The Real Estate Roundtable with IPRG
IPRG Partners and guests discuss various topics on New York City Real Estate and the broader Real Estate Market.
The Real Estate Roundtable with IPRG
Summer 2025 NYC Rental Market Update with Natalia Harvey
We dive deep into the current state of New York City's rental market with Natalia Harvey from Compass, unpacking bidding wars, shifting renter preferences, and why lease timing matters more than ever. From rising rents in Bushwick to the return of space-conscious tenants, this episode covers the trends shaping the summer surge — plus a look at how new rental laws and high-interest rates are fueling the rise of high-net-worth renters.
Follow IPRG: @iprg_ny
www.IPRG.com
We're here for the Real Estate Roundtable with IPRG and today our guest is Natalia Harvey from Compass. Welcome, thank you, nice to see you.
Speaker 2:You as well.
Speaker 1:Good to be here, thank you, and Luke Sproviero and Derek Bestrick are here, and we want to talk mostly about, I think, the rental market in New York City at this point. But you know really anything real estate related, things that we're seeing on the ground, things that we find interesting. But, yeah, we're in June of 2025. Seems like it's been a pretty active rental season so far. So, yeah, we'll start off there. We want to just talk about, you know, whatever, whatever it is that you're working on or seeing, yeah, no, I mean you know we're in the middle of the high season of the rental market.
Speaker 2:As you guys know, it's a very seasonal market, so from spring to like September we see the highest uptick in the rental market. So we're literally in the middle of it. Rents are high, tenants are competitive. So you know, I see all positive things. They're definitely you know our variances depending on location and product, but overall I mean we're happy with what's going on in the rental market this season and it's been good.
Speaker 1:So when you say rents are high, like what is that like compared to? Is that compared to like this time last year? Is it compared to the winter? Like how much higher are rents, would you say?
Speaker 2:I mean the market has been increasing and growing over the last several years. So year over year we see increases of a couple percent. But the biggest difference is you definitely see in the rental market which are seasonal, so you know the same unit renting in the middle of December or, you know, right around the holiday season will rent for several hundred dollars more today just because of the seasonality and just the lack of, you know, demand around those, you know holiday times and just the winter season. Overall it really slows down significantly.
Speaker 1:Do you think that's because so many landlords have put their tenants on like summer lease schedules, so it seems like everyone's always trying to get their leases to roll in like June, july and August. So I just wonder how much of the market is even available to rent during the fall and winter seasons.
Speaker 2:Yeah, so that also is a factor. The inventory isn't really there also in the winter season because the demand is in there. So landlords are smart and they work around it and they position themselves so they have these summer expiration cycles thing that I always recommend to my clients to be mindful of, that if we have even potentially a winter move-in date, to offer extended lease terms to get it on a better cycle to take advantage of better markets the following year.
Speaker 1:Why is the summer season so much better than the winter? Why does that make sense, like rents are higher this time of year?
Speaker 2:Yeah, I mean it's a good question. Generally, you know, a lot of people come here for work. People graduate, young professionals start working later in the year. It's also, you know, when people go back to school. So a lot of students come into New York around the September timeline, so that's usually when there's a big influx of people. It's really, you know, job related and just where people are in their lives. And in the winter cycle people are less focused on making also big life decisions and big moves. And you know, come November people focus on spending time with family, people travel home and just don't make any big moves and it's just kind of like established itself as like this cycle in New York and the real estate rental market in New York.
Speaker 3:I never thought about that, but it's definitely true. I've never moved in the summer, but it definitely obviously in New York is so true.
Speaker 1:I always moved in the summer. But it definitely obviously in New York is so true. I always moved in the summer because I moved here after college and I moved in the summer and then I was just always on the summer cycle.
Speaker 3:I will tell you that every time I've rented. My last lease started in November and there's not a lot on the market.
Speaker 2:You got a nice little discount on that. Exactly I was going to say that say not really, because there was not anything on the market, because you paid the uh, the broker fee.
Speaker 3:Oh yeah, we'll get into that yeah well, no, but it's just there wasn't. I'm in, I'm at a stage now in my life where I have kids and where I live in manhattan like I need a big apartment, or a bigger, I should say, apartment, and there's just not a lot of that ever. So it was slim pickings for me anyway. It's's not like I got a deal.
Speaker 2:There wasn't a lot so larger size units, I will say, are always more competitive. But, like you said, you know there are people that are trying to be savvy and like take advantage of those months to get that discount. But it doesn't always work out in their favor because they just might have to settle for something that they didn't really want because the availability is in there. So that's also why, you know, the summer market is that competitive, because people know they'll have more to choose from. But there's a lot more people coming in and just fighting over these desirable apartments. So we see a lot of bidding wars also in the summer season.
Speaker 1:Really.
Speaker 2:Yeah.
Speaker 1:Like stuff going over. Ask.
Speaker 2:Yeah, so I just did a deal in Greenpoint really nice condo, not amenitized building, eight family and really nicely done and we priced it right. And we had so many people come in and we got 10 applications with several bids and we went significantly over ask and charged a full broker fee.
Speaker 1:So why was it in such high demand?
Speaker 2:Because there's just that type of product. The inventory is really really tough right now and it was in a prime location in Greenpoint, green point and there just isn't that many units that are priced. First of all, well, because it's also a strategy that I discuss with my clients and it's almost like an art to price it just right, to get the sweet spot of making the most out of your investment but getting the demand, because landlords tend to just push pricing to the limits and then you have the opposite effect where potentially you know your unit sits on the market, you have to reduce pricing and you might get less for what you would have gotten if you priced it a little bit lower. And that's a strategy I like to go with, especially with private clients, because they oftentimes also care about having the selection of people coming in. So it really depends also on the client that I'm working with the strategy we go for. So I'd rather price it conservatively and drive it up naturally by creating bidding wars.
Speaker 1:Do you usually tell the owner what your suggested list price is, or are they kind of dictating to you like this is what we need. This is what we want.
