This week we’re highlighting an analysis of the city’s Mandatory Inclusionary Zoning program, a report on 2014 residential permits, the proposed water and sewer rate hike, more clues on the timing of interest rate increases, and updates on developments throughout the city.

Mandatory inclusionary zoning has the potential to produce affordable units in high-rent neighborhoods where market rate units produce enough income to make the trade-off financially attractive, but it may not succeed in low-income communities, according to a study released by the NYU Furman Center. Even with a generous 421-a property tax exemption, “low-rent neighborhoods-such as East New York in Brooklyn and the Jerome Avenue corridor in the Bronx-may not have sufficient market strength to justify high-density, mixed-income development without other forms of subsidy.” The report noted that if the requirements are too strict, mandatory inclusionary zoning could actually reduce the number of units produced. The analysis used the financial modeling that a developer would use to determine the feasibility of building an affordable development.

Permits for 20,329 residential units in 1,513 buildings were issued by the NYC Department of Buildings in 2014 compared to permits for 18,378 residential units in 1,383 buildings in 2013, according to a New York Building Congress analysis. Brooklyn accounted for 7,551 residential units, or 37 percent of the city’s total; Manhattan, 5,281 units; Queens, 4,900 units; the Bronx, 1,885 units; and Staten Island, 712 units. In spite of the uptick in activity, the totals were still below the period between 2005 and 2008 when the city issued permits for an average of 30,000 units annually, with the numbers peaking in 2008 at 33,170 residential units in 2,299 buildings. The report also showed that the average estimated hard cost of construction per unit reached $99,500 in 2014, an increase of $1,000 per unit from 2013.

Federal Reserve Chairwoman Janet Yellen said in an 18-page speech that policy-makers will most likely increase rates in small steps to prevent undermining the economic expansion, the WSJ reports. She said she is cautiously optimistic that the economy is improving, but wants to make sure that inflation doesn’t fall further. Inflation has been below the Fed’s 2 percent benchmark for nearly three years. Fed officials are forecasting an increase in the fed funds rate from near zero to 0.625 percent by the end of the year; 1.875 percent at the end of 2016; and 3.125 percent by the end of 2017. In contrast, rates rose to 5.25 percent in the mid-2000s, and were 6.5 percent at the end of the tech-stock boom in 2000.

The de Blasio administration is recommending that the New York City Water Board raise the city’s water and sewer rates by 3.24 percent effective July 1, the WSJ reports. If approved, it would be the lowest rate increase in a decade. The Water Board will hold public hearings in each borough before voting on the rate increase this spring. Emily Lloyd, commissioner of the Department of Environmental Protection, said the increase is needed to service the debt and invest in infrastructure improvements.

The New York State budget will include nearly $440 million over four years for services to combat homelessness, the NY Daily News reports. The city’s homeless population has risen to nearly 60,000, of which 25,000 are children, a 10 percent increase since Mayor Bill de Blasio took office. Of the total, $220 million is proposed for rental subsidies for domestic violence victims, seniors, and working families unable to afford rent; $15 million for a pilot project to prevent evictions by increasing housing allowances; $40 million for rental subsidies; $4.5 million to target runaway and homeless youth; $1 million for emergency homeless needs; $34.2 million for shelter, transitional housing, and homelessness prevention programs; and $124.5 million for a program to allow individuals to live independently in housing outside the shelter system.

The Mott Haven section of the South Bronx is experiencing the beginnings of a renaissance as restaurants are opened, buildings are renovated, and new apartments are built on empty lots, the NY Times reports. Carnegie Management owns the 95-unit Clock Tower at Bruckner and Lincoln Avenue and this summer plans to break ground next door on a 130-unit rental with an indoor pool. JCAL Development Group also plans to break ground on a residential building on Alexander Avenue. A total of 58,000 residents live in Mott Haven, which is bordered by East 149th Street, the Harlem River, the Bronx Kill and the Bruckner Expressway. More than 40 percent of the neighborhood residents live in poverty, but crime has fallen in the 40th Precinct from 70 murders in 1993 to 27 in 2001 and 7 in 2014.

