As we enter the fourth quarter, the macroeconomic backdrop sheds more bad news than good. Soaring inflation, rising interest rates, and a global energy crisis are keeping many domestic investors on the sidelines. Further complicating matters are continued uncertainty in Ukraine and heightened tensions with China and Taiwan. All while the world’s largest corporations fight to attract capital as they descend on “Davos in the Desert.”

Rents remain at all-time highs.
Blackstone (historically a good prognosticator of future trends) believes that woefully limited apartment construction, low rates of vacancy, and significantly less leverage will continue to push rents (and profits) higher – a cash investor paradise. Through much of 2022, spiking rents broke records in New York and helped push inflation to a 40-year high. Blackstone COO, Jonathan Gray, stated that “long-term assets in real estate, which is obviously a big area of focus for us, is a really good area to be in.”

Where the big players are placing bets.
While it is near impossible to time the absolute bottom in this (or any) housing downturn, we can identify value. One of the surest ways to find it is to look at where the big players are placing bets. New developments generally come in clusters and bring along untold neighborhood improvements, directly impacting appreciation and annual returns.

The Real Deal analyzed 2022 building projects filed with the NYC Department of Buildings and found that Brooklyn accounted for seven of NYC’s ten busiest neighborhoods. Of those, we choose the four neighborhoods that we believe offer the most short-term and forecasted upside. They are as follows:

#1 Park Slope: 1.4M total square feet with 5 projects total
#2 Greenpoint: 599.8K total square feet with 10 projects total
#3 Prospect Heights: 530.7K total square feet with 4 projects total
#4 East Williamsburg: 485.1K total square feet with 6 projects total

New developments in the above-mentioned neighborhoods generally are not hemorrhaging (yet). They are, however, cognizant of the challenging market conditions and as such, we're seeing upwards of 10% negotiation on price. We expect this to continue in the favor of buyers/investors as we head into 2023.

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