MANHATTAN — The rise of glittering new condos for billionaires and the decline of homes priced under $1 million set the tone for New York's residential real estate market in 2014.
Now, there's a slowdown in sales for the pricey new condos, while the appetite for lower-priced apartments has only grown stronger. Expect a shift in the strategies of developers in 2015, including a focus on all things smaller, whether in the luxury market or in the rental market, with buzz about micro units and shared suites for roommates.
We asked some real estate experts to share their 2015 forecasts:
1. Price growth cools in Manhattan
Prices are still expected to increase in Manhattan, but at a slower pace: rising a "healthy" 4 percent, which is roughly half the growth the market saw in 2014, StreetEasy data scientist Alan Lightfeldt predicts.
2. But not in Brooklyn and Queens
As many New Yorkers embrace Crown Heights, Bedford-Stuyvesant and Long Island City, prices are set to continue rising at faster rates.
"There's still such an influx in new demand pushing prices, so the story might be a little different there," Lightfeldt said.
3. More inventory is expected in those boroughs
Inventory is expected to rise with new development — condos and rentals — in Brooklyn and Queens, along with an uptick in apartment owners looking to downsize or trade up.
"We have a lot of owners looking to put their homes on market in first quarter," said Corcoran's Leslie Marshall, who specializes in Brownstone Brooklyn. "Owners see that prices are good, they've been good for a few years now and who knows where they’ll go, so why wait. They're saying, 'let's get on the bandwagon.'"
4. But developers might also pause before building new rentals
A state program, known as 421a, that gives tax breaks to developers is set to sunset on June 15, 2015, spurring many developers to rush and file plans before the deadline, since they are not sure what to expect next.
"There is nothing scarier than uncertainty," said Drew Fletcher, of the Greystone Bassuk Group, a firm that arranges financing for large developers. Many rental developers are taking a pause until there's more "clarity on what the ground rules are."
5. Amenities get 'cool'
Developers are creating events and programs to ensure amenity spaces get used, especially for high-end rentals.
At Downtown Brooklyn's 42-story 66 Rockwell Pl., the developer hired a full time "amenity manager" to oversee the 10,000 square feet of common spaces, Dermot Company's Andrew Levison said.
The building is partnering with the nearby Mark Morris Dance Group to offer classes onsite and talking to other local arts organizations like Brooklyn Academy of Music to create some "cool" events, like film series.
"We want to inspire people to stay in our buildings for a long time. This is one way to do that," he said. "And, quite frankly, rents are very expensive in New York City, and we want to make sure people are getting value for what they're paying for."
6. Developers will focus on roommates
Paying $3,000 a month for a one-bedroom is too burdensome for many New Yorkers, especially the coveted group of young professionals, so developers are eyeing the "micro-suites" model where up to three tenants, each with their own small room, share a kitchen and bathroom.
"You have to find alternatives," said Greg Katz, a partner of Sterling Equities, which shifted some attention this year from Manhattan to Brooklyn, snatching up Williamsburg rentals.
The company is discussing how "young professionals can have a clean, safe place" and perhaps "split up an apartment where they're paying less than $1,500 a month," Katz said.
7. Manhattan's ultra-luxury market shifts to smaller units
With the uptick in new condos priced above $10 million, brokers have seen a slowdown in sales. Feeling less urgency, wealthy buyers are becoming choosier, many said.
Reversing the recent trend of sprawling units, developers are eyeing new strategies like creating smaller apartments that have the luxurious touches and still command $2,500 to $3,000 a square foot, experts predict.
"Now, instead of palatial, we have clients taking a slightly more conservative approach to what they're building," Fletcher said. "They're trying to do more modest-sized units, priced at $2 million to $4 million, to appeal to a broader market."
8. China will lead the foreign buyers
Chinese buyers will dominate, especially as its government loosens investment restrictions, he added.
9. Local elites want smaller buildings and more privacy
High net-worth locals — those in finance and entertainment who are raising their families here — want smaller, private-feeling buildings, said architect Nancy Ruddy, of CetraRuddy, who worked on 443 Greenwich St. in TriBeCa, where a driveway goes into the building so residents never have to touch a sidewalk. Elevators open onto apartments — and won't stop until you've reached the lobby so there's no need for elevator small talk.
"The issue of privacy and exclusivity has become a new touch point," Ruddy said.
10. Neighborhood undergoing most massive transformation: Hudson Yards
With the No. 7 train extension on track to open in February and the early phases of the $20 billion Hudson Yards project to begin opening over the next few years, the spotlight will be on the far West Side, many said.
"That 7 line is going to be amazing," said Karen Kelley, of Corcoran. "Everything is going to converge and make that area a great value now for people who have foresight."
11. Queens will have its day
Newly-minted as the nation's No. 1 tourist destination by Lonely Planet, Queens is on many developers' radar. Besides big projects in Long Island City and Astoria, new development is rising in other areas, from Forest Hills to Flushing.
"Queens is the next frontier," said Barry Brandt, director of sales at Argo Real Estate, a real estate owner and property management company.
A lot of "established development money" is now being funneled into Queens, he said noting, for instance, Vornado Realty Trust's 314-unit luxury apartment tower above its Rego Park shopping mall and Lincoln Equities Groups' $1 billion Hallets Point project expected to bring more than 2,000 market rate and affordable units to Astoria.
12. The Bronx is next
As Queens and Brooklyn become pricier for house hunters — and developers — the next stop is The Bronx, several experts said.
Bronx neighborhoods including Tremont, Pelham Parkway and Mott Haven, in the South Bronx, are expected to see revitalization, Brandt noted.
13. Project people will be talking about: MyMircoNY
Expect buzz around the end-of-summer opening of the city's winning micro-unit project on East 27th Street.
In the spring, developer Monadnock will be hosting a "stacking event" for the 9-story prefabricated building — when cranes stack the units made in a Brooklyn Navy Yard factory. When the building is ready, Monadnock plans to invite the public to peak into the 55 units, ranging from 250 to 370 square feet.
"A 260 square foot unit that has big windows and tall ceilings and nice design is a very nice place to live in," said project manager, Tobias Oriwol. "Until someone walks into a unit like this, they’re not going to realize that everyone knows someone who lives in a smaller, but worse situation than what we have. I think it will be really eye opening that the stereotype of the tiny dark musty room doesn’t really apply to small living spaces."
14. A focus on kitchens for foodies
Apartment dwellers building trophy kitchens are now actually using those spaces, said architect Lee Skolnick.
"Because of people eating well and eating local and cooking at home, we find people more interested in what's really going to work for them," he said.
They're looking at restaurant-quality Wolf ranges and want counters that won't leech chemicals, so more people are going back to butcher blocks for islands, he said.
Kitchens are also looking more like built-in furniture, opened up to living/dining areas. But since many apartments don't have room for islands, architect Marc Spector said designers have to get more creative with storage space.
15. "Mud rooms" are the rage
Apartment dwellers want "dumping grounds" for coats, shoes and backpacks, so besides building vestibules inside apartments for residents, Spector is working with several clients who are buying the rights to use part of their building's corridor space — at the end of hallways where it won't create egress issues — to build such spaces.
People want the "luxury of having a space to take off and then go in," Spector said.