Citing its architectural, historic, and cultural significance, the NYC Landmarks Preservation Commission approved the designation of the Crown Heights North III Historic District in an area from Brooklyn and Kingston Avenues to Albany Avenue, and from the north side of Pacific Street southward eight blocks to Lincoln Place. The Crown Heights North III Historic District consists of more than 600 buildings, including single- and two-family row houses, flats buildings, and apartment houses primarily built from the 1870s to the 1930s. The designation brings the total number of protected buildings and sites in the Crown Heights section of Brooklyn to 1,752, including 448 buildings and sites in the Crown Heights North Historic District, and 630 buildings and sites in the Crown Heights North II Historic District.

The MTA board voted to sell 478,000 square feet of air rights from an MTA-owned lot in Long Island City to a development group for $56 million, the NY Daily News reports. Queens Plaza Park Development, which includes Property Markets Group and Karman Hakim, plans to use the air rights to build a residential tower near 41st Avenue and Bridge Plaza North that will rise up to 77-stories and include more than 850 apartments. Without the air rights, a building with less than 40 stories would be allowed at the site. The MTA also will sell three small parcels of land on which the developers will build a public park.

The 7 line extension to 34th Street and 11th Avenue, which was originally set to open in December 2013, may be delayed again, Capital reports. In a statement, the Metropolitan Transportation Authority’s Capital Program Oversight Committee said all sides “are aggressively pursuing completion of construction and testing forecast for the end of second quarter 2015 …” However, service “may occur at a later date,” possibly the third quarter. In addition, the committee said that the Second Avenue line is on schedule to open in December 2016, but may be delayed by construction issues.

Although Chinatown hasn’t experience the level of development seen in the rest of the city that may be changing, according to a WSJ profile of the neighborhood. Luxury condos and a few hotels have opened in recent years along the neighborhood’s border with Tribeca, SoHo, Little Italy, and the Lower East Side, and some buildings have started trading within the community. New restaurants, coffee shops, art galleries, and developments are encroaching from the Lower East Side where the 1,000-unit Essex Crossing development is planned for the Seward Park area. A Pratt Center for Community Development and the Chinatown Working Group found that Chinatown is “struggling to maintain its cultural and economic identity in the face of rising real-estate values and changing demographics.” By 2011, fewer than half of the residents of Chinatown were foreign born and the white population had increased.

Manhattan Councilman Ydanis Rodriguez has proposed rezoning a 100-acre “manufacturing area” in Inwood and transforming it into a residential, commercial, and retail development, Crain’s reports. Most of the housing would be built above the MTA’s 207th Street rail yard, which is bordered by 10th Avenue, the Harlem River, and 207th and 215th Streets. Councilman Rodriguez said no one would be displaced from the area where he envisions a tech hub that could attract Google, Apple, or Facebook. The site is not one of the locations currently being considered by the de Blasio administration for upzoning to accommodate affordable housing.

Study Finds Future of Affordable Housing Threatened if 421-a Program Isn’t Renewed

This week we’re highlighting studies about the 421-a program, EB-5 program, and luxury housing; the city’s new tourism goals; proposals by state and local officials; and highlights of developments throughout the city.

If the 421-a program isn’t renewed, more than 5,484 affordable units would be lost immediately, according to a study released by REBNY. The program, which is set to expire in June, is an essential tool to address the city’s housing shortage and without it, there will likely be a sharp drop in the production of new rental housing units and an increase in the number of condominiums built, the study found. Hector Figueroa, 32BJ SEIU President, also weighed in, saying that since the federal government no longer finances affordable housing as it once did, the 421-a program can be improved and used to create even more affordable housing as well as good jobs.

