Luxury Developments Struck Big In 2013

It was a good year for luxury residentials in New York. According to an end of year report by Olshan Realty, 2013 saw the best year for contracts signed since 2007 totaling in at nearly $10.9 billion sold.  This represents a 70% increase over total sales contracts in 2012.

Development, particularly in the Manhattan area, also saw a sharp upturn this year. 38% of all luxury apartment sales were made on new developments that are not yet completed, and the total number of development contracts in Manhattan jumped 20% in the third quarter of 2013. The new Leonard series of developments proved to be in high demand among the wealthy tenants of New York City. 56 Leonard did particularly well, seeing 90% occupancy in 9 months at an average of $3,200 per square foot.

The Azure luxury residential in Manhattan co-developed by Carl Mattone and the DeMatteis Organizations continued its slow but steady climb to success. The Azure building announced earlier this year that it had reached 75% occupancy, and though the penthouse units remain unsold they underwent an extensive interior makeover by acclaimed design specialists Bjorn Bjornsson and James Rixner.

Though the year ended on a high note for luxury high rises, the inauguration of Bill de Blasio as mayor of New York City on Wednesday may prove problematic for 2014. de Blasio spent a portion of his ceremony speech condemning the economic disparity within NYC, particularly the rapid development of luxury condominiums under Bloomberg’s oversight. Though his current action plan shows no sign of actively opposing luxury development, he has plenty of time in 2014 to decide to do so.

Downtown Jamaica Business Improvement District Courts Food Businesses

Downtown Jamaica is showing some major economic growth this season and seems intent on proving its worth as a business improvement district. The area’s developers and economic leaders met with restaurant owners to tap into the roughly $430 million in unused ground-floor space.

Since the onset of the Jamaica Center Business Improvement District in 1979, the area has seen major economic growth under the management of the Greater Jamaica Development Corp (GJDC). Queens developer Carl Mattone and his real estate firm the Mattone Group developed the Jamaica Center building itself in 2002. In the past few years, GJDC has opened brand new retail outlets, a hotel and a department store and recorded roughly 86,000 people in foot traffic. Despite these numbers, downtown Jamaica only offers three dedicated restaurants and the meeting was an effort to fill that gap.

Jamaica Center BID research consultant Mark Lohbauer rhetorically asked restaurant owners “You’ve got hundreds of other choices right here in the five boroughs of the city. You could go anywhere. Why would you go here?” He then pitched the growth Jamaica downtown has seen in the recent years and the need to fill out ground-floor restaurant space. “They (GJDC) bothered to treat their district much like a mall,” he said “and they intend to manage it much like a mall.”

Sangria’s, CityRib and Applebee’s are the three dining options in the area, and those surveyed during Lohbauer’s study reported that they had food on their minds. Dedicated sit-down restaurants, healthier cafes and specialty food stores were all high priorities for those traveling through downtown Jamaica.

New York Office Demand Shifts to Budding Tech Startups

One of the upcoming difficulties for mayor elect Bill de Blasio will be adjusting to the real estate demands of an industry shifting from law and business to technology. New York developers are pushing for de Blasio to support office spaces that will appeal to the tech and creative start-ups that are becoming more and more numerous.

Image courtesy of Pete Bellis via flickrcc

The ideal office space going forward seems to be middle to small sized and favoring cost efficiency, rather than the large but expensive business hubs that used to be more commonplace. Former president of the New York City Economic Development Corporation Seth Pinsky stated that a solution “partially lies in the traditional existing business centers, but it can’t be entirely accommodated in these areas”.

Mr. Pinsky and many others believe that additional development will become a necessity to house the companies of the future. A spokesman for de Blasio stated that he would support development for more modern office spaces, but did not give any details on what that support would entail.

New BID Suggested In Queens, Longest In NYC

A new proposal has been made to add a business improvement district to Queens along a two mile stretch of Roosevelt Avenue. The proposal calls for a major structural renovation to Roosevelt Avenue. Changes include street cleaners to remove graffiti, paint street furniture, additional flower gardens and garbage cans, and even a Wi-Fi corridor. Experts would be called in to design websites and shopping guides for businesses in the project area.

