No rent increases: big lux building takes the lead
Started by fieldschester
over 12 years ago
Posts: 3525
Member since: Jul 2013
Discussion about
http://www.nytimes.com/2013/08/25/realestate/surprise-no-rent-increases.html?_r=0 Surprise! No Rent Increases! In this red-hot rental market, why would the landlord, Forest City Ratner Companies, renew its leases without demanding more in rent? Most of us who rent, and that is the bulk of New Yorkers, expect to be mildly abused by their landlords. Every year as our leases near the end of their... [more]
http://www.nytimes.com/2013/08/25/realestate/surprise-no-rent-increases.html?_r=0
Surprise! No Rent Increases!
In this red-hot rental market, why would the landlord, Forest City Ratner Companies, renew its leases without demanding more in rent?
Most of us who rent, and that is the bulk of New Yorkers, expect to be mildly abused by their landlords. Every year as our leases near the end of their terms, we wait anxiously to find out what next year’s outlay will look like.
And when we gaze at behemoth rental towers that offer perks like full-time doormen, health clubs and live-in supers, those annual rent increases seem as inevitable as a roof-deck misting station. But that may just not be true.
Lynda Lippin, 47, lives in an alcove studio at 8 Spruce, officially known as New York by Gehry at 8 Spruce Street, with her husband and dog, a onetime stray. After two years, she still carries around the silver Tiffany key ring she was given when she moved in, a square in the shape of the tower. She speaks fondly of the private residents-only viewing party held not long ago for a $35,000-a-month penthouse, where cheese and wine were circulated amid the unobstructed 360-degree views. She attends the buildingwide barbecues, where gourmet ice-cream sandwiches are handed out. And even though she doesn’t regularly go to the building’s gym, “it is lovely to stare at the snow falling on the glass ceiling” while swimming in its heated pool.
Last month the managing agent e-mailed her to say that if she committed to her two-year lease by mid-July, rather than wait until it expired at the end of October, she could renew at her current rent, around $3,300 a month. Her annual $300 per-person amenities fee would also be waived.
“I couldn’t believe it,” said Ms. Lippin, a master instructor at Real Pilates, a studio in TriBeCa. “I was stunned, actually.” She signed the lease immediately.
This is a far cry from the rent increases and stiff competition that most New York renters are experiencing. “It’s a tough market,” said Marc Lewis, the chairman and a senior adviser for Coldwell Banker A.C. Lawrence, whose listings generally skew toward the lower end of the price spectrum. “At most buildings, rents go up every year, and the increases have been more this year than last year and the year before that.
“Landlords rarely give tenants a hometown discount anymore,” he added, referring to concessions offered to current tenants. “Now, if you were paying $2,000 last year, this year they are asking $2,700.”
There are many reasons why Forest City Ratner might forgo rent increases. The luxury market, which has been commanding steadily higher prices for more than a year, may finally have plateaued. This may be especially true downtown, where luxury rents have fallen over the past year. There are also the costs associated with having to find new tenants, as well as competition from new developments in the neighborhood.
Rental renewal rates are proprietary to landlords and nearly impossible to track. Declining to discuss specifics, Melissa Roman Burch, the director of commercial and residential development for Forest City Ratner, said in a statement, “Since the building opened we have received great feedback from tenants, who are drawn to Frank Gehry’s iconic design as well as the building’s world-class amenities, and our renewals reflect this enthusiasm.”
Cliff Finn, an executive vice president of Douglas Elliman Development Marketing, who, while at Citi Habitats, oversaw the original leasing at 8 Spruce Street, said there were “lots of reasons for landlords offering promotions like this.” With 899 apartments, the building was so large that incentives like free rent were necessary when it opened, to fill it up as quickly as possible, said Mr. Finn, who continues to represent the building. “So now, when these tenants come up for renewal, having a zero percent increase helps them mentally adjust to the full market rent.”
But from Ms. Lippin’s perspective, the lack of free rent in the new lease makes little difference. “Except for those first two months two years ago,” she said, “we’ve been paying full rent, so the money out of our pocket stays the same as it has always been.”
The overall rental market may also be a factor in Forest City Ratner’s decision. After quarter upon quarter of steep price increases, it looks as though it may finally be flattening out. “In Manhattan over the last 18 months, there has been an unprecedented rise in rents,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel. “But in the last five months, it has been sliding, with rents rising at a slower pace.”
