Christine Haughney reports that so many of those Manhattan condominium developments are morphing into condo/rental and condo/hotel developments to suit a changing market.
Gary Barnett, the chairman of the Extell Development Company, said that for some of his projects, he was still figuring out how many units he might turn into hotel rooms or rental apartments.
One building that he is planning to construct on Riverside Boulevard between West 62nd and 63rd Streets may have some rental apartments. He is planning to turn the lower half of his project at 135 West 45th Street into a hotel, and part of his project at 151 East 85th Street into rentals.
Jules Demchick, the chairman of the J. D. Carlisle Development Company, who is building 290 apartments at 23rd Street and Third Avenue, said he would decide within the next month what the breakdown would be between rentals and condominiums.
Converting projects to rental apartments is starting to make more sense because this sector has strengthened. The vacancy rate for rental apartments in Manhattan is a very low 0.8 percent, according to Citi Habitats, a Manhattan real estate brokerage. The borough hasn’t had such a small percentage of rental vacancies since before Sept. 11, according to Gordon Golub, Citi Habitats’ senior managing director of Citi Habitats.
This is not surprising to me as we saw signs of this last year when Related began construction of a hybrid rental/condo project in an attempt to hedge the market.
101 Warren Street also is a recent project that combines the two but at least this project separates the rentals in a different building. Tenants also don’t have use of the condominium amenities. Which brings me to the question I have as a real estate professional and a condominium owner… how will this hybrid structure affect the perception of the buildings by prospective purchasers?
I own and live with my family in a condominium that has very few renters. The building is not a hybrid, but a full fledged condo with some investor units that have been rented out. That said, it is an industry-wide belief that owners tend to take greater care of the building and its common areas when their own financial stake is rooted in the project. Renters typically are a bit more lax in caring about the building as a whole. So in a building that is structured to house a significant number of tenants among the home owners, what will the ramifications be both aesthetically and financially for the owners? Will these hybrid condo projects be perceived as less valuable because of the rental segment of the population? I suspect that many of my buyers will choose projects that are 100% condo versus the hybrid project.
Regardless of the high rents that tenants will pay in these buildings, their lack of investment in the building may indeed lower the perception of value for prospective purchasers. Something that absolutely must be considered when shopping for a condo these days.