Speaker 2:So it depends really on the client. So my private owners usually they go by my recommendation and I provide them with a market analysis and data and I explain my recommendations to them. But I do also work with larger portfolios where they have just set requirements and numbers that they need to meet. So that's usually where we're pushing pricing, because it's really just a business strategy and we need to just accommodate that and meet that. And our team is doing the best that we can and we are oftentimes achieving these rents and these prices in these cycles. So that's why it's also so crucial to have the proper expiration dates and if we want to go deeper into it, one of the reasons my clients hire me is because we don't cut corners on marketing. So if you want to get top dollar, we treat our rental listings as if they were sales. So we go all out in our marketing and do the same as if we were trying to sell it and we usually move it at the right prices.
Speaker 3:I will say, though, after I've worked with you a number of times, I'm personal buildings that we own, and your pictures are very, very good. Our current listings are great.
Speaker 1:So let's talk about that. So you know, I'm starting to see a lot of the virtually staged units which I'm always kind of skeptical of. I'm like what does it really look like? What can it really fit? But I think those are starting to get better. I know that with for sale listings, a lot of brokers doing actual like physical staging they're putting in furniture and they have that whole side of the business. Then I'm starting to see this AI staging starting to roll out which, honestly, I don't think it looks great. I think it looks pretty fake. I'd love for you to elaborate in terms of what it is that you're doing for your listings to put them in the best light possible.
Speaker 2:We work with professional photographers. We still use the virtual staging and I agree it used to be a lot worse but it's gotten significantly better and it depends on the vendor that you use, and we have a list of great people that we work with and sometimes people are surprised that it's actually fake furniture yeah when they come in. So you know, it's always like good to hear feedback from clients.
Speaker 1:Is the furniture like? Is it sized accurately for the space?
Speaker 2:Yes, because we provide them with measurements of the rooms and ceiling height so they can scale it accordingly. So they are very, very good at making it you know it natural, so it doesn't look fake and we've achieved great results with it. So the actual physical staging for the online marketing part isn't necessary, but we do sometimes opt for physical staging still to showcase certain spaces, because it definitely helps, especially in higher price points.
Speaker 1:Got it. And what about this AI staging? Have you seen any of that?
Speaker 2:We haven't used it because I'm not a fan of it. Also, the AI images they're not ready yet, I think.
Speaker 1:They're not.
Speaker 2:In my opinion it's not.
Speaker 3:What's the difference?
Speaker 2:What's AI saying.
Speaker 1:Someone sent me this building that he's trying to sell last night and he's like look at the listings. The building came out amazing and I went on. I'm like, oh my God, I'm like these look unbelievable. The units, the units.
Speaker 3:Wait, it's staging more. It's like lying about what the kitchens look like.
Speaker 1:It's on Street Easy right.
Speaker 3:Okay.
Speaker 1:And the lighting is perfect and the sun is going down, and the way that the blanket is draped over the bed or the couch, it's absolutely perfect. And then I look at it a little closer and I'm like this is all fake. I'm like what does it really look like? So if I was a prospective tenant looking to rent, all of a sudden I don't know if I want to go see it because I'm like what am I actually getting?
Speaker 3:into here. Is this worth?
Speaker 1:my time to go.
Speaker 3:Like the kitchens you mean. It's not fake, though. It's just like you put furniture in.
Speaker 1:I'm sure what the agent did, I assume, is they took a photo of the space and then put it into like chat, gpt or whatever and asked for like an upgraded rendering of the space and then they put them on Street Easy. At first look it looks great, but then, after you look for another second, it looks completely computer like computer generated it looks fake that's not good yeah, it's like looks too good you don't want to waste people's time?
Speaker 1:yeah, you don't want to waste people's time. I, if I'm the tenant, I don't know that I'm going to go and spin my wheels to go see it without real photos and it's also not beneficial to anyone, because you never want to over promise, under deliver and then they show up and they're disappointed.
Speaker 2:So oftentimes the feedback we get, people come in and they're like, oh wow, this actually looks like what it is.
Speaker 2:And it immediately creates a better you know client relationship and they trust to move forward with you and work with you. Because you know, when you have images online that sometimes don't even represent the actual apartment, people come in and they're frustrated because you know they wanted to see the apartment in the photos. And they arrive and it's it's not what it is. They immediately blame the broker. You know you're not trustworthy, they don't want to work with you and it's just like it's off to a bad start.
Speaker 2:So you want to like start on the right foot and be transparent, and I think that's also like a big thing that people value these days. Uh, because unfortunately they're. You know, our business has a reputation of not always being that, but I think like there are more and more agents coming forward and using that approach of transparency and people value that.
Speaker 1:It's great.
Speaker 3:Yeah, it's really good, all right.
Speaker 1:Well, you mentioned that larger units are very high in demand. What else are you seeing where there's just a lot of demand? Is it outdoor space like a backyard or a terrace, and obviously all?
Speaker 3:locations, just to jump in. All locations are obviously different and different markets, but I think from what Derek's saying, like amenities, right.
Speaker 1:You're basically touching on that. Yeah, anything really.
Speaker 3:What gives you the biggest ramp up?
Speaker 1:I guess what I want to know is what is the most in demand and what's the least in demand.
Speaker 3:I think it depends on like location, right, yeah?
Speaker 2:It's going to vary from neighborhood to neighborhood.
Speaker 1:Okay.
Speaker 2:But, if you really like, generally speaking, when I say I think space is the overall winner. Amenities are still very much in demand, especially in higher end neighborhoods.
Speaker 1:What amenities?
Speaker 2:You know, having a doorman 24-7 elevators you know those are like the basics Laundry nowadays. I almost don't want to call it an amenity because it should be standard. Everybody expects that. And then obviously we have the luxury high-rises that offer, you know, gyms, health clubs, whatnot roof decks. So those are still amenities that are desired in higher price point neighborhoods. So, you know, on the waterfront Williamsburg, dumbo, those are areas where people really go for those luxury buildings and the price points are really, really high nowadays and people will pay for that quality, but they still pay close attention to space.
Speaker 2:So it's kind of like a dance between the two, but I think the overall market will still go for space, especially in several Brooklyn neighborhoods. Like you mentioned, it depends on the area Bushwick, bed-stuy, up-, up and coming areas that have been establishing themselves. It's still definitely an area where people are looking for space. Ever since COVID, people started working from home, so people look for that extra. You know square footage because people spend a lot more time at home and outdoor space also has become a big one, yeah, footage because people spend a lot more time at home and outdoor space also has become a big one.