According to a recent rental report for Douglas Elliman that Mr. Miller wrote, the median rents downtown increased a nominal 1.5 percent, to $3,350, in July compared with July 2012. And in the market for three-bedroom apartments, which are typically luxury units, the median rent downtown actually fell 8.7 percent, to $5,250, during the same period.
The Gehry building in particular seems to have seen some softening of prices. When it was under construction, it marketed its penthouses for as much as $60,000 a month, a staggering price for the area. It eventually lowered the price tag to $45,000 and is now renting them for $35,000.
“Sometimes it behooves a landlord to keep a tenant in place even if there is a minor dip below the market-rate rent,” said Gary L. Malin, the president of Citi Habitats. “The reality is, if there are a significant amount of people whose leases are overturning at the same time, or if you consider the cost of preparing an apartment for a new tenant, like painting, concessions and paying the brokerage fee, it may make sense.”
Eight Spruce Street is also about to have some competition. Next summer, a few blocks to the south, the former headquarters of the financial giant A.I.G. will open as a huge luxury rental development. The developer Rose Associates is converting the building, known as 70 Pine, into 780 units that will have a hotel component and amenities that include two bowling alleys and an observatory and cigar bar with unimpeded views of downtown.
Given these factors, Forest City Ratner’s decision to offer no rent increases “makes sense,” Mr. Miller said. “The landlord is anticipating that the rents are already high, let’s keep the building at the current rents and keep it full.”
But while downtown and 8 Spruce Street may be finding their footing, the overall luxury market is faring somewhat better. The top 10 percent of rental units across Manhattan saw a median price increase of 11.7 percent, to $8,412, in July compared with July 2012, according to data from Mr. Miller. And comparable buildings, like MiMA, a 500-unit rental at 450 West 42nd Street that opened last year, are not offering a break on renewals.
“We just went through our first wave of renewals and we didn’t offer any concessions,” said Daria Salusbury, a senior vice president who heads the luxury rental division for Related, “and 90 to 95 percent came with a modest rent increase. The rental market isn’t the strongest I have seen, but I’ve seen worse.”
So the market slide that 8 Spruce Street may be experiencing might be a function of its location. The neighborhood was hit hard by Hurricane Sandy, causing some tenants to leave. The building had backup generators, but there was still cold water and intermittent power for 9 days; the landlord offered tenants a prorated rent reduction to compensate for the inconvenience.
At the time 8 Spruce came on the market in 2011, it was said to be breaking a price ceiling in the financial district. Maybe the landlord, having broken into these higher price ranges, has decided that at least for the time being, it can go no higher. And that suits Ms. Lippin just fine.
A version of this article appears in print on August 25, 2013, on page RE1 of the New York edition with the headline: Surprise! No Rent Increases!
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Response by Riversider
over 12 years ago
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NY Times real estate section is not news. Clearly this was written as a p.r. piece and handed to a socket puppet, I mean the NY Times to put out as puffery.
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Response by fieldschester
over 12 years ago
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Riversider
about 10 hours ago
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NY Times real estate section is not news. Clearly this was written as a p.r. piece and handed to a socket puppet, I mean the NY Times to put out as puffery.
So there is a rent increase?
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Response by 9d8b7988045e4953a882
over 12 years ago
Posts: 236
Member since: May 2013
This piqued my interest: "The luxury market, which has been commanding steadily higher prices for more than a year, may finally have plateaued. This may be especially true downtown, where luxury rents have fallen over the past year."
Does that mean they will finally start building non-luxury for us poor market-rate renters?
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Response by aalsberg
over 12 years ago
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Its just supply and demand, downtown a lot of new construction is coming on the market whereas uptown such as on the upper east side and upper west side prices are still going up because of very little construction.
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Response by 9d8b7988045e4953a882
over 12 years ago
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"Its just supply and demand, downtown a lot of new construction is coming on the market whereas uptown such as on the upper east side and upper west side prices are still going up because of very little construction."
What is the reason for little construction taking place on UWS and UES? I'm guessing zoning, landmark status, difficulty of getting city permits, developer fear of future stabilization? Seems like there is a lot of pent up demand for non-luxury market-rate rentals. I now pay the same for a tiny studio that I paid for a decent sized 1-bedroom 6 years ago.
