I spend a little bit of each day seeing if I can read the Real Estate tea leaves.
How’s the market?
Is there some idea pushing the market forward or pushing it off a cliff?
New Development is endlessly fascinating to me, because so much of it takes the themes and trends of the market and amplifies them.
Design elements, apartment layouts and sizes, amenities, price points.
The new condo projects really are test cases for the market.
More expensive than resale apartments, normally, some buildings capture the imagination of buyers and some completely miss the mark.
This high-risk, high-return situation is so interesting, and full of higher highs and lower lows – and better stories for the press.
Of course, some developments do reinvent the wheel in some way, changing absolutely the way people think about a design concept or a location – but usually the tail (the building) doesn’t wag the dog (the market).
I generally believe that it’s all about timing- and some developers’ abilities are better than others – that understands
buyers’ tastes and appetites for certain design choices, for example.
In the past few weeks, a lot of discussion has
swirled around about the very high end of the new development market, and whether the media is to blame for its slowdown.
Some wise heads find that notion pretty laughable.
I don’t dispute the role that psychology plays in any market, be it the stock market or the housing market.
But, what if buyers simply aren’t there for
things over $10mm?
I’ll cover more of this in another post.
In the meantime, I visited a number of new sales offices of buildings that cover a range of design choices and price points.
I saw The Kent, on the corner of 95th and Third Avenue;
Citizen 360, at the corner of 1st Avenue and 89th Street;
70 Vestry, Robert A.M. Stern’s new design in Tribeca;
6 Cortlandt Alley on Broadway and White Street.
I’ll review these projects, taking some of these themes in mind:
- Monthly charges – how high is too high?
- Price per square foot vs. location
- Developer incentives
- New development and how it’s impacted buyer mentality – does everyone want new?
I was able to spend a while looking at the finishes of this lovely building at its
sales office 2 weeks ago.
On its face, some people might look at the design and feel it a retread of other building
RAMSA’s office has done of late, whether 15 CPW, 30 Park Place, or others.
However, if you zoom in and look carefully, the design does its best to circle the square.
They have incorporated industrial steel and made a squatter, more warehouse-like building to fit into its Tribeca location on the West Side Highway and Vestry Street.
The lead architect on the project spoke to me
about the French limestone they are using, and how it differs from the Indiana limestone of 15 Central Park West, or that which clads many of the prewar buildings you see around town.
A slightly different color; a slightly different glow; a different way of interacting with the black of the window detail and what appears to be wrought iron facade.
All of this seems like silly architectural nonsense, but the impression that someone is left with – the feeling inside that a passerby gets – is so crucial: whether the building inspires or not.
This impression, in essence, is what has made these buildings successful, and why others have fallen flat.
That said, the execution by a particular contractor will in the end determine much of its impact.
Good design and bad execution will end poorly.
I’ve heard of horror stories in China of good designs being reduced to awfulness.
So, there is that.
I’m reluctant to bash this building in any way, because I loved the design in and out.
What I can say is that I have some concerns about a buyer’s willingness to pay $3.50 per square foot in monthly charges between taxes and common charges, before even considering a mortgage.
That is to say, a 1500 square foot apartment will cost $5250 in common charges and taxes.
If a high-end two bedroom costs even $10,000-12,000 per month to rent, it seems quite less expensive to rent at that point.
If you put yourself in the mindset of the investor, assuming that the rental market can support a $12,000 two bedroom unit at roughly $4 million, the return is not even 2%.
It becomes a bit hard to see this as investor-friendly; really it’s only for primary users.
That’s not the end of the world, but something to consider.
On the opposite end of the spectrum is Citizen 360, a building delivering utterly nondescript finishes, in an utterly nondescript location, but doing it at a perfectly reasonable price point of under $1500 per square foot.
