On Willoughby Avenue in Bushwick a modern white building stands out from a line of look-alike old families houses. Number 979 is an eight-unit building of glass and cement. Large windows cover the façade that looks to the southwest. Inside, the apartments are new, furnished with modern kitchens and stairs made of steel.
They were ready to occupied in April 2007, but for the last two years, they have been empty. After construction, a long series of problems blocked the release of the certificate of occupancy. Last month, New York City Department of Buildings gave its final approval. The eight apartments are now officially on the market. The owner, Harold Tischler, who invested in Bushwick in 2005, remains confident that buyers will arrive quickly. But while the building awaited the certificates, the market drastically changed.
Only four years ago, Bushwick was at a turning point in its history. In December 2005, the Brooklyn Public Library held a forum entitled "Brooklyn’s Next Real Estate Hot Spot: Bushwick." The area was rebranded as East Williamsburg, in an effort to hide a legacy of decades of crime, poverty, and decline that had begun in the 1960s. In the first years of the new millenium, the city and state began pouring resources into the neighborhood, to improve housing conditions. Between 1990 and 2006, crime dropped 72 percent. Rents were cheaper than in Manhattan and other areas of Brooklyn. The L-line brought subway riders into the city in 20 minutes and fashionable Williamsburg was nearby. Bushwick wasn’t yet a fashionable neighborhood the poverty rate never dropped under one third, especially in the majority Hispanic population. But after decades of neglect, the transformation into the new Brooklyn hot spot had begun.
Young residents and artists moved in. And after the hipsters, the developers arrived. During the last quarter of 2006, there were 32 sales transactions of condos, co-ops and single-family houses. This was the highest number in four years, according to the data from PropertyShark.com, a website that provides real estate professionals, investors and homebuyers with real estate information. The median sale price per square foot was $409.
It was in this period that Harold Tischler, like many others, decided to invest here. His Vintage Builders, a real estate company with 16 years of experience, moved to Bushwick after the company’s first new development in Bensonhurst. He saw an opportunity: between Willoughby and Evergreen avenues a warehouse had been empty for a decade; it was pulled down by Vintage Builders to make space for the first modern building on the street.
"I liked this site and it was cheaper than other places," Tischler says. He believed in the area in 2005, when the work started, and he says that he still believes in it now. "Twenty years ago here you could have been killed walking on the road. In the next ten years it will be the new Williamsburg."
But data is not so reassuring. After a peak of 23 transactions in the second quarter of 2008, the number of sales dropped to ten in each of the following quarters. And in the first nine months of 2009 the number of transactions was 13 five between January and March, just one between April and June, and seven from July until September. The last registered median sale price for square foot was $360, after having dropped to $229 in the second quarter, according to PropertyShark.com. But even if there is an increase, it is not consider particularly significant by Bill Staniford, chief executive officer of PropertyShark.com.
At the end of November, the Department of Buildings registered six building sites in Bushwick where construction activity has come to an abrupt halt. But according to organizations working in the neighborhood the number should be higher. In October, Right to the City, a national network of grassroots organizations fighting against gentrification, released a survey about Brooklyn’s vacant condos. "We identified 60 residential buildings that appeared to contain a significant amount of empty units and 48 that appeared to be stalled in construction," says Jose Lopez, of Make the Road, a non-profit organization based in Bushwick, and a member of Right to the City alliance.
979 Willoughby Avenue was one of those buildings. But Tischler refuses to define it as a vacant building. "There are no vacant buildings in Bushwick," he says. "People are always looking for new places and want to move here." The real trouble, he adds, is the bureaucracy that slows down development. In April 2007, his building was almost complete. Each apartment had a private garage, utility room and roof-deck access. The eight apartments were on sale. An 834 square foot studio was on sale for $399,000, two 1,883 square foot four decks penthouses listed for $668,000. But new inspections found several faults in the chimney, the boiler, and the elevator.
Every new problem meant more money lost for Vintage Building which had already invested $1 million for the land and $1.2 million for the building. Tischler says that they were all minor faults, and he blames the inspectors for having stopped his job "Next time I’m going to build in New Jersey," he says. But now the building faces a harder market.
"I already have some offers," Tischler says. In three months, he adds, he’s sure that all the apartments of the building will be sold. He’s dropped the prices for the two penthouses’ price to $ 600,000. But even if the other prices stay the same, Tischler’s cost will barely be repaid. The investment did not work as expected. Still, Tischler remains confident in Bushwick.
But Staniford is not. "I think that all new developers in Bushwick are in trouble," he says. "Most in New York City are in trouble, I don’t really see a recovery anytime soon." His general view is that the prices will drop again 10-15percent over the next six months. Bushwick has been characterized by a high number of foreclosures. In 2007 the neighborhood had the third highest rate of housing foreclosures in New York City: 57.8 per 1,000 of 1-4 family properties. The number has nearly tripled since 2000, according to New York University’s Furman Center for Real Estate and Urban Policy, an academic research center devoted to the public policy aspects of land use, real estate development and housing. In 2008 they totaled 379, according to Right to the City alliance. In an average week of last November, ending on Thursday the 20th, PropertyShark.com registered 14 lis pendens, the formal notice that starts the foreclosure process. A sign of a high amount of future foreclosures, according to Staniford.
"Developers in distress won’t be able to pay their mortgage and they’re going to be no new developers in the future," says Staniford. In his gloomier forecast, what once made Bushwick an interesting new neighborhood could play against it. Investing on an area "not as well established," as he says, could seem too dangerous. "It could fall further," he adds. "The decrease of services provided by City of New York due to budgets cuts will affect poor neighborhoods. It could cause a potential collapsing in prices in Bushwick."
Still, some developers see a chance to get through the recession. Castle Braid, a former factory at 114 Troutman St., was opened last October and 75 of its rentals units are already occupied. Even if analysts like Staniford consider going into renting another sign of distress, the developer, Mayer Schwartz, is satisfied with his results and confident he can fill all the units in the next two or three months.
"I would not develop a big project now," he says. Without loans from the banks to buy or to develop thinking big seems impossible. But Schwartz is confident in smaller family houses and rentals. And the area still seems to appeal to his customers, young artists and professionals. "I think that switching to rent in Bushwick is not as devastating as in Williamsburg," he says. "Here the prices are cheaper." That is what people are looking for in a recession. Moreover the area in the last five years is improved. "There are café, artists, people want to live here. Bushwick is picking up," Schwartz says.
Still, he doesn’t hide the fact that times are hard. "Condos are dead," he admits. But the rental market still covers the expenses, and perhaps provides hope for that once-imagined brighter future for Bushwick.