Speaker 1:Yeah, what about on, like the low-rise buildings that don't have elevators and gyms and roof decks and like all, like, like, not the new construction on the waterfront. But what if you just go in a little ways, like, like, what? Like, what's the most in-demand units you know for, like a low-rise type of building?
Speaker 3:like you know, the boutique type six, eight-unit buildings, ten-unit buildings.
Speaker 2:Yeah, so those smaller footprint buildings I think are best designed for one-bedrooms. Three-bedrooms and those kind of properties tend to be very tight. So those have seen a slight decline in pricing but overall very stable. But one bedrooms definitely we've seen a much bigger increase in pricing because people just, you know, don't want to live with roommates anymore and just like, want to have their own space.
Speaker 1:And so this is. This is actually interesting. I'd like to dig in a little. So if someone has a building and they have the option of doing like a nice one bed with a lot of space, or they can maybe do the Tetra style and squeeze in two or three bedrooms, what kind of rents are they getting for those different type of units?
Speaker 3:The whole thing is the argument, and I agree with what you're saying, what you're bringing up. The argument is people are worried about just making, since a lot of our clients, a lot of people we're talking to, they're redeveloping these buildings, so they're choosing like should I make them ones, should I set them up so they can be ones, but if the rents, if the rail market is crazy, I can flex them to twos or I can take the twos and make them threes, but when you do that, it's not permanent, right? These aren't permanent ones.
Speaker 1:People are very afraid of making permanent ones or permanent twos when you could do the flex twos. Also also say that a one bedroom is going for 4500 for a nice big one bed yep. But a small shitty two bed, yep. Or three bed is going for like 52 to 5500, yeah, across like six to eight units in the building. I mean that's six to eight thousand dollars potentially in income a month. It could be a hundred grand difference on your NOI. That's a million dollars in a refi and obviously more in a sale. So what should owners be thinking?
Speaker 2:I mean I definitely understand that approach and there is a point to it. Definitely, it really depends on the floor plan and what I like to do is closely review especially in early stages of developments layouts, because there are options where you're absolutely right, like you can do you know, a good size two bedroom still, or a good size three bedroom still, and push that price point like you discussed Maybe not, you know to the top price point for a three bedroom in the neighborhood.
Speaker 2:But, like you said, a less desirable three bedroom will still get you more than, like a top price point one bedroom. But there is a limit to that where you can do it, because you know sometimes these spaces become just unusable. And when you have, like these tiny bedrooms where you can barely fit, you know, a twin bed and a dresser, you also are facing vacancy loss. And then you're facing a lot of turnover year over year because even if you find a renter, they will leave again. So it's coming with a lot more risk. So it really has to make sense numbers wise.
Speaker 2:So I like to review the plans and give proposals on what I think this layout can go for. Or this layout can go for the flex units that you've mentioned, for example. Oftentimes what I see, when we have a one bedroom that could potentially be flexed into twos, they rent for the same price and the twos sit a lot longer on the market versus the generously sized one bedroom. So that's what I'm saying. It really depends on the unit and how usable it is. But I advise against squeezing the second flex room because you know you have to discount your rent significantly and you're in the one-bedroom market at the end of the day anyways and it just has a negative effect overall.
Speaker 3:So I don't recommend it all the time. Yeah, that's interesting. What part has a negative?
Speaker 1:effect overall, so I don't recommend it all the time. Yeah, that's interesting. What, what part? No, it's just that, um, I mean, tenants are really gravitating towards better space, bigger and they're humans. Um, you want space. Yeah, trying to jam in that extra bedroom because the the rule of thumb used to be every you know, like an extra thousand dollars a month for an extra better.
Speaker 3:The extra better means you're taking away from your living area like what's more important, like I always thought that it's more important to have like a living room and living space than the bedroom, right, because the bedroom you're just sleeping in, but if you have like no living room, it's an issue like what is your opinion on that?
Speaker 2:no, I agree a hundred percent. Living space is just as important. Um, I think it used to be different, but times have shifted Again. Especially because of the work-from-home culture, the living space has become very, very significant.
Speaker 3:Living space being like living room. Living room, yeah, not the bedroom.
Speaker 2:Exactly so. That's also why we briefly touched base on this before our recording here that back in the day. You know, I was doing a lot of rentals in 2015 and the landscape was very, very different. Living rooms didn't matter Especially. You know, I was heavily involved in the East village and it was a lot of, you know, students coming into town and they just want it to be in those prime areas, and that was the time where flexing those rooms and squeezing every square footage into a bedroom made sense.
Speaker 2:But you know that was 10 years ago and the markets definitely have changed and COVID had a big impact on that and people are now looking for different things. And you know, getting rid of living space in order to get a second bedroom, to have a roommate in a space, isn't necessarily the thing to go anymore. Yeah, yeah.
Speaker 1:Makes sense. It absolutely does make sense. I mean some of these bedrooms we see that are like seven feet wide six feet wide. Yeah, it's supposed to be eight feet, but people come in and they're like where am I going to put my bed?
Speaker 2:Yeah, and you know it's supposed to be eight feet, but we all know how that goes. People come in and they're like where am I going to put my bed? And we try to measure it for them and show it to them. But I understand it. They're very, very tight rooms. And then you make a commitment, you rent a space for 12 months and then people often have furniture and they're like I can't put my bed in here. What are you going to do?
Speaker 1:Let me ask you this question. This has come up a little bit. There's somewhat of a debate that I'm hearing now about adding additional bathrooms or maybe taking that space and making it like a closet instead. Do you have any thoughts on closet space versus bathrooms? If there's a little bit of extra space that could be used?
Speaker 2:I am always team closet space because I think storage, especially in New York. City is never enough, and it's a big thing that comes up amongst renters, especially because in the condo sector, developers will make sure that there is enough closet space, but when you're looking at the rental market, it's really really minimal. And tenants complain about it and it's a real problem. So I would opt in for better closet space at any point, especially if you already have like a one bath plus. You don't necessarily need a third bathroom or like another powder room you know.
Speaker 2:So it's definitely important to pay attention to closet space. Um, I had a developer that did a two-bedroom apartment with three bathrooms and I asked him why didn't you do a walk-in closet instead?
Speaker 3:It was a two-bed, three-bath.
