The Real Deal New York

A history of the rivalry between shining, moneyed Manhattan and scrappy, working-class Brooklyn is peppered with one-sided results through the last century: Manhattan got skyscrapers, high finance and nightlife Brooklyn got low-rises, factories and grit.

The comparison no longer holds up, particularly in real estate. In a 2004 year-end report released by The Corcoran Group, the only brokerage in Manhattan and Brooklyn that keeps sales and rental statistics for both boroughs, it appears prices in a handful of Brooklyn locations are surging ahead of comparable Manhattan neighborhoods.

Brooklyn Heights, Park Slope and Dumbo are among the areas outpacing Manhattan neighborhoods, notably the far East Side, Murray Hill, parts of the Financial District and Midtown West.

“Brooklyn no longer takes a backseat to Manhattan when it comes to hip, well-serviced, desirable neighborhoods people want to live in,” said Pamela Liebman, Corcoran chief executive officer. “Priced per square foot, parts of Brooklyn are starting to rival Manhattan more and more.”

A quick glance at average sales price in the latest Corcoran data shows that marketwide, prices in Brooklyn don’t come close to Manhattan, though Brooklyn condominium prices grew by 33 percent from 2003 while Manhattan prices grew by only 9 percent.

Part of that huge increase might have to do with the average sales price of a condo in Dumbo, which at $968,000 crowned Brooklyn prices for condo sales and surpassed average prices in Downtown Manhattan, at $924,000, as well as Midtown West at $802,000. It also rivals Midtown East at $970,000.

Taking second in Brooklyn for average sales price of a condo was Williamsburg, but at $746,000, it didn’t come close to Dumbo or the lowest priced Manhattan neighborhood, Midtown West. Corcoran didn’t have 2003 data from either Brooklyn neighborhood to help gauge how quickly prices are rising.

Brokers with Douglas Elliman, which has a handful of agents who work in both Manhattan and Brooklyn, said their anecdotal experiences back up these numbers.

“Williamsburg and Dumbo certainly are competing price point to price point with the new developments down on the Lower East Side, which I think represents an area of great opportunity in Manhattan,” said Tribeca-based broker Doug Bowen, who lives in a Brooklyn townhouse and also invests in them. “We’re talking Chinatown, the Lower East Side from Houston down to Delancey that’s a very happening neighborhood.”

Bowen also targeted Clinton/Midtown West, also known as Hell’s Kitchen, as a Manhattan neighborhood that is outpriced by these Brooklyn neighborhoods.

“There is no doubt about that,” he said. “At $805 to $900 a square foot, with the chic of Williamsburg and the chic of Dumbo, there are a lot of people who are gravitating to that take-it-down-a-notch Brooklyn lifestyle in lieu of being in Hell’s Kitchen.”

In another independent analysis, Jonathan Miller, president of real estate appraisal company Miller Samuel, used Corcoran’s Brooklyn numbers to show that the average sales price for a Dumbo condo is surging past Midtown West and Battery Park City, at $859,000 and $720,000; and Williamsburg is surpassing Battery Park City.

Bowen was so rosy on Dumbo and Williamsburg that he predicted they are only slightly more than a year from catching Tribeca.

When it comes to co-ops, other Brooklyn neighborhoods steal the spotlight. According to Corcoran data, Cobble Hill, with an average co-op sales price of $520,000 pulled ahead of Manhattan’s Midtown West at $480,000 and may soon overtake Downtown at $557,000.

Cobble Hill also saw a greater price hike since 2003 at 27 percent than those two competing Manhattan neighborhoods, which both saw an increase of about 20 percent.

At $290,000, the average price for a studio co-op in Cobble Hill topped every Manhattan neighborhood except Downtown at $299,000. In Brooklyn Heights, the $1.3 million average price for a three-bedroom-plus co-op outpaced Midtown West’s $1.1 million average.

Miller’s independent analysis concluded that the average price of a co-op in Cobble Hill outprices Union Square, Gramercy Park, Kips Bay and Murray Hill, which averaged $503,000, as well as the Yorkville average of $485,000.

Brooklyn townhouses may be a few years from achieving parity with Manhattan, say townhouse specialists, whose analysis is supported by the Corcoran data.

While the gap between Manhattan and Brooklyn in the average sales price of condos and co-ops has narrowed significantly in the last year-and-a-half, “in the townhouse market, the gap is still much wider, so I would say the townhouse market in Brooklyn represents a great opportunity, because there’s a lot of it,” Bowen said.

David Grossman, director of Brooklyn sales for townhouse broker Leslie J. Garfield & Co. and a Brooklyn resident, agreed.

“In Brooklyn, if you are maybe picking a prime property on the best street in Brooklyn Heights, that may be the one comparison you can make to Manhattan, or maybe snapshot comparisons here and there,” he said. “But in general, it’s not there yet.”

Grossman said the only Manhattan neighborhoods where townhouses might be eclipsed by Brooklyn Heights and Park Slope would be Harlem and the Lower East Side.

“I think if things keep moving along as they are now, we could be talking a three- to five-year period that the better neighborhoods in Brooklyn will start matching up with the good neighborhoods in Manhattan,” he said.

Brooklyn apartment rentals in places like Brooklyn Heights, Cobble Hill and Boerum Hill are beginning to exceed rental prices in some Manhattan neighborhoods, such as the Upper West and Upper East sides.

Though the Corcoran data does not bear this out, a comparison of Corcoran’s Brooklyn rental prices with the Manhattan prices of Citi Habitats, a branch of Corcoran, shows that Brooklyn areas are becoming competitive in certain apartment sizes, such as Boerum Hill for studios and Brooklyn Heights and Cobble Hill for two- and three-bedroom apartments.

