New York City Housing Tour – An Eye Opener – Part 2

Another tremendous example of redevelopment in New York City is the Hudson Rail Yards.  As part of the overall project, $800M will be spent in covering the east and west rail yards to allow for development above the rail yards.  This is something that has happened elsewhere in New York and in Chicago.  Why can’t Toronto come up with a plan to do so for the rail yards which bisects downtown near CityPlace?  The scope of the redevelopment is breathtaking and which will change the face of the meat packing district and environment.  Sure we need lots of money to do it, but why isn’t there even a vision to think about it?

One of the most interesting things that we learned was that developers make more money building apartment rentals than condominiums.  A new project on the east side of the Hudson in Queens included 5 or 6 new apartment rental buildings with only 1 or 2 condominium buildings.  A beautiful site with a gorgeous view of Manhattan, and access to Manhattan is one or two subway stops or an easy ferry ride.  Both rentals and prices were 20-30% less than on the other side of the river.  Condominiums can start construction with much lower pre-sales because the developers and the lenders know that if sales do not materialize, the buildings can be converted into valuable rental buildings that will easily pay off the development loans and create a profit for the developers.  Unfortunately, in Toronto, rental rates still do not make the construction of new rental housing profitable, save for investors who are looking for payback by way of appreciation.  The demand is there clearly, but until rental rates move up to more of a market level, this type of construction is not going to happen.

Back to BIG, the Danish architectural firm.  These innovative architects have done developments in Copenhagen, Shanghai and are currently involved in an innovative project for Cadillac Fairview in Don Mills, Ontario.  In the Hudson Rail Yards, one of their most innovative projects is called “West 57^th Street” which combines an open core design with a pyramid building that will provide views and light unparalleled.  Yes, it will cost more to build but will people be prepared to pay for same because of the innovation and desirability of the location and design?  The answer is yes.  People pay a premium for Apple because it is unique and sexy.  The same should apply to real estate. 

I wonder how Christopher Hume would rate West 57^th Street?