Speaker 2:Yeah, and it didn't make sense and it wasn't necessary, but it was the same question that was raised. He thought everybody gets their own bathroom and then when they have guests over it might be a nice perk. And unfortunately I came in after the fact, when it was ready, and I told him like it wasn't the right call, because we were missing closets in that apartment yeah.
Speaker 1:What about, like, basement storage? Is that a pretty valuable amenity or thing to offer? If you can do it, yeah, I think so?
Speaker 2:Yeah, Because people have suitcases you know yeah. Seasonal.
Speaker 3:Yeah, I think so. Yeah, Because people have suitcases, you know seasonal items and where do you put them? People usually don't want to go out and rent. You know a monthly storage space outside. So having that in your building, it amenity, let's say like another half bath is, or outdoor space, obviously like washer, dryers, not washers, dishwashers, what, what, what's the best? Like what? Could someone really get the biggest bang for their buck when doing an apartment rental?
Speaker 2:Dishwasher and laundry, those are the staples you have to have it. Outdoor space is great, but it's not a must-have for every renter.
Speaker 3:Correct.
Speaker 2:So you're really just looking at the pool of tenants that you're working with and it's a much greater percentage of people needing to have laundry, needing to have a dishwasher, and then you have definitely there is a market for outdoor space where they say I can't live without it, but most people will say it's a nice to have. And this is also always something I ask my renters when I work with them what are your must-haves and what are your nice-to-haves? And that's usually the two categories that these fall into.
Speaker 1:How much are tenants willing to pay for outdoor space? What's the premium on a private outdoor space?
Speaker 2:Ballpark, again depending on the neighborhood. Like for a nice balcony in the Bushwick and Bed-Stuy areas, I would say $100, $150 at most. If it's a really nice outdoor space, for a backyard $300, $400, $500 depending. But in prime neighborhoods obviously that's going to go up also as rents go up. So that's going to increase as well.
Speaker 3:Yeah, I would think it's. I agree with you. I mean, I think it's just such a game changer to have it. I mean a real outdoor space, not just like a balcony, to have like a roof deck or backyard. I think I mean it changes your entire experience.
Speaker 1:I mean someone in this office said they pay a thousand dollars a month for outdoor space.
Speaker 3:And I don't know if that's necessarily. That person also has a dog, though, and that's big that. I believe, though, in higher price point neighborhoods.
Speaker 2:A hundred percent, a thousand dollars is not, you know, unreasonable to upcharge for a backyard.
Speaker 1:It's a lot of extra space too.
Speaker 2:Yeah, and like you mentioned having a dog, you know people with pets, people love their pets. People will spend a lot of money on their pets. So you know especially the backyard factor Balconies less so because there's only so much you can do with it, but yard space is definitely a big one for people.
Speaker 1:So I'd like to talk about concessions and, um, just get a sense of what people are doing. Like there was a period of time when a lot of landlords were like grossing up the rents and offering like a month free. And is that still like a trend for people offering like higher rents but one month free? And then, um, you know what happens when the lease expires. Does the tenant get another month free or is the landlord basically saying you have to pay the full rent? Like how's all that stuff? You know what happens when the lease expires Does the tenant get another month free, or is the landlord basically saying you have to pay the full rent? Like how's all that stuff playing into the market at this point?
Speaker 2:Yeah, I mean it really is an interesting topic. In general, like with the concessions, it's a big thing for new lease-ups. When you have a fully vacant building and you're trying to lease it up, you know, depending on how big the development is, you offer these concessions to incentivize people to come in and oftentimes the developers will try to the following year not offer the same concession. But tenants have caught on to that and they now are asking these questions ahead of time and they're asking what's going to happen to my rent next year? And people do try to pre-negotiate options to renew um where the landlord is sticking to the same concession structure, still pushing gross rents um, whilst offering that same concession to keep the increase reasonable for that tenant year over year.
Speaker 1:Why do you think landlords want to gross up the rent? Does it have to do with, like, the refinance value or the sale value, or is it like a good cause, eviction type of thing, where they want to like make sure they're keeping the rent high enough so that they don't end up getting stuck below market?
Speaker 2:I think it's a little bit of everything. I think mostly it's a focus on the refinance aspect. It definitely helps in the resale value as well because you have a higher gross rent roll and this is what's being paid attention to With the good cause eviction laws. In certain neighborhoods, even with the gross numbers being higher, you don't really reach that limit limit, especially, you know, in Bushwick and Bed-Stuy neighborhoods. They're still going to be subject to good cause eviction unless you know you have a newer construction where the new certificate of occupancy.
Speaker 2:You're exempt from that. So we see also a lot of the alterations. One to bypass that good cause eviction law, because everything else is subject to that has CO issued prior to 2009.
Speaker 1:Yeah, yeah. So good cause eviction. I think the rate of increase allowable right now is like 8.79%. It's like almost whatever, just a little under 10%. When renewals come up, are owners able to get basically that full good cause eviction increase. Are owners asking for that increase? Are they offering something less Like? How is that playing into renewals with existing tenants?
Speaker 2:Yeah, I mean usually landlords opt to go with market rates, so that's not necessarily dictated by the good cause eviction, you know caps, and I mean it's a very generous increase amount anyways, and usually you're not able to get close to 10% on your year over year lease.
Speaker 1:Yeah.
Speaker 2:We saw that a lot after COVID happening because we heavily discounted rents and then we just came back to the market. But nowadays standard increases are like between five to 6% and those are already, you know, getting pushback from tenants. So landlords are trying to obviously keep their renters in place and just keep it at market rate. Eventually, you know, they will try offering higher renewals. But if the tenant is pushing back, it's better to keep the tenant than having to, you know, re-rent it and not necessarily getting the same rent on the open market. But obviously, unless your unit is currently undervalued, you're going to let that tenant go and rent it, you know, for the right price on the open market. Yeah.
Speaker 3:All right, cool, that makes sense, but are you seeing that a lot Like the cause?
Speaker 2:We haven't really dealt with it all too much it hasn't been an issue for us at all because it's still within the limits and it hasn't come up as a conversation with our renewals just yet, so we're not really struggling with it.
Speaker 3:And people from our side of the road. People are definitely underwriting to it, right. I mean people. When they look at these buildings with low rents, they have to take into consideration and we're seeing it too right. A lot of tenants obviously know about it and they're exercising that and it's tougher to price out these free market units.