Photo courtesy of Doug Letterman via flickrcc

Proponents of the plan argue that a new BID would reduce crime in the area and help local businesses compete with shopping malls. However, some small business owners dispute that claim saying that having to pay an average of $2000 per year could bankrupt them. Supporters of the Queens BID say that not only are the services worth the yearly fee, but the BID will result in a reduction in crime and more legitimacy in the eyes of city agencies. New York is no stranger to BIDs, with 67 currently operating within city borders. Annual budgets for these BIDs range from $53,000 to $16 million, and the proposed changes to Roosevelt would make it the longest BID yet.

Bill de Blasio’s Plan For New York Development

With his recent win as mayor-elect on November 5th, Bill de Blasio promises to bring some changes to the New York real estate scene. Replacing Republican-turned-independent Michael Bloomberg, the Democratic de Blasio has generally taken an aggressive, progressive stance on topics such as more education, income-equality and more affordable housing.

de Blasio’s ambitious plans are going to require significant funding from an already strained city economy, and he hopes to accomplish this in part by setting up a tax on the wealthy to directly fund public education. That said, taxes on the wealthy have a habit of being unpopular and would require de Blasio to butt heads with current New York governor Andrew Cuomo.
Cuomo already has a standing relationship with several New York developers, notably his friendship with Carl Mattone of the Mattone Group, and under Cuomo and Bloomberg, New York has seen significant real estate development already. However, de Blasio feels that there is an overabundance of “luxury condos”.

But despite his public remarks de Blasio keeps a very pro-developer attitude, stating that “I’d like to focus on four critical areas today: 1.) Maximizing opportunities for development, 2.) Lessening the burden on small businesses, 3.) Investing more smartly with our procurement tools and pension assets, and 4.) Building the workforce of tomorrow.” He has also proposed giving real estate developers rights to increase square footage on a given plot of land, in exchange for those developers support affordable housing projects.

de Blasio’s idea of educating and housing the lower class has a romantic appeal to many, but there are still real barriers of funding and support to overcome. As of now, the funding does not seem to be there and rapid new development is generally looked down on by existing residents due to construction, congestion, etc. Many hope that de Blasio’s election means lower rents in the New York City area, but only time will tell if that hope has any chance of fruition.

As Economy Recovers, Luxury Retailers Push Out Lower End Retailers

A recent trend has higher end malls and retailers performing significantly better than their middle or lower end counter parts, as more affluent consumers begin to recover their wealth from the recession. As the stock market recovers and housing prices begin to rise, America’s upper class is beginning to feel more comfortable putting money into higher end retail outlets.

Unfortunately this has not been the case for consumers that are less well off. Many don’t have significant stock holdings and their mortgages are worth more than their properties. This combined with no significant increase in wages for the middle and lower class means that middle and lower end retailers have not seem a proportionate stimulus.

As a result, higher end retailers such as Nordstrom are making much stronger earnings than a middle tier store like J. C. Penny. This has a snowball effect that causes malls with a greater density of higher end outlets making more money, therefore seeing lower vacancy rates and higher investor confidence.

The long term effect is that, at least for the time being, higher end malls are seeing their ideal environment; a place where people can come to socialize and spend their day. Lower end malls are largely lifeless, with 40% of higher vacancy rates shoppers that visit only to stop by a particular store briefly. Though malls overall are on the path to recovery, the more retailers a mall has that caters to the wealthy, the more benefits they are reaping.

Chicago Manufacturing Sector Revived as Network Hub

As a society where many of us still grew up buying items at stores or malls instead of ordering everything online, the internet is a mechanical mystery. We accept that it is capable of transporting data across hundreds of miles in a few seconds but as far as many of us know, internet operates out of thin air.

As it would turn out, the online world does have a physical presence (albeit a very small and fast one) and that presence needs highways and an origin point like anything else. It is in this niche that old, outdated factory building in Chicago have found new life.

Chicago has always been a major distribution and manufacturing sector of the United States due to its relatively central location, and as luck would have it these features are still relevant to ensuring the fastest internet speeds possible.

Favorable geographical features come into play as well. Chicago has a relatively low rate of natural disasters, compared to the flood and hurricane battered shores of coastal cities. After Hurricane Sandy, many companies are looking to store their data in more than one place and diversify to areas just like Chicago. The presence of ready-made buildings to house their data centers only sweetens the deal.