Visas issued through the EB-5 program increased from 8,564 visas in 2013 to 10,692 visas at the end of the 2014 fiscal year according to a Savills Studley study, Globest.com reports. “Of the visas issued in 2014, Mainland China comprised just over 85.4 percent of the total (9,128 visas), as compared to all other countries (1,564 visas). And in 2013, Mainland China made up nearly 81 percent of total issuance (6,895 visas), a steady increase from just over 80 percent (6,124 visas) in 2012, and 69.5 percent in 2011 (2,408 visas).” Developers such as Silverstein Properties and Related Cos. are marketing New York City projects as EB-5 opportunities.

Prices for luxury housing in New York City increased 18.8 percent in 2014 from 2013, a percentage increase higher than any other luxury market in the world, according to a Knight Frank study, the Real Deal reports. Four U.S. cities were among the cities worldwide where luxury home prices appreciated the most. The other U.S. cities were Aspen, 16 percent growth, ranked second; San Francisco, 14.3 percent growth, ranked sixth; and Los Angeles, 13 percent growth, ranked 10th.

Mayor Bill de Blasio announced a tourism forecast of 67 million annual visitors by the end of 2021. The mayor said, “From the North Bronx to the South Shore, New York City is home to thousands of diverse neighborhoods and communities-and we’re proud to welcome visitors from across the globe to our vibrant and ever-growing city. This year, we’re committing to attract a record 67 million annual visitors by the end of 2021-and we look forward to working alongside businesses large and small to showcase all that our five boroughs have to offer.” The previous tourism target was 55 million visitors by 2015, but the city exceeded that goal in 2014 when it welcomed a record 56.4 million visitors.

Steven Spinola, president of REBNY, praised a City Council proposal to increase the staff of the Mayor’s Office of Special Enforcement to root out short-term rentals such as those offered through Airbnb. He wrote in a Real Estate Weekly column that the real estate industry is concerned about the safety of all tenants when keys or security codes are given out and can be duplicated, tenants stay with complete strangers, and fire hazards are created by more people and luggage. He referred to a study showing that over 58 percent of the Airbnb listings in NYC violate the New York State Multiple Dwellings Law, and of this 58 percent, 10,000 are located in Manhattan.

The New York State Senate has approved a bill sponsored by Sen. Andrew Lanza of Staten Island that would set a 2 percent cap on property tax increases in the five boroughs, Capital New York reports. Mayor Bill de Blasio’s office has issued a memo opposing the cap because the city would lose “billions of dollars in necessary tax revenue each year. Revenue that would be impossible to make up.” The legislation has no sponsor in the State Assembly.

Some of New York’s most prominent business leaders announced their support for Gov. Andrew Cuomo’s proposal to increase the minimum wage this year from the current $8.75 to a proposed $10.50 statewide and $11.50 in New York City. Local supporters of the increase include Phillippe Dauman, Viacom; Doug Steiner, Steiner Studios; Kathryn Wylde, the NYC Partnership; Lloyd Williams, Greater Harlem Chamber of Commerce; Carlo Scissura, Brooklyn Chamber of Commerce, and Mark Jaffe, Greater NY Chamber of Commerce. The wage hike would affect 1.3 million New Yorkers and result in $3.4 billion in direct economic value statewide and $1.9 billion in direct economic value in New York City, according to the governor’s announcement.

The five buildings that make up Brookfield Place, formerly called the World Financial Center, have a vacancy rate of under 5 percent today compared to a 41 percent vacancy rate in 2013 the NY Post reports. In 2013 and 2014, new tenants including Bank of New York Mellon, Jones Day, the College Board, Time Inc., and Hudson’s Bay Company leased 3.1 million square feet of office space, replacing tenants that included Merrill Lynch, Nomura, and Deloitte. The new tenants are paying in the high $50s and $60s, and remaining space is being marketed at up to the high $70s for upper floors. On March 26, luxury fashion stores and a restaurant row will open in the complex.

City Limits has created a map highlighting the dozens of sites in the Bronx that are being considered for housing developments, according to City Limits. HPD is seeking developers to build affordable housing on at least 25 under-used lots it owns, and Bronx Borough President Ruben Diaz has identified additional locations for housing development such as the Harlem River waterfront from Third Avenue to 149th Street, the 161st Street corridor, the southern portion of the Grand Concourse, and the up-zoned corridors of Webster Avenue and Fordham and White Plains Roads. Also, the Department of City Planning is currently studying rezoning 73-blocks of Jerome Avenue to allow housing development.