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Response by Riversider
over 12 years ago
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What is the reason for little construction taking place on UWS and UES.
Available land. The best options usually are old parking lots, gas stations,etc. Pretty difficult to take over an old rental building, kick everyone out, tear it down and put up a new building. There are just not that many prime locations that are easy to build on in the upper West.
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Response by NWT
over 12 years ago
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E.g., the Hertz garage at 210 W 77th just sold for a bit more than $700 per buildable ft².
Once you add construction and other costs to that, there'd be no way to rent the apartments at less than so-called-luxury levels.
Looked at in the other direction, the seller couldn't have gotten the $700 if not for all the people willing to pay a lot to live there.
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Response by w67thstreet
over 12 years ago
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PPL overpay for lots of stuff... except for TEAM RE. FLMAozzzzzz
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Response by w67thstreet
over 12 years ago
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GO Go NWT...=> your only asset grows... therefore you are safe financially. The fact this is your ENTIRE life... BONUS!
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Response by 300_mercer
over 12 years ago
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Fields, The initial rent was inflated as it came with 2 months free rent for two year lease. 2 months free rent has disappeared on lease renewal. Effectively a 9 percent increase. Do you not see it this way?
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Response by fieldschester
over 12 years ago
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>Fields, The initial rent was inflated as it came with 2 months free rent for two year lease. 2 months free rent has disappeared on lease renewal. Effectively a 9 percent increase. Do you not see it this way?
If you are a college student or otherwise plan to move every year, then sure, I see where you are coming from, and you would be like the people who take the bus to the Sands Casino for the free food and casino vouchers and assume that the Sands is a money-losing company: http://lens.blogs.nytimes.com/2013/08/23/the-casino-as-lifeline/?_r=0
For the rest of the real world, taking an upfront move-in bonus and "amortizing" it over your lease to come up with some nonsensical "net effective rent" is an irresponsible way to look at your own budgeting. Even though renters move more frequently than owners, these incentives are not recurring and are best viewed as something similar to a furniture allowance or other one time benefit. To the landlord, their cost of such incentives is zero when they are using this type of incentive as a way to fill an empty building with paying tenants.
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Response by 300_mercer
over 12 years ago
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Fields = one of the grays?
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Response by yikes
over 12 years ago
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deal boy?
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Response by 300_mercer
over 12 years ago
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No
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Response by 300_mercer
over 12 years ago
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Think screen names sounding like name of places.
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Response by fieldschester
over 12 years ago
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Genius
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Response by MAV
over 12 years ago
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funny that the article doe not even mention the free rent!!!!
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Response by jason10006
over 12 years ago
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I think 99% of renters view the expiration of the free month rent period as a rent increase. I have in fact had that very discussion with LLs before, where after the two years with two months free rent, the third year has no nominal increase to make up for no more free months. This is actually very common, and not just among college students.
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Response by fieldschester
over 12 years ago
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>I think 99% of renters view the expiration of the free month rent period as a rent increase.
99 is a lot of percent. I guess on the article they found the 1 percent who were surprised by having no increase.
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Response by fieldschester
over 12 years ago
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funny that 300_Mercer and Jason are the only two who agree with this short-term thinking
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Response by 300_mercer
over 12 years ago
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Sorry Hburg do not have a license to talk to you.
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Response by fieldschester
over 12 years ago
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poor sad 300_mercer, can't afford his own apartment any longer, can't support himself in an argument.
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Response by 300_mercer
over 12 years ago
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Find yourself a therapist.
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Response by fieldschester
over 12 years ago
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You are right, I could use a massage. Though it seems like you could use a bit more help.
"funny that 300_Mercer and Jason are the only two who agree with this short-term thinking"
Renters are short term by definition.
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Response by gcondo
over 12 years ago
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keeping the rent the same is as good as investing in your building. happy tenant = good tenant.
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Response by vic64
over 12 years ago
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I think that writing style resembles greensdale more than Hburg.
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Response by 9d8b7988045e4953a882
over 12 years ago
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"Available land. The best options usually are old parking lots, gas stations,etc. Pretty difficult to take over an old rental building, kick everyone out, tear it down and put up a new building. There are just not that many prime locations that are easy to build on in the upper West."