Yes, the write up about the design makes the building sound quite interesting:
A smoked walnut entry door and white oak foyer welcome you to this luxurious residence… features white oak floors and oversized windows…The custom kitchen designed by Clodagh for Citizen360 features smoked walnut cabinetry, Persian White Pulido Porcelanosa slab countertops and backsplash. Appliances include a stainless steel Bertazzoni range, a Liebherr refrigerator, and a Bosch dishwasher. The unique powder room features Porcelanosa tiled floors and walls with Sense by Clodagh 27 fixtures. Baetig Azul limestone flooring and Saint Louis limestone walls with a custom stone and teak vanity offer spa-like tranquility in the four-fixture master bathroom. Recessed medicine cabinets, double sinks and glass-enclosed shower with Sense by Clodagh 27 fixtures complete this serene retreat. The three-fixture, en-suite secondary bath features Yakarta Blanco Porcelanosa tile, custom wood vanity with stone countertop and glass-enclosed shower with Sense by Clodagh 27 fixtures.
The takeaway, though, is that this is an utterly practical purchase.
First Avenue, with charges in the realm of reasonable – about $2/square foot including taxes.
The sales office doesn’t inspire, and nothing feels particularly unique.
However, it should end up capturing buyers, if for nothing else, for the price point.
Not too far from Citizen 360, but really a world away, Extell Development has reached the sixth floor already for a tower on 95th and Third Avenue, the Kent.
Some hubbub late in 2015
talked about sales hitting the market in early 2016, but they just launched a couple of weeks ago.
Design-wise, this is geared to the family buyer.
We generally can’t talk about this in our apartment marketing, but clearly when the bulk of the units are three-bedrooms and larger, you know whom they are targeting.
A few interesting things about the sales office.
First, buyers will have their choice of kitchen cabinetry and counters from a preselected group.
This is the next step in for Extell. Before, in their marketing of buildings like the Aldyn on Riverside Boulevard, the kitchen finishes alternated between two choices, depending on whether you were on an odd or even floor number.
Now, this idea of choice.
How very suburban!
The next wrinkle: the salesperson told me about a few “upgrades” that would be made available to buyers (zebrawood paneling in the powder room, for an $11,000 upcharge).
This is unusual, though it does fall into the category of allowing your a/v guy to come and do some pre-wiring before closing.
Again, this is in the spirit of helping a buyer feel that he or she has some agency in the design decisions.
Lastly, and this is probably the biggest indicator of the softness of the market right now, the developer is offering a 5% discount on large apartments, from the listed price, and various smaller discounts on smaller units.
All of this without any prompting.
Which is to say: the seller, even arguably the most successful developer working right now, has acknowledged the elephant in the room, a slower market, and is trying to get out ahead of it.
Bravo for him.
Keeping prices just a hair below $2000 per square foot may help also.
The finishes are discussed on the website, including the options.
I don’t have any knock on the design, and I applaud the creativity to set the building apart as a value in a location that may look quite convenient once the 2nd Avenue subway opens.
6 Cortlandt Alley
Sometimes a developer wants to let the story sell the apartment.
Surely, in the case of the relatively unknown Cortlandt Alley, the story of Andy Warhol living across the street, and the quaintness of the street, is meant to help move property.
But will it?
This is a unique situation in that the depth of a slightly shallower block of Broadway to the alley allowed this developer to do something different.
That is, by creating a series of floor-thru apartments, really BIG apartments, they felt they could steal away some buyers from other options in Tribeca.
6 Cortlandt Alley, then, is 150 feet deep – so the apartments are big, but not too big.
The lightwell they created allows them to create two bedrooms with no views, but legal bedrooms nonetheless.
It’s wide enough to allow for two bedrooms facing the alley, as well.
Finishes – really pretty – are meant to use local woods and help it feel as artisanal as possible, as if it were not done by a developer.
Perhaps this is because part of the developer team is a contractor.
But, in the end, will a buyer pay over $1900 per square foot to be east of Broadway?
Given the $7000 per month charges, and the fact that it is only 5 units, I could see buyers taking pause.
The charges almost certainly will go up quickly, and these boutique projects make it hard to have recourse if there is any construction defect.
All that said, the buyer mentality after seeing all of this really well-executed product has to have shifted.
Do buyers find themselves disappointed when looking at resale apartments?
How long is the attention span on new development?
That is, how long before new finishes start to feel dated?
When is new development old?
More next month – there’s a lot to consider out there.