Speaker 2:Yeah, yeah. So that's why it's very important, when you do a new lease up, to have the right team in place and get your numbers right, because unfortunately, like you said, when you're stuck with a below market rental, then this is when it's becoming a problem.
Speaker 3:So, yeah, yeah, so you were saying you're involved a lot of times before people start developing. They're having you look at like layouts before they start actual construction.
Speaker 2:Yeah, some of my landlords. We do that for them. So we really like sit down together and game plan and I'll advise them accordingly, depending on what it is that they're trying to do. If they're going down the rental route, you will develop it differently than if you're going down the condo route, because you know you need to plan your layout slightly different and the demands and wants of the different groups and clientele is just a little bit different. So you tailor it towards a renter. If you're looking to make it a rental income-producing building and hold it or flip it afterwards.
Speaker 3:A lot of our clients are doing the flex stuff still. I mean you brought that up and I'm thinking about it a lot that you're talking. It's hard because people are trying to sell these exits a lot of times to these big owners that you're doing rentals for too and they want the income right, everyone's looking at it from a yield basis and people don't really think about actually just renting the units and have them sit on the market and not have turnover and solid tenants and they gravitate towards this flex market type units so they could sell to a fund or they could sell to someone that's just looking at rents. Yeah, and it must make a lot of these markets in brooklyn like tough right, like, I'm sure, like williamsburg, greenpoint, bushwick, bedstock, these are all those type of markets and I'm sure the inventory must not be great, for, like a tenant, I feel bad right yeah, yeah, yeah, it's definitely.
Speaker 2:That's why, especially well-made units, they fly off the shelf and you know that's the apartments where you get the bidding wars yeah and then you have, you know, those developments that unfortunately, you know have been chopped up into what they should have never been yep and then it sits on the market and you know you have a lot of vacancy loss and it's just you know when you're trying to sell it down the line.
Speaker 2:You know these private equity funds they're also, you know they're savvy, they look at that and they look at the data a lot and they consider and factor in everything that you know could happen and it's higher risk units at the end of the day and they will come in and price it more conservatively.
Speaker 3:You're right. Yeah, that's what we're seeing too. I mean mean buildings that we own, like we talked about earlier the bigger bedrooms, the bigger living space. A lot of times these are buildings that you didn't put a lot of money into, but they're just laid out the right way and they go quick. Yeah, there's bidding wars.
Speaker 2:People want to live in these, in these units people love charm like people love like it doesn't necessarily have to be like brand new, and a lot, yeah, I hear from people is like they're looking for character because there's so much new construction and so many developments and people are slowly starting to get tired of it and like having a well-maintained and preserved, you know pre-war building and people will come in and see the original detail and people appreciate it, because it's rare nowadays and it's uh, it's less efficient in how it's laid out, so that means there's more space.
Speaker 2:You actually get living space Exactly.
Speaker 1:Yeah, it's bigger overall layout, just like the townhouse versus condo argument where the townhouses are more inefficient, there's wasted space, there's more space and people really appreciate that, compared to the condos, where every single square foot is maximized For sure.
Speaker 3:That's why, where I live in Manhattan, there's a lot of lofts and lofts. The same thing so much waste, not waste space. We use every inch of it, but it's not so perfect where, when someone's building a building or got renovating a building, they're maximizing every inch. So it's tough, yeah. Yeah, did we touch on the new rent laws?
Speaker 1:No, so I was about to bring that up the Fairness in Apartment Rental Expense Act, the FAIR Act, which goes into effect next week, yeah, June 11th. You want to give us a quick overview on what this is all about.
Speaker 2:Yeah, so it's really.
Speaker 2:The purpose of it is to try to make, you know, renting more affordable and more fair for tenants and consumers and, you know, putting broker fees at the end of the day on the client that hired them.
Speaker 2:So it doesn't eliminate broker fees, because I think that's what some tenants believe. But what it does is now there's going to be a law implemented that the landlord is going to be responsible for covering the broker fee if they choose to hire their own broker, whereas now sometimes an owner can just choose to say the tenant has to pay the fee, although I hired the broker, and there's always this difference between fee and no fee apartments, and that's just going to eliminate that whole question. And if the landlord hires the broker, it's always going to be a no fee listing for the consumer, provided they come in without their own broker. So if a tenant still chooses to hire their own representation, they're responsible for paying the broker fee because they're getting a service and you know they have someone on their behalf. So it doesn't really eliminate that because tenants are still working with brokers.
Speaker 3:They are.
Speaker 2:And yeah, they are For rentals. Yes for rentals, because you know there are people they have busy schedules or they, you know, are relocating. The New York rental market is crazy and overwhelming and they want the help of someone who actually knows what they're doing. And people pay their brokers, especially if you do a good job for them, and they gladly do.
Speaker 1:So in that situation is the landlord, the owner, paying their broker, and then the tenant is also paying their broker.
Speaker 2:So there's like two fees If there's two brokers. Yes, there's two separate fees, Two separate fees.
Speaker 3:But yeah, it makes sense, yeah, like for me I never used a broker for like my rentals, right, like I would. I mean there was a as a tenant. Yeah, like I didn't like have my own representation.
Speaker 3:Yeah, obviously the landlord has rep, right. But yeah, I guess, especially like the high-end stuff, I'm sure high-end stuff, I'm sure Like in Manhattan where the rents are big, I'm sure people do have dual rep where they want to have people scour the market. But now, with Street Easy and all this stuff, do you really need someone finding you an apartment? It's like insane, it's not really about finding the place because, like you, said it's all available online.
Speaker 2:You can do it on your own. But there are people that just want the extra, like you know help and they don't have time or they're not here Oftentimes you know people relocating. They have an agent like on the ground, like previewing all of these units for them, and that's mostly like when people will work with someone. But you know a longtime New York City resident who's you know been around the block and has done this many, many times over. They don't necessarily hire their own tenant's representation.
Speaker 1:They don't need it because they know what they're doing. So what's this going to do in terms of rents, especially in Manhattan? Because Manhattan was usually a market where the landlord would hire the broker but the tenant pays the broker fee. So the tenant would basically sign the lease paying like 15% of the annual rent up front or at least a month. But now if the landlord has to pay the fee, is the landlord just going to raise the rent and factor that in?