Rental market may have peaked again. 18 straight months of full steam ahead had to plateau at some point. I've always found the under $2500 a month market as one of the best barometers of the markets health, absorption, etc. Its by far, the most liquid part of the market and frankly, the most realistic in terms of income for singles in the city. If someone if making $75k-$100k they'll be looking in the $1850-$2500 range. Or at least they should be. That being said, a general search on streeteasy will show a lot of downward arrows as of today (price reductions). There is a studio for example, where the new asking rent is $600 higher than just 2 years ago. Obviously they're not going to get it, but the market didn't increase at a rate if 50% for this price point. 20% max. In any event, I think the move on the part of these owners to lock in tenants was extremely prudent. Now someone needs to explain that to my moron landlord. I'm in a studio (temporary) but 2 separate 1 bedrooms just came on the market in my building. Both had good tenants (neighbor seemed like a good guy) and were paying $2450 and $2600 respectively. One of the one bedrooms went for $3k and the other, after some Reno for $3500. Turns out the one that went for $3500 is being paid for by a parent, so I assume, and after one look of this guy, who was beating his girlfriend the other day. 1 week in the building and girlfriend is crying in the hallway. So great. Nice guy next door paying $2600 moves out. They re-rent to some loser paying $3500 who's certainly a mommys boy and likely a serial killer.
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Response by jason10006
over 12 years ago
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"Rental market may have peaked again"
Not at the very high end. Elliman's July report had luxury up 12% YOY and ultra luxury up 6% YOY in Manhattan, compared with 3% overall for doorman buildings of all kinds and 2% for non-doorman. So it seems kind of impossible to argue that based on ONE building, the high-end rental market has stalled. No.
I wasn't talking about the upper end. Read my post again. The upper end has nothing to do with the greater market as a whole. Wish people would understand this. We are in one of the most unhealthy markets that I can ever remember. I hear it over and over again from all different people, oddly however, accept from the people at the upper end who appear to be in a bubble of their own.
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Response by Nah
over 12 years ago
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And consistent to my other comment, eventually well run out of mommies and daddies paying rent and we'll be back to people supporting themselves an with stagnated wages (yes, even in Manahattan), rents will flatten out or even tick down, which they already are below $2500. The market is being falsely supported by the exclusive upper end and parental support. Party's over soon, I'm just trying to figure out when exactly.
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Response by 9d8b7988045e4953a882
over 12 years ago
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"eventually we'll run out of mommies and daddies paying rent and we'll be back to people supporting themselves"
One can hope. It certainly makes the lives of the self-supporting more difficult to have to compete for very limited housing with such people. The massive rent increases and moving costs every few years have been painful.
I think the bigger problem is that a huge percentage (about 68%) of NYC rental units are regulated and basically off the market. See http://en.wikipedia.org/wiki/Rent_control_in_New_York#Rental_unit_distribution. There are about 1 million stabilized units and only 665k non-regulated. So everyone must fight over 32% of the market.
Very little new, non-luxury rental supply has been created. A host of barriers including zoning, landmark status, environmental impact studies, community boards, permits, etc make it very difficult for developers to build new supply. So when something does get built, it tends to be high-end luxury.
There seems to be very little incentive to change the system. Too many people seem to benefit from it, though at the expense of others.
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Response by Nah
over 12 years ago
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Very true that stabilization and control has a very severe impact on how the market functions, but we're unfortunately beating an old drum that won't change much. Parental support however, is something new. It's usually the other way around I.e. children help their parents into retirement. That being said, I do see a slowing of parental support in the coming seasons. Lower end rentals are already starting to fall off their highs. The market at the lower end has absolutely peeked. I mean seriously, folks, how sustainable is a market comprised of $2850 studios is just regular elevator buildings? Check bldg lately? All their product is massively overpriced. They are who I was referring to in a previous post. A studio was $2100 in 2010 and now approaching $3k. Anyone who thinks that will continue forward needs medication. Start looking for rental prices to recede over the winter.
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Response by aalsberg
over 12 years ago
Posts: 99
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Rental prices generally go down in the 4th quarter but so does supply so you get all the leftover 5th floor walkups 1st floor and obstructed view doorman building units. Landlords know this so this becomes the renovation season with the new apartments coming in the spring.
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NY Times real estate section is not news. Clearly this was written as a p.r. piece and handed to a socket puppet, I mean the NY Times to put out as puffery.
