Bloomberg - Oshrat Carmiel - 17 November 2016
The first apartment tower at Forest City Ratner Cos.’s mega-development in Brooklyn -- planned for a decade and under construction since 2012 -- will open for leasing this month, just as the borough’s run-up in rents is beginning to cool.
At 320 feet (98 meters), the building at 461 Dean St. has the distinction of being the world’s tallest property whose units are stitched together from prefabricated modular blocks, according to the developer, a unit of Forest City Realty Trust Inc. Less unusual is the timing of its arrival, with thousands of other newly built rentals also coming to the Brooklyn market.
The surge of construction is keeping a lid on rent growth in New York’s most populous borough as tenants, battered by years of rising costs, shop around for better deals. The crowded market spurred Forest City Realty to announce this month that it would postpone work on other buildings planned at its 22-acre (9-hectare) Pacific Park project in downtown Brooklyn, which is slated to have more than 6,400 residential units for sale and rent when complete.
For now, there’s the modular tower to lease up.
“There are so many units coming online in downtown Brooklyn right now, but I think that this building looks better,” Adam Greene, vice president of residential development for Forest City Ratner, said on a tour of the site this week. “We feel good about this one because it’s a better product.”
The 363-unit property, adjacent to the Barclays Center arena, offers the requisite luxury amenities: a rooftop terrace with panoramic city views, a game room with billiards and ping-pong tables, and washer-dryers in each home. The apartments were all constructed inside a warehouse in the Brooklyn Navy Yard, and delivered complete -- with the toilets, cabinets and sinks attached -- to the development site for installation.
Market-rate units, which account for half the building, start at $2,450 a month for a studio, $3,125 for a one-bedroom apartment and $4,750 for a two-bedroom. The one-and two-bedroom prices are higher than the Brooklyn median for those categories last month, according to data by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Forest City Ratner is monitoring the market to determine what kind of move-in incentives to offer, Greene said.
The glut of competition is already pushing Brooklyn landlords to cut deals to fill apartments. Property owners gave concessions, such as a month’s free rent or payment of a broker’s fee, on 12 percent of new leases last month, compared with 7.9 percent of agreements a year earlier. The median rent for all Brooklyn apartment leases signed in October was $2,875, down 0.3 percent from a year earlier and the third annual decline since July.
“The Pacific Park project appears to be entering the Brooklyn market just past peak pricing in this cycle,” Jonathan Miller, president of Miller Samuel, said in an e-mail. Rents in the borough, once considered a refuge from Manhattan’s escalating costs, peaked in August 2015 at a median of $2,950, he said.
About 6,635 new apartments are expected to be listed for rent in Brooklyn this year, according to brokerage Citi Habitats. An estimated 7,642 units will reach the market in 2017, the firm projected.
“Brooklyn needs time to absorb the new supply,” David LaRue, chief executive officer of Forest City Realty Trust, said on its Nov. 4 earnings call. Citing challenging market conditions in Brooklyn, the company wrote down the value of its real estate investments by $307.6 million, with much of that reduction related to the Pacific Park development, formerly known as Atlantic Yards.
Forest City Ratner is building the project with China’s Greenland Holding Group, which holds a 70 percent stake. The venture is currently working on a condo tower and two rental buildings designated as affordable housing that when combined with 461 Dean -- with which Greenland is not involved -- total about 1,200 units, according to Greene.
“We remain committed to bringing the entire project to completion, but there are a number of existing and near-term market factors that we must consider,” MaryAnne Gilmartin, CEO of Forest City Ratner, said in an e-mailed statement. Those include the new development supply, rising labor costs and the resolution of issues surrounding a New York affordable housing program, she said.
“While the overall schedule is fixed, and we will meet it, there is flexibility in terms of individual buildings, especially given the amount of work underway,” she said.