So many of the people who’ve come to Brooklyn in the last 15 years have come with big dreams in their overstuffed satchel bag they brought with them on the bus from Bumblefuck. Those dreams are so often chewed up in the city’s uncaring maw though, then shat out and left as fertilizer for other people’s dreams. The latest group of big dreamers now confronting just how tough it is to make in this concrete jungle where dreams are made from? Developers of luxury buildings, who are building so many shiny expensive buildings in Brooklyn that they might drive down the prices of these unit and not make so much money they can send their grandkids’ grandkids to Yale.
The word of the potential luxurypocalypse comes from the Wall Street Journal (subscription required), who reports that real estate analysts are suddenly looking at the glut of thousands of luxury apartments coming to Brooklyn and theorizing that the competition between all the buildings to attract tenants will lead to falling rents. It’s haunting really, just look at this chilling tale from a huge faceless landlord conglomerate:
Today, though, Chicago-based Equity is striking a different chord: While its Manhattan assets are generating strong demand and, in turn, higher rents, Brooklyn “is really dragging the portfolio down,” Mr. Santee said in a discussion of second-quarter results this summer.
Left out of the “dragging the portfolio down” quote was the end of the sentence, “down, down to the depths of the ocean to be drowned along with so many other screaming souls.”
To be clear, none of these rents are dropping like stones so far, but with 21,822 new units coming on the market by 2019 according to the Journal, analysts are predicting that Brooklyn won’t be the easy profit generator it once was. This is stoking fears among developers. Relatable, human fears:
Moreover, as land costs soar, developers are pegging thousands of rentals to the luxury market, intensifying competition for the same pool of moneyed millennials, hip techies and so-called broken-hip-sters, empty nesters and baby boomers flocking to the urban core.
Could you imagine? Instead of “moneyed millennials,” these buildings having to rent to regular old schmuck millennials like us?
Some developers like John “CATS” Catsimatidis are taking a brave stance, mocking analysts for what he terms “screaming” while beating his chest and noting “I’m the one who writes the checks.” And why not still beat your chest, since the Journal also talked to Jonathan Miller of the real estate firm Miller Samuel. Miller told the paper that while prices for luxury studios are going down a bit, studio prices in non-luxury buildings are still shooting up.
[Th]e entry level is seeing more demand-fueled rent increases…“Starter properties are growing quickly in price, but new product still skews to luxury,” Mr. Miller said.
We ran Miller’s quote past someone who knows how to translate real estate-ese, and he told us that it means luxury housing is pushing up prices for every kind of apartment, and that “unless you have money to burn you’re screwed.” Guess the old game of “Heads they win, tails we lose, let’s just reverse commute from Cleveland” is still being played.
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Don't bet on rents lowering. Developers would rather cut off their right arms than lower rents. They'll let the building go fallow until the city bails them out. Or they'll just wait a few years until the glass crumbles and collect the insurance.
Cleveland Rocks.