Riversider
about 10 hours ago
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NY Times real estate section is not news. Clearly this was written as a p.r. piece and handed to a socket puppet, I mean the NY Times to put out as puffery.
So there is a rent increase?
This piqued my interest: "The luxury market, which has been commanding steadily higher prices for more than a year, may finally have plateaued. This may be especially true downtown, where luxury rents have fallen over the past year."
Does that mean they will finally start building non-luxury for us poor market-rate renters?
Its just supply and demand, downtown a lot of new construction is coming on the market whereas uptown such as on the upper east side and upper west side prices are still going up because of very little construction.
"Its just supply and demand, downtown a lot of new construction is coming on the market whereas uptown such as on the upper east side and upper west side prices are still going up because of very little construction."
What is the reason for little construction taking place on UWS and UES? I'm guessing zoning, landmark status, difficulty of getting city permits, developer fear of future stabilization? Seems like there is a lot of pent up demand for non-luxury market-rate rentals. I now pay the same for a tiny studio that I paid for a decent sized 1-bedroom 6 years ago.
What is the reason for little construction taking place on UWS and UES.
Available land. The best options usually are old parking lots, gas stations,etc. Pretty difficult to take over an old rental building, kick everyone out, tear it down and put up a new building. There are just not that many prime locations that are easy to build on in the upper West.
E.g., the Hertz garage at 210 W 77th just sold for a bit more than $700 per buildable ft².
Once you add construction and other costs to that, there'd be no way to rent the apartments at less than so-called-luxury levels.
Looked at in the other direction, the seller couldn't have gotten the $700 if not for all the people willing to pay a lot to live there.
PPL overpay for lots of stuff... except for TEAM RE. FLMAozzzzzz
GO Go NWT...=> your only asset grows... therefore you are safe financially. The fact this is your ENTIRE life... BONUS!
Fields, The initial rent was inflated as it came with 2 months free rent for two year lease. 2 months free rent has disappeared on lease renewal. Effectively a 9 percent increase. Do you not see it this way?
>Fields, The initial rent was inflated as it came with 2 months free rent for two year lease. 2 months free rent has disappeared on lease renewal. Effectively a 9 percent increase. Do you not see it this way?
If you are a college student or otherwise plan to move every year, then sure, I see where you are coming from, and you would be like the people who take the bus to the Sands Casino for the free food and casino vouchers and assume that the Sands is a money-losing company: http://lens.blogs.nytimes.com/2013/08/23/the-casino-as-lifeline/?_r=0
For the rest of the real world, taking an upfront move-in bonus and "amortizing" it over your lease to come up with some nonsensical "net effective rent" is an irresponsible way to look at your own budgeting. Even though renters move more frequently than owners, these incentives are not recurring and are best viewed as something similar to a furniture allowance or other one time benefit. To the landlord, their cost of such incentives is zero when they are using this type of incentive as a way to fill an empty building with paying tenants.
Fields = one of the grays?
deal boy?
No
Think screen names sounding like name of places.
Genius
funny that the article doe not even mention the free rent!!!!
I think 99% of renters view the expiration of the free month rent period as a rent increase. I have in fact had that very discussion with LLs before, where after the two years with two months free rent, the third year has no nominal increase to make up for no more free months. This is actually very common, and not just among college students.
>I think 99% of renters view the expiration of the free month rent period as a rent increase.
99 is a lot of percent. I guess on the article they found the 1 percent who were surprised by having no increase.
funny that 300_Mercer and Jason are the only two who agree with this short-term thinking
Sorry Hburg do not have a license to talk to you.
poor sad 300_mercer, can't afford his own apartment any longer, can't support himself in an argument.
Find yourself a therapist.
You are right, I could use a massage. Though it seems like you could use a bit more help.
http://en.wikipedia.org/wiki/O%27Connor_v._Donaldson
Here you go Hburg. Get some help.
Poor sad pathetic money-losing 300_mercer.
"funny that 300_Mercer and Jason are the only two who agree with this short-term thinking"
Renters are short term by definition.
keeping the rent the same is as good as investing in your building. happy tenant = good tenant.
I think that writing style resembles greensdale more than Hburg.
"Available land. The best options usually are old parking lots, gas stations,etc. Pretty difficult to take over an old rental building, kick everyone out, tear it down and put up a new building. There are just not that many prime locations that are easy to build on in the upper West."
