Stabilized rent is has been a dwindling and highly sought after commodity in New York City. As people age, move out of apartments, and as properties get re-zoned, finding a place with stabilized rent is becoming a rarity. This June, legislation will decide the future of rent-controlled properties, and commercial real estate investors in NYC are making preparation for all possible outcomes.
The Benefits of Offering Rent-Controlled Spaces
With the exception of a few outliers, few commercial real estate owners lose money by offering rent-controlled units. Most of the investors taking a financial hit are those with tenants dating back a decade or more, who cannot maintain a healthy cash flow due to legacy leases. Finding that “sweet spot” that provides positive revenue while still attracting tenants looking for stabilized rentals can take a bit of research, but the payoff can be well worth the effort. If tenants leave or end their leases, property owners can increase the rent by as much as twenty percent, under the current NY laws.
The Argument Against Rent Controlled Spaces
The most obvious talk point against rent-controlled spaces is that stabilized rentals are just leaving money on the table. The free market allows tenants to shop around for the best deal, and with more revenue from rent, property owners can improve rentals to make them worth the price. Opponents to non-stabilized rent fear that such a free market would drive rent through the roof, and force tenants to look elsewhere. The other consideration is that if people are forced out of NYC due to rent prices, it could negatively impact the local economy.
The June Deadline
In June of this year, legislators will decide for or against rent stabilization. Either way, property owners will need to rethink their leasing strategies to attract tenants while still maintaining a healthy revenue that allows for upkeep, additional investments, and profitability. Right now, things are up in the air until June, and investors need to prepare for both outcomes until the decision is made.
Express Capital Financing provides funding solutions to commercial real estate investors and property developers in New York City. If you are lining up a rental property, or getting an existing property ready for tenants, talk to our team and get the right financing to fit the scope of your project.
