A Thawing of the Development Freeze?
Despite what you might think driving through parts of Williamsburg, new building development has not been at a complete standstill. According to an article today in the Wall Street Journal, 364 formerly frozen projects have started back up since February 2009; 108 of those have been in Brooklyn, and of those 31 have been completed…
Despite what you might think driving through parts of Williamsburg, new building development has not been at a complete standstill. According to an article today in the Wall Street Journal, 364 formerly frozen projects have started back up since February 2009; 108 of those have been in Brooklyn, and of those 31 have been completed so far. “The sites that have recommenced work tell you that there is greater depth to the market than just looking at stalled numbers would suggest,” says Kevin Price, a senior vice president of the Radco Cos., a real-estate development firm. “It shows cases where lenders and sponsors are coming to terms.” Still, don’t expect to see a return to the boom times any time soon. “You’re going to see a bifurcated market,” says Frederick Peters, president of Warburg Realty Partnership. “Guys with deep pockets have been able to finish their buildings, while a lot of first-time developers walked away.”
New Life in New York [WSJ]
WBer brings up an excellent point regarding quality, and I speak here from first-hand experience (I bought my condo in 2005). During the boom time it became quite hard to secure the services of a quality contractor, given the demand. This was especially the case when developers of any caliber had to address myriad “punch list” items after the purchase. At that time contractors could pick and choose their work, and were not interested in punch list projects, as they tend to be a pain in the neck.
“does anyone else find this chart particularly uninformative?”
Probably not. It tells us what’s coming online. More inventory.
***Bid half off peak comps***
I agree that buyers should pay close attention to build quality on these condos, regardless of why a project was stalled. But I don’t know that these units would be any worse than boom-time developments – we all know that corners were cut, value was engineered, etc. in the rush to cash in on the boom market.
BTW (and pardon the Tufte sidebar), but does anyone else find this chart particularly uninformative? It doesn’t tell you how many projects were stalled overall, just the number of stalled projects that have restarted. The two colors imply a comparison, where there is none – 139 Brooklyn projects have restarted, but that could be great news (139 of 150!) or bad news (139 of 500!). As I recall, Brooklyn had the largest number of stalled projects – so does this mean that Queens is booming relative to Brooklyn? Is Staten Island still in the tank?
“It is always difficult/impossible to judge the solvency of the sponsor”
Really????
in case of construction defects, the risk to buyers is the recourse to the sponsor (and not the construction lender). It is always difficult/impossible to judge the solvency of the sponsor, but, post crisis folks probably should assume the worst. i think that is the point made by skeptics, er, i mean dave and slopefarm. case #1, see boymelgreen, shaya.
benson, on that much we agree. My own experience has left me on the more cautious side in these matters, and less entrepreneurial or adventurous. But I know you and others have made out well in new construction.
Slopey;
I agree that additional due diligence is required in this situation. My only point is that one shouldn’t assume that a stalled project is due to the lack of depth in the developer’s pocket -there might be other factor’s at play. It may make perfect economic sense to mothball a project if the market tanks, regardless of the developer’s financial strength.
Benson, I do think it is a reason to kick the tires harder. Some developments sailed through to completion during this rough patch, others did not. Some develoeprs are on sound financial footing, and some leverage to the hilt and keep leveraging to squeeze through. I don’t think it is wrong to suspect that some of the longer-stalled project stalled because lenders balked, and if those developers did not have the resources to carry on, chances are they have been tight from the beginning, or at least once constructionr esumed, and have cut corners along the way. I also wouldn’t assume all of the most heavily squeezed developers whose projects stalled left tehm in states where only the most impervious structural components were left open to the elements. I’ve seen in both new construction and in a number of renovations, including my own, the kinds of corners that can get cut when money runs short. If a project was stalled for 9-15 months, you can be sure no one was coming out to check the tarps every day, and you can’t be sure that there was nothing installed that is susceptible to water or wind damage. Not everyone builds the right way or stopped at a convenient pahse. Mine is not a “don’t buy” recommendation, just a be wary and vigilant recomendation, but I think with good reason.
Just hope they will start building on those empty lots on 4th avenue. They are an eye sore.