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New York’s Housing Shortage is a Precursor to an Evolving Market and Emerging New Options
“We expect the new mayor of New York City to press for the development of more low-income affordable housing while the middle class continues to have fewer alternatives in what is effectively a demand-driven market,” said Glenn Brill, a managing director in the real estate and infrastructure industry team at FTI Consulting. “The greater challenge is leveraging public policy to incentivize a broader base of private sector investment in a range of housing options and neighborhoods that will both keep the City competitive and grow economic opportunity.
“This kind of pressure on the marketplace is going to require new solutions to meet demand from diverse populations;
Among the trends that Brill highlighted are:
A bigger push into new areas of the boroughs. Forgotten areas are experiencing community revitalization and are now on people’s lists of places to live as investors continue to seek out emerging neighborhoods and a large segment of New York City’s rental population. In particular, entry-
Micro housing offers good things in small packages and is gaining traction. These units feature smaller spaces for roommate-free living options and the opportunity to make housing affordable to Gen Y’ers and the high percentage of New York City households without children. Micro housing properties can accommodate double the number of units and charge less rent for each unit, which can run as small as 250 square feet. Many of New York’s younger renters are rarely home but need private down time when they are. Micro housing can also meet the housing needs for renters that are transitioning through supportive housing at a lower cost without a return to the SROs (Single Room Occupancy) of the past.
Developers are seeking out a competitive advantage to secure the highest rents as consumers become more discriminating with higher expectations for their living space. For example, smoking bans and wellness amenities, street accessible bike storage, social networking, concierge services, co-working space, and a new definition for “pet friendly” are all in the future.
The convergence of 24/7 work and personal lives is also driving change. The physical space needs to facilitate a seamless transition between work and personal time, as well as social networking. Gen Y’ers, in particular, are seeking efficiency and convenience, home office spaces, multiple telecom providers, and of course Wi-Fi.
Foreign investors are interested in New York’s multifamily scene too and continue to convert obsolete office buildings into amenity-rich multifamily properties, while increasing demand for retail amenities and 24/7 activities in once-quiet business districts.
“Multifamily is, in many ways, the sweet spot for real estate investing, with vacancies at all-time lows, nominal risk, a reasonable cash-on-cash return and inflation hedge,” Brill added. “But the industry must continue to evolve to creatively meet the needs of New Yorkers and sustain the overall population to achieve future economic growth. It’s an exciting time to invest and develop, and mixed income neighborhoods can offer a steady flow of diverse opportunities beyond the shores of Manhattan.”
About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 4,200 employees located in 26 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The Company generated $1.65 billion in revenues during fiscal year 2013. More information can be found at www.fticonsulting.com.