Developer Mark Stagg’s Stagg Group has started construction on a market-rate development for middle class tenants at 3677 White Plains Road in the Bronx, New York YIMBY reports. Two-bedroom apartments are expected to start renting at $1,700 for market rate units and less for 20 percent of the affordable units in the project, which is receiving a 421-a tax abatement and other subsidies. “Our model is that we provide market-rate apartments for working-class people,” Mr. Stagg said. “The nurses, nurses’ aides, firemen, policemen making $40,000 to $80,000.”

Sunnyside, Queens, offers a small town feel in the big city, according to a NY Times profile of the neighborhood. About 27,000 residents live in nearly a one-half square mile area in zip code 11104, but Mayor Bill de Blasio has announced a plan to build more than 11,000 units of affordable housing next door in Sunnyside Yards. Most of the buildings are six-story 1940’s-era apartment buildings that have been converted to co-ops and condos, and attached row houses. One-bedroom co-ops are selling for up to $325,000 and single-family, three-bedroom townhouses are selling from $700,000 to $1 million. One-bedroom rentals fetch between $1,750 and $2,100 a month.

The Chetrit Group is planning four new buildings, one up to 16-stories high, on the former site of the Mary Immaculate Hospital at 150-13 89th Avenue in downtown Jamaica, Queens, New York YIMBY reports. The new buildings will offer 298,000 square feet of residential space comprised of 324 apartments. The blocks around Rufus King Park are zoned for residential use, so the project doesn’t include retail, but will have a 237-space underground parking garage. The developer bought the development site for $4.8 million in 2009.

New York City Multifamily Volume In January Rises Year-Over-Year

New York City multifamily transactions increased 14 percent and the dollar volume of those trades rose 8 percent in January 2015 compared to January last year, according to Ariel Property Advisors’ Multifamily Month in Review: New York City for January.

Multifamily Month In Review

For the month, New York City saw 65 transactions comprised of 86 buildings totaling $739 million in gross consideration, while January 2014 saw 57 transactions comprised of 92 buildings totaling $683 million in gross consideration.

Multifamily volume in January declined compared to December, a month that typically sees robust activity as many transactions close prior to the end of the year for tax purposes. A total of 116 buildings traded over 66 transactions totaling $1.59 billion in December 2014.

“Continuing momentum seen at the end of 2014, the New York City multifamily market showed a solid first month in 2015 with year- over- year growth in sales volume and strong pricing throughout the city,” said Shimon Shkury, president of Ariel Property Advisors. “Pricing has been particularly strong in the Bronx where the average cap rate in the last six months fell below 6 percent.”

The following is a breakdown of the January 2015 volume by submarket:

Manhattan. Manhattan led all submarkets in January as it saw 21 buildings trade across 16 transactions totaling $249 million in gross consideration. One notable deal was the Montrose, a 97-unit elevatored rental building at 308 East 38th Street that sold for $75 million or $804 per square foot. Continuing the trend seen throughout 2014, the building’s new ownership plans to convert it to condominiums as condo prices continue to rise.

Brooklyn. Brooklyn experienced 15 transactions comprised of 19 buildings totaling $230 million in gross consideration. Pricing in the borough continues to reach new heights, even in neighborhoods outside of “Brownstone” Brooklyn. This point is exemplified by the sale of 23 Caton Place in Kensington, a new construction elevatored building located just south of Prospect Park, which sold for $76 million or $629 per square foot.

Northern Manhattan. Northern Manhattan had a strong month as 15 buildings traded across 13 transactions totaling $115 million in gross consideration, marking a 92 percent increase in dollar volume year-over-year. Of note was the sale of 225 Central Park North, a 58-unit elevatored building overlooking Central Park, for $33 million or $622 per square foot. Another notable sale took place at 567-69 West 125th Street where a renovated 24-unit mixed-use building across the street from the new Columbia University campus sold for $11.6 million or $533 per square foot.