Also, a fairly large swath of the Upper West Side was declared a landmark, which makes it pretty much impossible to build anything new. See http://www.westsiderag.com/2013/06/25/landmarks-commission-approves-big-new-uws-historic-district
Rental market may have peaked again. 18 straight months of full steam ahead had to plateau at some point. I've always found the under $2500 a month market as one of the best barometers of the markets health, absorption, etc. Its by far, the most liquid part of the market and frankly, the most realistic in terms of income for singles in the city. If someone if making $75k-$100k they'll be looking in the $1850-$2500 range. Or at least they should be. That being said, a general search on streeteasy will show a lot of downward arrows as of today (price reductions). There is a studio for example, where the new asking rent is $600 higher than just 2 years ago. Obviously they're not going to get it, but the market didn't increase at a rate if 50% for this price point. 20% max. In any event, I think the move on the part of these owners to lock in tenants was extremely prudent. Now someone needs to explain that to my moron landlord. I'm in a studio (temporary) but 2 separate 1 bedrooms just came on the market in my building. Both had good tenants (neighbor seemed like a good guy) and were paying $2450 and $2600 respectively. One of the one bedrooms went for $3k and the other, after some Reno for $3500. Turns out the one that went for $3500 is being paid for by a parent, so I assume, and after one look of this guy, who was beating his girlfriend the other day. 1 week in the building and girlfriend is crying in the hallway. So great. Nice guy next door paying $2600 moves out. They re-rent to some loser paying $3500 who's certainly a mommys boy and likely a serial killer.
"Rental market may have peaked again"
Not at the very high end. Elliman's July report had luxury up 12% YOY and ultra luxury up 6% YOY in Manhattan, compared with 3% overall for doorman buildings of all kinds and 2% for non-doorman. So it seems kind of impossible to argue that based on ONE building, the high-end rental market has stalled. No.
http://www.elliman.com/pdf/74a9347e56bfe99c2c1c1abab0ed6254fbd83954
I wasn't talking about the upper end. Read my post again. The upper end has nothing to do with the greater market as a whole. Wish people would understand this. We are in one of the most unhealthy markets that I can ever remember. I hear it over and over again from all different people, oddly however, accept from the people at the upper end who appear to be in a bubble of their own.
And consistent to my other comment, eventually well run out of mommies and daddies paying rent and we'll be back to people supporting themselves an with stagnated wages (yes, even in Manahattan), rents will flatten out or even tick down, which they already are below $2500. The market is being falsely supported by the exclusive upper end and parental support. Party's over soon, I'm just trying to figure out when exactly.
"eventually we'll run out of mommies and daddies paying rent and we'll be back to people supporting themselves"
One can hope. It certainly makes the lives of the self-supporting more difficult to have to compete for very limited housing with such people. The massive rent increases and moving costs every few years have been painful.
I think the bigger problem is that a huge percentage (about 68%) of NYC rental units are regulated and basically off the market. See http://en.wikipedia.org/wiki/Rent_control_in_New_York#Rental_unit_distribution. There are about 1 million stabilized units and only 665k non-regulated. So everyone must fight over 32% of the market.
Very little new, non-luxury rental supply has been created. A host of barriers including zoning, landmark status, environmental impact studies, community boards, permits, etc make it very difficult for developers to build new supply. So when something does get built, it tends to be high-end luxury.
There seems to be very little incentive to change the system. Too many people seem to benefit from it, though at the expense of others.
Very true that stabilization and control has a very severe impact on how the market functions, but we're unfortunately beating an old drum that won't change much. Parental support however, is something new. It's usually the other way around I.e. children help their parents into retirement. That being said, I do see a slowing of parental support in the coming seasons. Lower end rentals are already starting to fall off their highs. The market at the lower end has absolutely peeked. I mean seriously, folks, how sustainable is a market comprised of $2850 studios is just regular elevator buildings? Check bldg lately? All their product is massively overpriced. They are who I was referring to in a previous post. A studio was $2100 in 2010 and now approaching $3k. Anyone who thinks that will continue forward needs medication. Start looking for rental prices to recede over the winter.
Rental prices generally go down in the 4th quarter but so does supply so you get all the leftover 5th floor walkups 1st floor and obstructed view doorman building units. Landlords know this so this becomes the renovation season with the new apartments coming in the spring.