Speaker 2:I think that's just the natural development that's going to follow, because you know landlords don't like spending that extra money and that's why they were trying to put it on the tenant. But also, you know, with the no fee listings that are currently existing, it always has been factored into the rent regardless, because I always present my clients with two numbers. We can list it at a higher number as a no fee unit, or we list it as a fee unit where the tenant covers the fee expense but we get less money for it.
Speaker 1:So that has been.
Speaker 2:It's not a new thing. It's just it's been happening already, but now it's going to, you know, become a law and just uniform, where you know the broker fee is going to be priced into the rent from day one, without it being a question how you want to approach it. But I think that's just ultimately what's going to happen and it's just going to miss its effect because it's just overall going to make rentals more expensive for tenants because now the landlord has to pay the fee.
Speaker 3:I agree and I slightly disagree too. I mean, I like this law. I think that tenants shouldn't have the burn of paying it and it's spaced out right that tenants shouldn't have the burden of paying it, and spaced out right. So, instead of like coming to the table with like you have to pay a huge fee and like it's like the first month rent and then security, it's the owner can just pay it, right, like everyone just gives. I'm sure you're not supposed to, but they just give the broker the security deposit and there's your fee anyway, right? So it's not like they should probably leave it in an account, but people do that. They should probably leave it in an account, but people do that. Um, I think it's a lot. Especially, I didn't see some. Is it a big thing in brooklyn for for tenants to, for landlords to not pay, or do they? Do they pay in brooklyn? I?
Speaker 2:mean in brooklyn. Yeah, most of what I see are no fee apartments yeah and it's again. It's something that I've been like recommending to my clients, because it always, um, at the end of the day, you make slightly more money over it because, uh, the pool of renters is bigger, because every single platform has that little check box no fee listings, only please. So a lot of tenants will exclusively search for that, even if it means they have to, like, stretch their budget a little bit.
Speaker 2:Yeah, because again it's priced into it already and I fully agree with you, like coming to you know, uh, the lease signing and like having to like put up with you know first month's rent, security and a broker's fee.
Speaker 3:It's a lot, it's a lot for sure yeah like, yeah, I've always rented in manhattan and I think every apartment I've paid the paid the broker. But brooklyn I know it's not the same, but manhattan I mean maybe it's changed now, but yeah, it's rare, yeah, and I feel like for the owner it's changed now but it's rare and I feel like for the owner it's no big deal to pay the broker fee.
Speaker 1:It's like you hired the broker, they did a good job, they brought you offers and applications and pay the fee. But to put that on the tenant at the lease signing it's a lot to ask.
Speaker 3:And it's not like a one-month fee. These people are trying to get real money, like 15% it depends what the rent is, but that's a lot and for the consumer, the tenant, to be negotiating with a real estate professional who's insisting and demanding on 15%.
Speaker 1:it's a tough position to put them in For sure. I like the FAIR Act. I think it's fair.
Speaker 2:I think it's going to.
Speaker 1:That's my opinion.
Speaker 2:I think at the end of the day it's also going to benefit the landlords in a way, because then they also have transparency over the fees Because, like you said, like brokers will try to charge the full 15 percent, which I think you know is excessive, and now it's going to be probably just kept at the one month's rent which is usually what I charge my clients when doing a rental.
Speaker 2:And then it's also a little bit more transparency, because the 15% of the annual rent was mostly designed to also be split between two brokers when there's like both sides involved, but it just became standard, for you know, the listing agent to collect the full thing, even when the tenant came in without a broker, and the owner might have not even known about that.
Speaker 1:I didn't know about that.
Speaker 2:So it also provides transparency to the owner, because your unit might not be renting, because your broker is trying to make 15% instead of reducing their fee to a month's rent, but now the owner has control over that how much they're willing to pay their agent.
Speaker 2:I like that, which puts the landlord, at the end of the day, in a better position. Also, instead of having the broker have free range and charge whatever they want and potentially discourage a renter from renting an apartment. So unfortunately, it's still something that's happening. So I think, at the end of the day, it will provide more clarity and transparency throughout the whole process and everybody knows, you know what they're in for and how much they need to pay, so you know it's going to be a good thing in that sense.
Speaker 2:But, on the overall market. It will have a negative impact on tenants because it will increase rents.
Speaker 1:It'll increase rents but it'll be amortized over the term of the lease.
Speaker 2:Yeah, so it's not really a change because, like I mentioned, it's been happening already when you had a no-fee listing.
Speaker 3:Yeah, so let's start off a little bit differently. I have a question so what areas do you like the most? Let's say Brooklyn, for example, right, what neighborhoods? Or Manhattan, what neighborhoods are you seeing that have? Like, maybe a lot of landlords aren't focusing too much on it, but the rents are just as good as a different area and there's good pops there. Like, what's your favorite area these days?
Speaker 2:There's, you know, two answers to it Because there's obviously you know my personal preference and my professional preference where things are just like moving quickly and are good markets. But personally I still think you know Williamsburg, greenpoint are very, very desirable neighborhoods. Dumbo recently, you know, has skyrocketed in rents and people pay premiums on these waterfront facing or not necessarily being fully on the water, but like these prime neighborhoods. But bushwick and bedstuy have been really growing a lot and they have a lot of, you know, cute boutiques, small coffee shops, like lots of charm and like they're super neighborhoody and people love that and you know people, unfortunately, you know, get uh priced out of park slope areas and you know they tend to like gravitate towards these new developing like neighborhoods and it's it's definitely a vibe and you know people like those those uh places and there's a lot of good inventory there as well yeah, you're thinking like bedside bushwick.
Speaker 3:Yeah, yeah, all of bushwick, or all bedside. Or there's certain pockets that you really like, or you're surprised there are definitely pockets.
Speaker 2:I mean Bushwick, anything around Maria Hernandez Park, like that's prime, like you know it attracts a lot of people for its nightlife, for you know just the overall culture in the neighborhood. So that's just like it's such a hot market right now. Just like it's such a hot market right now, um, the further east you go, the tougher it gets, because that uh part of bushwick hasn't arrived, uh, just yet, in terms of like um the offering in in restaurants and like nightlife and neighborhood vibe and whatnot, um bed stye, you know, bed stye west, like anything around, like no strand, avenue Avenue, those are like prime, prime neighborhoods.