Queens. Queens had a great month as the borough saw 13 buildings trade across six transactions totaling $73 million in gross consideration. Dollar volume was driven by the $51 million sale of a four building mixed-use portfolio in Astoria. The portfolio consisted of 143 residential units and 11 commercial units, and sold for $401 per square foot.

The Bronx. The Bronx had a quiet month as it saw 15 transactions comprised of 18 buildings totaling $70.416 million in gross consideration. A package of walk-up buildings on Rochambeau Avenue in Bedford Park sold for $13.5 million, translating to $152 per square foot and a 4.64 percent capitalization rate. In the Fordham neighborhood, an elevatored mixed-use building sold for $10 million, or $233 per square foot.

For the six months ended January 2015, the average monthly transaction volume decreased slightly to 66 transactions per month. The average monthly dollar volume remained relatively steady at $1.248 billion.

The multifamily transactions included in the analysis occurred at a minimum sales price of $1 million, with a minimum gross area of 5,000 square feet, and with a minimum of 10 units.

More information is available from Mr. Shkury at 212-544-9500, ext. 11, or sshkury@arielpa.com. For a copy of the report, please see http://arielpa.com/newsroom/report-MFMIR-Jan-2015.

Our Observations For the Week

Mayor Bill de Blasio appointed three new members to the Rent Guidelines Board, the NY Times reports. The Bloomberg appointees were replaced by Helen Schaub, NY State director of policy and legislation at 1199 S.E.I.U. United Healthcare Workers East; K. Sabeel Rahman, a policy advisor and professor at Brooklyn Law School; and owner representative Scott Walsh, an architect and vice president for development at Forest City Ratner Companies. All nine members of the Rent Guidelines Board are now de Blasio appointees. A board report shows that the net operating income for rent-stabilized buildings rose 3.4 percent in 2013, but the report didn’t take into consideration costs. On April 29, the board will take a preliminary vote on rent increases and a final vote at the end of June.

The Department of City Planning is expected to certify a rezoning application for East New York in the spring, Capital reports. Once certified, the land use review process could take all year, according to Planning Commission Chairman Carl Weisbrod’s testimony before the City Council. The city plans to review upzoning 15 neighborhoods to encourage the construction of affordable housing, but so far has only released studies on six. Although city officials have been meeting with the residents in the identified communities, no certification schedule for those areas has been announced.

New York City had a net gain of 115,600 jobs between January 2014 and January 2015, a 2.9 percent year-over-year increase, bringing the city’s job count to 4,099,700, according to the NY State Labor Department. Statewide, jobs grew by 1.8 percent to 156,000 between January 2014 and January 2015 with gains in educational and health services (+56,500), trade, transportation, and utilities (+26,100), and professional and business services (+25,600).

The Municipal Art Society of New York released an interactive map cataloguing properties in New York City that has received benefits from the 421-a program, which is up for renewal in June. The Municipal Art Society is encouraging the following program changes: “rationalize 421-a’s cost-benefit equation either by strengthening the affordability requirements or by decreasing the financial incentives; redraw the lines of the GEA to reflect actual market conditions, based on data and statistics, rather than politics; and dramatically increase the program’s public transparency and use this data to monitor the program’s successes and failures.”

The Special Harlem River Waterfront District, a former industrial area that was rezoned to encourage private residential, retail, and commercial projects along the Bronx waterfront, has attracted the attention of major developers in recent months, the WSJ reports. Somerset Partners LLC and the Chetrit Group have purchased about five acres along the Harlem River and are looking for more sites on which to build a complex with six, 25-story towers that will include market rate apartments and ground floor retail. A SOBRO analysis of the area estimates that the waterfront district could accommodate 2.8 million square feet of affordable and market rate housing; 2.3 million square feet of office, retail, and light manufacturing space; and 1 million square feet of public space including parks and recreation centers.

