Dive Brief:
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While rents in New York City's high-end multifamily segment drop amid an oversupply and banks step back from financing deals, at least one developer said he is unphased and willing to keep building, according to Crain’s New York.
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Slate Property Group principal David Schwartz told Crain's there aren't enough properties coming online to meet the anticipated long-term demand as population levels rise city-wide while building activity is projected to cool.
- Multifamily building activity in recent years has been fueled primarily by the expiration and uncertain return of the 421-a tax break. Developers in the city believe that, even if the abatement is reinstated this year, the number of developments will not increase again until 2021.
Dive Insight:
A flurry of new buildings hitting New York City’s key markets led to rents tumbling in February, according to Crain's. This marked the first time in four years that rents for all unit sizes, including studios, have dropped.
The construction boom in many U.S. metros has largely been concentrated at the top end of the multifamily market as developers responded to an uptick in post-recession demand for luxury properties. As consumers backed away from homeownership in the wake of the recession, young professionals set their sights on job opportunities in major urban centers where they opted to rent instead of buy, putting pressure on available rental units.
The growth in top-tier inventory is not expected to slow in the near-term, with a January report by MPF Research finding that 378,000 new apartments are scheduled for completion across the U.S. this year — almost 35% above the 20-year average.
Chicago, too, is seeing rent drop-offs in response to an oversupply of apartment units. In February, Appraisal Research Counselors reported that inventory levels in that city are set to rise 150% from mid-2005 to 2018.