Speaker 2:So it's really just like the extension of like Fort Greene and Clinton Hill and it's like moving slowly further east. But you know, if you're still like in that Ocean Hill neighborhood, those are really really tough areas.
Speaker 1:What about, like Lefferts Gardens, flatbush, prospect Park, south Windsor Terrace, kensington, anything popping off over there? It's been kind of slow.
Speaker 2:Windsor Terrace, I think, is on the map now, like it's definitely getting there because it's still, you know, you have the proximity to the park. There are a lot of really cute townhouses Prospect Lefferts Garden, it's an interesting area so it's like hit or miss. I've seen really, really nicely done townhouses there that achieved record pricing, but those are like one-offs In general. I think that neighborhood needs a little bit more time, so it's not fully on the map yet.
Speaker 3:I would say yeah, what's the last listing? You have to give an address. What's the last listing? You got where you're like I'll take this. It's not the best, but then it flew, or you had like more activity than you would have thought hmm, that's a good question.
Speaker 3:I wouldn't even in those neighborhoods, you mean even like anything like maybe it was like, for instance, I was always surprised. I've seen rent. We see a lot, a lot, a lot of rent rolls and east, like east williamsburg, let's say, like by, like the bushwick l, but like even farther out, like more east. Yeah, I've seen rents I'm like I can't believe it like farther out of metropolitan or out on powers rents that are very, very good and I just thought you were very East, but I guess there is a train and people really like that little pocket. So I personally was surprised to see rents at that level. So I'm just wondering, from your perspective, are you ever surprised by like a rent that you get where you're like I didn't think this area supported a rent for a two bedroom X amount.
Speaker 2:Yeah, Sometimes we still see that but you know we're uh what, when it usually happens it's off market deals, Interestingly enough because we work with a lot of people. Because we have so many listings, we always have a client for something.
Speaker 3:Yeah.
Speaker 2:And when you have something off market, it's really easy to pitch it to someone and, you know, make it, you know, desirable to them, because they're the only ones putting eyes on it, and they are then motivated to take it off the market before anyone else gets to see it and that also helps pushing pricing.
Speaker 2:So I just did a record. You know, the one bedroom rental where we got, I think, $500 from the last rent in place because it was an off-market deal and the tenants just didn't want to lose it. And I did a couple of those. So that was like in the East Williamsburg area. We had a couple of buildings in Bushwick where we had five developments in you know, near proximity to one another, and I had a unit with a private roof deck that hasn't been listed and we didn't even have a price yet. So we just threw out like a high number and like just see if it sticks and they're like we love it, we'll take it, don't where was this?
Speaker 3:not just for what area?
Speaker 2:that was bushwick south actually all right.
Speaker 3:So bushwick south is one of those neighborhoods I was gonna like bring up that I've seen rents from. I'm like, oh my God, very surprised South. You're talking about the Wilson L area.
Speaker 2:Yeah, that South yeah.
Speaker 3:I've seen rents there that are just as good as North Bushwick.
Speaker 2:They're getting there North Bushwick definitely.
Speaker 3:Maybe a lot of townhomes and there are Condos. Let's say they're not like brown zones, they're like private residences. Yeah, frame, and it's like a little neighborhood. You have some retail, you have some whatever.
Speaker 2:I mean, it's just square park, like that area is nice yeah but I think like if you get too far um east and like past, like you start, like passing the cemetery okay that's like almost like a dead end area where there's not too much happening yet so we're struggling a little bit with that neighborhood.
Speaker 2:Uh, just because tenants are are a little bit concerned about, like, accessibility to everything and it's a little bit off the map, but like there are definitely blocks and it's it varies block by block, to be honest, like in that neighborhood. Also because there are beautiful like tree-lined blocks there with beautiful town homes yep um, you know, and retail is coming up, but like, if you go too far east, it's not there yet for sure yeah, and that's like also like that corner, you know where ocean hail meets, and broadway junction, and like that's a little south.
Speaker 3:Yeah, that's yeah like.
Speaker 2:I've seen developers try to like make it happen. But I say I tell them. It's like it's not happening yet.
Speaker 3:So another surprise to me is like going over. I know we're so focused on Brooklyn in this conversation, but, like Ditmas Park, like Prospect Park South.
Speaker 1:Trevor Burrus 00,00,00. I'm surprised you have. You think stuff is going for big numbers there. Aaron Alexander 00,00,00.
Speaker 3:I think people are living in the people are starting to live in areas that I did not think people would like live in, that being one of them. Right, like you're just close to some pretty fringy neighborhoods, so yeah, there's areas where I'm surprised. Leftford Scars is an area I thought had more pops in the rents than it has. I think the retail really holds that area back. I think that's probably the reason. But there's just certain areas have fairly strong demand and some obviously don't. But that was one that surprised me, that I thought would, because the trains are all there.
Speaker 2:Yeah, but the neighborhood is just, it's not for everyone.
Speaker 3:Yeah.
Speaker 2:And I had clients that desperately wanted to live in Park Slope.
Speaker 3:Okay.
Speaker 2:Just unfortunately couldn't afford it.
Speaker 3:Yeah.
Speaker 2:And then I'm like let's look at Prospect Lefferts Gardens. It's just on the other side of the park, because they wanted to be on the park and we found the most charming, beautifully done uh townhouse. It had like a lofty vibe, very tall ceilings. They fell in love with the apartment and, um, they also had multiple bids on that unit because it was a special, one-of-a-kind apartment and we won the bidding war. They moved in and then they call me we hate the neighborhood. Yeah, boom and they moved out after a year.
Speaker 3:Oh, it's terrible. Yeah, boom, I mean that's what I think. I mean you'll go on blocks and lefferts that blow you away. Yeah, the best limestones, brownstones, tree-lined. Then you're like, oh, I have to go shopping on Ocean Avenue.
Speaker 2:Yeah.
Speaker 3:It's like, okay, yeah, all right, all right. No, it's the truth about.
Speaker 2:That's the one thing it holds it back, yeah, but um, yeah, that's why I was saying that, because people get priced out of, like, certain neighborhoods and then you know, it's just a natural like development that's happening and certain areas will get more popular and populated in general because they can't afford other neighborhoods anymore. And that's just a natural development of New York City real estate. It's been happening for, you know, ever Manhattan, a lot of Manhattan people shifted over to Brooklyn because Brooklyn used to be the affordable one and now Brooklyn prices are skyrocketing.