Manhattan median rents rose 8.9 percent to $3,375 and average rents rose 4.1 percent to $4,093 in February compared to the same month last year, according to the Elliman Report. Listing inventory in Manhattan during this period declined a slight 1 percent to 5,164, and the vacancy rate rose 0.5 percent to 2.38 percent. Year-over-year in Brooklyn, median rents declined a slight 0.9 percent to $2,863, the average rental price declined a slight 0.6 percent to $3,160, and listing inventory jumped 37.8 percent to 1,919. Year-over-year in Queens, the median rent was unchanged at $2,600, the average rental price rose 1.3 percent to $2,784, and listing inventory totaled 278.

A 60-story, luxury residential tower at 56 Leonard in Tribeca is still under construction but units have already sold out for slightly more than $3,000 a square foot, the WSJ reports. Many apartments were sold to people living in the neighborhood and only one unit is left, a five-bedroom penthouse for $34.5 million. More than ten 19th century buildings in the area are being converted into luxury condos.

The Real Deal highlighted the largest projects filing permits in February including 30 Sixth Avenue in Brooklyn where Greenland Forest City Partners plan a 23-story, 341,595-square-foot, 305-unit building with 20,000 square feet of commercial space in Pacific Park. Other large projects include Rockefeller University’s 160,000-square-foot, two-story structure at 1174-1192 York Avenue in Manhattan; 1520 Boone Avenue in the Bronx where Monadnock Development filed two new permits for its 274,313-square-foot, 292-unit residential complex; 42-22 27th Street in LIC where the Rabsky Group filed plans for a 135,000-square-foot, 15-story, 99-unit residential building with 20,000 square feet of commercial space; 1180 Fulton Avenue on the site of the former St. Augustine Catholic Church in the Bronx, where a 101,833-square-foot, 12-story, 112-unit affordable housing project is planned; a 97,000-square-foot, 44-unit building is planned for 303 East 44th Street in Midtown East; the Bluestone Organization, L+M Development, and Triangle Equities are planning a 93,812-square-foot affordable housing project at 45-05 Rockaway Beach Boulevard in Queens; the Rabsky Group filed plans for a mixed-use building with 130 units at 115 Stanwix Street on the former site of the Rheingold Brewery, where the developer has already filed for permits for two other buildings; D&F Development Group is planning a residential project with 85 subsidized apartments at 171-04 Baisley Boulevard in Jamaica, Queens; Velocity Framers is planning an 80,000-square-foot, 118-unit residential project at 21 Kane Place in Brooklyn; and a 40-story tower with 38 units is planned for 30 East 31st Street in Manhattan.

Vacant lots in the Boerum Hill section of Brooklyn are filling up with modern town houses that range in price from $3.2 million to $4.3 million, the NY Times reports. About 18,000 residents live in the neighborhood, which is bordered by Court Street, Fourth Avenue, Schermerhorn, and Warren and Wyckoff Streets. Rows of Greek revival and Italianate houses between the 1840s and early 1870s can be found in the historic district bordered by Pacific, Dean, Bergen, and Wyckoff Streets. Inventory is tight and only 24 townhouses sold in Boerum Hill last year for a median price of $2,996,500. In the last six months, two-bedroom condos have sold for an average $956 per square foot and two-bedroom co-ops sold for an average of $1,012 per square foot. However, in a 210-foot-tall condo planned at 265 State Street, units are averaging over $1,300 per square foot.

Several new projects with 1,200 residential units are planned for Myrtle Avenue in Brooklyn, the Real Deal reports. John Catsimatidis’ Red Apple Group is planning buildings at 81 Fleet Place, 86 Fleet Place, and 180 Myrtle Avenue to accompany the developer’s building at 218 Myrtle Avenue; a 45-unit building is planned at 134 Vanderbilt Avenue; Madison Realty Capital is completing a rental building at 490 Myrtle Avenue and building a tower at the former Pratt Station Post Office at 504 Myrtle Avenue; a seven-story, mixed-use building with 22 units is planned for 525 Myrtle Avenue; and a five-story, mixed-use residential building with 27 luxury apartments is planned for 531 Myrtle Avenue.