The Real Deal New York

Downtown nudges out Uptown as priciest destination for luxury buyers

New data show average prices ramping up in Tribeca, Soho, Chelsea

March 26, 2013 05:30PM
By Katherine Clarke

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An interior shot of 150 Charles Street, Sotheby’s broker Mara Flash Blum (left inset) and Corcoran Sunshine’s Kelly Kennedy Mack (right inset)

It’s conventional wisdom that “blue chip” apartments surrounding Central Park command the highest prices in New York City, beating out trendier Downtown towers on a price per square foot basis. For the first time in a decade, however, the asking prices for luxury Downtown apartments have outpaced those in Midtown and Uptown, new data show, as developments in Tribeca, Soho and Chelsea demand in excess of $7,000 per square foot.

The average asking price for a Downtown luxury apartment rose to $2,777 per square foot in the fourth quarter of 2012, surpassing comparable units in Midtown and Uptown, where the collective average price was $2,685 per square foot, according to data from Corcoran Sunshine Marketing Group provided to The Real Deal.

The data, which the new development marketing firm has been tracking for 10 years, is based on a survey of 140 Manhattan luxury condominium and co-op buildings that have asking prices averaging more than $1,700 per square foot. The collective Uptown and Midtown neighborhood is defined by the firm as north of 34th Street and south of 110th Street, while the Downtown neighborhood is defined as south of 34th Street not including the Financial District or Battery Park City.

The growth in the market is the result of a bevy of new luxury towers hitting the market Downtown in recent years, as well as buyers’ willingness — and even preference — to seek out homes far afield of Central Park. And while this trend has been on the rise for years, the pace has escalated in the last 12 months.

In fact, prices for Downtown units have risen a dramatic 28 percent compared to the same period in 2011, marking a 30 percent jump over the previous peak in the fourth quarter of 2007, the data show. Uptown prices have not seen the same dramatic uptick, despite the introduction of luxury towers such as Extell Development’s One57.

“Uptown is tried and true — if you list something pre-war Uptown, you’re going to sell — but Downtown really has the buzz right now,” said Michele Kleier, a luxury broker whose brokerage Kleier Residential is based on the Upper East Side. “People are much more open about location now in general. It used to be they would have a 10-block radius in which they wanted to live [on the Upper East Side]. Now, it’s a lot more about the apartment for a lot of people. They’re flexible on location. That fabulous apartment with a terrace and a view is worth moving for.”

The evolution of the Downtown market has been in the making since the mid-1990s, said Jonathan Miller, an appraiser at Miller Samuel, as neighborhoods such as Soho and Tribeca became popular with celebrities and Wall Streeters. The influx of moneyed buyers began with the rise of the dot com boom, he said, when Park Avenue-qualified buyers started looking at similarly sized spaces in raw, Tribeca loft buildings.

More recently, the debut of several luxury Downtown skyscrapers — which have pushed the envelope in the last 18 months with asking prices in excess of $6,000 and $7,000 per square foot — are shifting the market even further. Recent examples include 56 Leonard, a 60-story condominium tower in Tribeca developed by the Alexico Group, Dune Real Estate Partners, Goldman Sachs and Hines, and the Witkoff Group’s 150 Charles Street in the West Village.

Last year, sales also launched at pricey new developments such as Chelsea’s Walker Tower, a condominium project by JDS Development and Property Markets Group, and 18 Gramercy Park South, the new project from the Zeckendorf brothers, who developed 15 Central Park West.

While sales at these developments have not yet closed, the eye-popping asking prices and rapidity of contract signings have reinforced the desirability of Downtown homes.

At the same time, while Corcoran Sunshine’s data provides an insight into the luxury market through the lens of particular buildings, it may not be conclusive for the luxury market as a whole, said Kirk Henckels, chairman and director of private brokerage at Stribling & Associates.

For one thing, there are much fewer new luxury residential developments on Fifth Avenue and Central Park West than Downtown, Henckels noted. (New developments tend to command higher prices than resales, and condos are often pricier than co-ops.)

For another, the Upper East Side and Upper West Side can still command top dollar—literally. Last year, the city’s priciest home sales all took place in Midtown and Uptown, including the largest co-op deal (the $54 million sale of media mogul David Geffen’s apartment at 785 Fifth Avenue), the largest townhouse deal (the $49 million sale of the Stanford White Mansion at 973 Fifth Avenue), and the largest condo deal (the $88 million sale of a penthouse at 15 Central Park West), according to a market report prepared by Henckels.

But buyers are also seeking trophy homes Downtown, and increasingly finding towers that come heaped with amenities, including swimming pools, gyms, roof decks and screening rooms. Properties with access to those facilities have not historically been available in Downtown neighborhoods.

“The Uptown people tend to want these newer buildings with views. Downtown properties historically haven’t offered that,” said Mara Flash Blum, a luxury Downtown broker at Sotheby’s International Realty. “Most areas are landmarked so you can’t build these huge tall towers there.”

The building under construction at 56 Leonard, which stalled for several years during the financial crisis, was permitted to rise to 830 feet thanks to its location between the Tribeca East and Tribeca West Historic Districts. A penthouse there is asking $6,400 a square foot, while at 150 Charles Street, one of the priciest units has a price tag topping $7,592 per square foot.

Kelly Kennedy Mack, head of Corcoran Sunshine, which is marketing 56 Leonard, told The Real Deal that the property is commanding interest from a range of different kinds of buyers, including some who previously may have opted to live in a trophy tower Uptown. If it hadn’t been for the introduction of properties such as 56 Leonard, many buyers would never have considered looking southward, said Mack, who noted that the building has been hit so far with local buyers more so than international purchasers.

“We had always suspected that 56 Leonard would compete with luxury high-end properties in the Midtown market, particularly for the international buying community and for the penthouses,” she said. “This is the first time that a product is being introduced to the Downtown market that has ticked all of the boxes historically only checked in prime Midtown.”

And it’s not just condos that are seeing price hikes.

“I’m seeing record numbers in co-ops Downtown,” Blum said. “The average price in the co-op market Downtown has been somewhere between $1,200 and $1,300 a square foot. When you start to see $1,500 to $1,900 a square foot, as we’re seeing now, that’s pretty outrageous.”

These are not the first Downtown properties to achieve record numbers. Last year, for instance, a pair of penthouses at Superior Ink on West 12th Street sold separately for $16.9 million and $10.5 million. Several years ago, a penthouse co-op at 40 Fifth Avenue sold for $11 million.

“If that came on the market right now, would it come on at $25 million?” Blum wondered.

To that end, brokers who have traditionally stuck to selling pre-war Upper East Side co-ops to well-heeled Manhattanites may need to learn mobility as demand for properties further south ramps up, Kleier said.

“We need to be in a car or on roller skates [to keep up],” she joked.

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