BUYER BEWARE! Part 1 – Neighborhood Evolution that could impact your NYC Condo Investment
As we look around New York we see construction almost at every corner and in every neighborhood of the city. Places that were recently as two years ago empty, are replaced by new developments offering their apartments for sale or for rent. The structure of the city and its neighborhoods is changing by leaps and bounds. Despite some softness in segments of the market prices continue to remain strong, the question is where should one buy next. All neighborhoods are not created equal.
Cheap money led to rapid expansion in construction projects that made some of areas less attractive from an investment and appreciation point of view. It is important to note that personal preferences in achieving a certain life style often trumps everything else. If you are open to look at the entire market and interested in greater than average appreciation or high income from the property; future construction new developments will affect the market and your purchase.
Photo via Flickr by Mark Simon
Let’s take Trump Village for example. It is a stretch of land from 60th Street to 72 Street west of 11 or West End Avenues bordering the Hudson River. At the time the development started it was considered by many a new frontier with Hudson River views and ultra-modern apartments. Initially these apartments, first built on 72nd Street on the bank on Hudson River in 2000, were in a great demand and did very well. However, as the construction by Extell Development Company progressed and now in its final finishing stages (the last new development at 60th Street and 11 Avenue is to be completed within 6 month) the whole stretch of land has been overbuilt. This is not only affecting the buildings in Trump Village but also nearby new developments such as Element (555 west 59 Street) or 10 West End Avenue were rents dropped as much as 20% in the past 3 years. The rentals in these condo buildings experienced dramatic decline in rent and the appreciation on the condominium apartments is not as rapid as in other parts of the city.
To make a future income from these condo rentals even lower one has to look at several new mega rental developments on 57th Street between 11 Avenue and West Highway and along Amsterdam Avenue between 61st Street and 70th Street which offer a tremendous competition. A private owner of condo apartment has to compete with major real estate developer and hundreds of units offered for rent with considerable subsidies.
The Hudson Yards and Midtown West are most recent examples in which similar problems may arise. The Hudson Yards however does have great potential but it is important to evaluate each unit carefully making sure you buy the right unit/product. Typically, when purchasing an apartment off the first amendment, (Schedule A) pricing that potential for capital appreciation may balance out excess supply issues down the line if they were to play out. In order to avoid buying in the potentially or soon to be overbuilt areas one should look at the current state of the neighborhood and type of the buildings it is made out of.
If you buy in neighborhoods such as the villages (East, West and Greenwich village) or Lower East Side you can be assured that you’ll be risk free from over construction of new mega developments. The historically assigned buildings and streets prevent developers to build mega apartment complexes. It is also true for most of the Upper West Side and Upper East Side west of Lexington Avenue. Developments in that type of area tend to be smaller with a limited number of apartments that can be easily absorb by the market. In your quest for new apartment walk around the block and see how the building you are buying in compares to other buildings on the block.
As a rule of “thumb” long time (70 to over 100 years) established neighborhoods with historical districts and assign historical buildings prevent large number of constructions with excessive heights and mega units.
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