NYC Property Development Plunges Due to Covid, But Still Has Shimmer of Hope

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Sales of development sites in New York City fell 27%, compared to the same time from last year, posting just 103 transactions so far this year, as per an analysis by real estate firm Development Site Advisors.

By: Hellen Zaboulani

The city that never sleeps saw development plummet this year due to the COVID-19 pandemic.  Sales of development sites in New York City fell 27%, compared to the same time from last year, posting just 103 transactions so far this year, as per an analysis by real estate firm Development Site Advisors.  The report also shows that builders spent $1.4 billion, or 44% less on the purchase of new land in 2020, compared to the first six months of 2019.   In addition, builders took 41% less space at 7.3 million buildable square feet.

As reported by Crain’s NY, despite the depressing news, developers remain hopeful in the city’s ability to bounce back and resilience.  The report said there were 450 new building permits filed since January to start construction on their new sites. “New development is far from moribund, regardless of the uncertainties posed by Covid-19,” said Lev Kimyagarov, a managing principal and co-founder at Site advisors™. That number, for permit filings, is still 18% below the level for the same period in 2019, data shows.  Most of the permits are for residential developments, in all five boroughs of the city, except for Staten Island, which is centering on manufacturing.

Manhattan had the most transactions, in the dollar value of site sales, with about $530 million in sales, accounting for close to 40 percent of the total activity.  Still, there were just11 transactions as opposed to 21 deals made in 2019.  Brooklyn posted the second highest sales with $349 million from 42 sales. Staten Island had one transaction worth $2.3 million.

Brooklyn accounted for almost half of the total new building permit filings for NYC, with 212 filings since January.  Queens and the Bronx tied for second, each seeing 82 filings. Manhattan had only 27 new building permits filed.  “Brooklyn is the most populated borough in the city and has an extremely strong appetite for residential apartments,” said Rubin Isak, who also runs Development Site Advisors.   He also noted that the number of dealings is a more reliable measure of the market’s health, as it takes into consideration movement as well as the number of parties involved.

The COVID-19 lockdown, had a dismal effect on construction employment.  Despite the current activity, it is well beneath 2019 levels. In June, construction employment dropped 25 percent compared to 2019, despite the phase 1 reopening on June 8, which opened 33,556 non-essential construction sites back up for work.  The employment in June was 20% higher than the month of May.

Lou Coletti, the president of the Building Trades Employers Association, didn’t share much optimism.  He noted that though private development has started back up, the city’s public construction jobs are stalled for lack of funding.  “We’re really concerned about where the real estate market will be in the middle of next year,” Coletti said. “Many of the existing jobs will start to finish.” He added that there is still plenty of uncertainty in each step of the development process and that obtaining financing may become a difficulty.

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