Speaker 1:Do you see a shift from like Manhattan to Brooklyn still, or do you see Brooklyn to Manhattan? Are you seeing any crossover between the boroughs still, or do you?
Speaker 2:see brooklyn to manhattan. Are you seeing crossover between the boroughs? I mean, there was a big trend from manhattan to brooklyn, especially covid, it's what like kicked it all off, but now brooklyn is as expensive as manhattan in certain areas. So it really just depends on, like individual preferences where people want to be. But it's brooklyn isn't necessarily the choice anymore because it's cheaper, because it's not.
Speaker 1:In many cases it's not Do you think people are staying in Brooklyn or do you see people getting priced out of Brooklyn and going to either fringe type of markets or leaving Brooklyn altogether?
Speaker 2:I think people don't necessarily leave Brooklyn altogether because they're getting priced out of it. That's just circumstantial and where people are in their lives, but they definitely getting priced out of it. That's just circumstantial and where people are in their lives, but they definitely get priced out of neighborhoods. So that's where we see like shifts in where people are moving and again raising prices in neighborhoods that weren't on the map previously because more people move there and it's just Jersey's one of them.
Speaker 3:I mean a couple people in this office live in Hoboken. The prices in Hoboken are they're not at Manhattan levels yet but they're damn close, way more than I thought. And the increase in the last I would say Hoboken, a really good Jersey city in the last three years, I mean it's just huge increases. And then obviously I speak to the Manhattan team in our office all the time. I mean there's obviously you have the outliers like a Tribeca or a Soho or like Prime Upper East, where it's just superior rents to Brooklyn. I don't care where in Brooklyn it's just superior. But like East Village, lower East Side, like West Village, even the two-bedroom, three-bedroom rents are very similar to Brooklyn rents. I mean they are. I mean a very solid East Village location, a three-bedroom there, like that's what you're getting in, like good Brooklyn.
Speaker 2:Yeah.
Speaker 3:So I'm seeing it, Williamsburg especially.
Speaker 1:Are you seeing a lot of families, or is it like single people or roommates? Is it just Everybody?
Speaker 2:Everything, everybody, everything, yeah, yeah.
Speaker 3:So One thing we've noticed, I mean from speaking to landlords they've said in the last three, four years, I mean the type of tenant, the caliber of tenant that they're seeing in Williamsburg, greenpoint and their Brooklyn buildings are like serious, serious people, serious business people. Oh yeah, seven-figure I've heard the term, seven figure tenants where they're showing that kind of money in their bank accounts like big incomes, like I think that's been a real shift because people are renting now I like I've seen well overqualified tenants in my in my rent rentals um because they opt not to buy right now because interest rates are at.
Speaker 2:So that's also what's pushing? The rental market because people with serious money they will still rent, although they could put down a down payment, but they don't want to pay the crazy interest rates that there are right now.
Speaker 3:So that's another push that we don't really talk about why rents are just so insane. It's not just like the rent stabilization laws, it's interest rates, because now these people aren't buying. So now you're adding a whole other wave of renters and it's people aren't building because of the cost and the whatever and potentially a good cause of eviction. I don't think that it's taking units offline. It's not taking them off, but people aren't moving.
Speaker 1:But it could, as it progresses over time.
Speaker 3:But the cost of construction and the tax abatements are people aren't building, so that's taking away.
Speaker 1:And people mentioned the tariffs.
Speaker 3:Tariffs for building and then the Rent Stabilization Act in 19. I mean, that's just.
Speaker 1:And now interest rates and low supply for sale inventory. You're right, there are so many high-end renters.
Speaker 3:There are so many high-end renters the amount of people that I know personally that are renting that easily could buy. It's a lot of people. Yeah so there you go. That makes a lot of sense. That's probably why people, the caliber of renters it's huge these bidding wars people are like.
Speaker 2:Yeah, because people can't afford it, if they really want something because people can afford it. Yeah, if they really want something, yeah, they can afford it. Like we see a lot of overqualified and financially like very well off people just like opting to rent.
Speaker 1:Yeah, I'm also hearing people are just having trouble finding something that they'd want to buy, just not a lot of inventory, yeah.
Speaker 3:And renting is a great bandaid, like let's look at a year. Yeah, and renting is a great band-aid, like let's look at a year. Yeah, let's rent. Yeah, and in some ways it's a lot more affordable in a lot of ways.
Speaker 2:Oh, it is For sure, yeah, 100% it is yeah.
Speaker 1:Even with the rents being high, you don't have to come up with the 20% down plus, you don't have to deal with the closing costs. All the maintenance issues. For sure, the maintenance issues.
Speaker 2:Yeah.
Speaker 3:Yeah Things, breaking ovens, refrigerators.
Speaker 1:It's a line item.
Speaker 3:For sure.
Speaker 1:Heating expense.
Speaker 3:Well, now you're going to have a lot of issues. You're paying.
Speaker 1:Well, I think this was a really good conversation where we went over a lot of stuff. I don't have any other questions.
Speaker 3:I think the biggest thing I'm taking out of this and we'll end it here, but I think a big mistake that investors are making when they're gut rehabbing these buildings. They need to involve people like you, rental agents, people that sell condos, that know what people want. They need to be more involved. A lot of these people are just numbers, numbers, numbers. I need an NOI here. I need to exit to this. That is something people need to do. What is rentable?
Speaker 2:You need a person that knows the customer that's actually going to like give you money for your product.
Speaker 3:Yeah.
Speaker 2:That is a big piece that is missing to a lot of these. You know developments, Just having, like you, Just having that person that maybe doesn't know construction, but I know the person who's going to rent this place and I know how much it's going to be worth it to them.
Speaker 3:Yeah, people need to start doing that. It's a big move.
Speaker 1:It's a big shift, people should do.
Speaker 3:Because people definitely do it on. If you're doing a high-end condo project, you're definitely involved in someone like yourself in there for finishes and layouts, because you're obviously selling something for millions of dollars. But yeah, people don't do it for rents and they really really should. It's a big mistake. It's a good point. But thank you so much.
