By Konrad Putzier
Over the past year, land prices across New York City have skyrocketed and yields have shrunk.
But some leading developers argue that many neighborhoods still offer bargains.
“We’ve been in West Harlem for a year,” said Justin Palmer, partner at Synapse Capital Advisors. “It offers much more opportunity for capital appreciation and has seen strong rent increases.”
He added that the Broadway retail corridor makes the area particularly attractive.
“We also have a project in Jersey City, right next to the PATH station. It’s tough to not make a project work if land is $12 per square foot.”
At Ariel Property Advisors’ recent “Coffee & Cap Rates” panel, industry leaders gave their outlook for 2014 — and offered tips on which neighborhoods are undervalued and may still offer developers high yield.
Kevin Davis, CIO of Taconic Investment Partners, also said he sees potential in Harlem, along with downtown Brooklyn, outer parts of Bushwick and Crown Heights.
“New York is becoming a bit like London in the sense that it is becoming a city with many different neighborhoods where people tend to stay,” he said.
But Davis also emphasized that just because a neighborhood is up and coming doesn’t mean it is ideal for developers.
Washington Heights may have potential, he said, but an abundance of rent-stabilized apartments means it can’t go as quickly as Williamsburg in past years.
Shimon Shkury, president of Ariel Property Advisors, sees potential further north.
“The Bronx has a tremendous opportunity to grow,” he said, predicting growth in Bronx real-estate prices in 2014.
David Dishy, executive vice president for acquisition and investment at L+M Development Partners, agreed: “As the world realizes there is life outside of Manhattan, there’s a real possibility for growth in the Bronx,” he said.
Dishy added that artists priced out of Brooklyn could migrate north of the Harlem River, although he admitted the Bronx still faces “somewhat of an uphill battle.”
Dishy said he sees good opportunities for developers in an east-west corridor stretching from Newark over the financial district to downtown Brooklyn — in part because of a booming downtown office market. “The Conde Nast workers are looking for places to live,” he explained.
And for all those who consider West Harlem or downtown Brooklyn yesterday’s news, Joseph Kohl-Riggs offered a rule of thumb to find the next hot neighborhood. “You look at any given subway line,” said the director of acquisitions at The Hudson Companies, “go as far as you can — and then two more stops.”