“Neighborhoods like Brooklyn Heights and Park Slope and parts of Williamsburg and Dumbo can fetch higher rents than areas in Manhattan proper, like the high 90s on the East Side, and Peter Cooper Village, and the lower, lower East Side,” said Andrew Heiberger, president of Citi Habitats.

New York lives are full of love-hate relationships, and Gothamites’ bonds with their real estate brokers are among the most fractious.

In a city where real estate is a consuming preoccupation cutting across class lines and wealth brackets, it’s no surprise that a recent survey indicated both agents and their customers see a connection that is marked by mistrust and low expectations of real estate professionals.

But in a climate where the media is sometimes critical of industry practices, particularly in the general financial press, the business gets a better shake in New York than in some other markets big deals involve the famous, the rich and the powerful, a club that plenty of the city’s denizens aspire to join. New Yorkers may not always love their brokers, but if they can’t always live with ‘em, people know they wouldn’t live anywhere without them.

Stories in national publications, including articles last summer in Forbes and the Wall Street Journal, assailed industry practices. Forbes in particular took aim at real estate agents’ reactions to a proposed public offering by national Internet discounter zipRealty, going so far as to say: “The Realtors are pros at the protection game and have beaten back other interlopers, including the nation’s biggest banks and Microsoft, which last year gave up a five-year effort to compile its own real estate listings.”

Coverage of the industry in New York isn’t necessarily softer, but does focus on the practical aspects of finding a place to live, while at the same time touching on what New York magazine senior editor Christopher Bonanno calls “aspects of the social comedy” that swirl through city real estate, from penthouses to tenements. The weekly New York Observer also devotes ample space to real estate with its “Manhattan Transfers” features.

“New Yorkers worry about real estate more than anybody else in the nation,” Bonanno says, explaining the prominence and popularity of the magazine’s real estate coverage, which includes a designated page of prominent real estate news and larger stories on the subject, including a recent cover story on the children of developer Donald Trump. “Prices are so high and inventory is so scarce that essentially everything about your life is governed by real estate.”

“There are two notes we try to hit one is practical advice, but you don’t want big heavy doses of it every week. The Times does that very well,” he says. “The other is the social comedy. Real estate is something people talk about endlessly. We don’t wish to make fun of the industry, but at the same time, you can be respectful of the people involved and take a tone that can be more, ‘It’s a ridiculous situation, but we’re all in this together.’ It’s sort of an elevated version of community newspaper coverage, but we’re focusing on a certain segment of wealth and power.”

One thing New Yorkers have in common is a certain distrust of real estate agents. Though the average New Yorker moves seven times in his or her Big Apple tenure, the relationship between a broker and a buyer or seller usually lasts through one transaction, which is probably why 78 percent of agents and 69 percent of buyers and sellers believe that “most people don’t trust real estate agents or they don’t expect much from them.”

The data comes from a survey commissioned by Braddock and Purcell, a consultancy that claims to be the first in the city to match clients with real estate agents, usually for high-end property transactions. The Times, which has pumped up its real estate coverage with higher volumes of how-to and where-to-hunt articles in its Sunday edition, was among the media outlets to cover the findings.

Paul Purcell, a former president of Douglas Elliman who founded the company with Kathy Braddock, his former general sales manager, says he’s not surprised by the negative reaction, but adds that the business is becoming increasingly professionalized, which will eventually lead to better perceptions of real estate agents among their customers and in the press.

“At the core of it, it is an extremely easy profession to get into the barriers to entry are so low,” says Purcell, who worked as a sales executive for Proctor and Gamble before moving to real estate and climbing to the top of the Elliman organization. “You take a 45-hour state course, and if a firm will hire you, then you are immediately ‘qualified’ to assist someone in the single biggest financial transaction of their lives.”

The public perception, then, is that real estate isn’t rocket science, though Purcell says internal training programs at larger real estate firms help agents with all levels of experience.

“I think real estate professionals should be trained the same way as any other sales organization,” he says. “At Proctor and Gamble, you did not go out on a sales call unless you’d been trained thoroughly. A sales manager went out with you for a year before you worked alone.”

At some firms, Purcell says the sink-or-swim approach to putting new agents to work means management comprised of successful brokers is fulfilling a different function, and it certainly isn’t training.

“They’ve evolved into gatekeepers or in some cases, zoo keepers,” he says. “They were brokers, and the next day they’re managers, which I think is damaging.”

Jim Fisher, a professor at St. Louis University and director of the Emerson Center for Business Ethics there, says the combination of sometimes spotty training and the fact that few people move as much as New Yorkers do adds up to a certain skewed perception of the business.

“Given that few buyers have first-hand experience in the market, it may not be apparent to them how a real estate agent gets compensated and how that coincides with the buyer’s interest,” he says. “It’s important for people who are selling to get customer expectations at a level where they can be met.”

But if real estate agents are sometimes portrayed through a somewhat skewed lens, the real estate business is also increasingly depicted as a field where savvy investors can prosper. Fortune magazine’s Dec. 27 issue featured an article profiling five successful small real estate investors with cover line: “Real Estate: How Real People Get Rich.”

The Real Deal

Recently filed lawsuits by CB Richard Ellis against former employees have other commercial real estate brokerages sitting up and taking notice, as the company gets tough about its turf and its money.

The nation’s largest commercial real estate brokerage appears to be clamping down on brokers who leave the company for rivals, pursuing one broker with a claim for an unpaid draw and going after a group of Long Island brokers it alleges took confidential information when they defected en masse to Newmark & Co.

The first lawsuit was filed November in State Supreme Court against former broker Michael Burgio for allegedly failing to repay a draw of about $812,000. A draw is a loan many commercial brokerages offer their agents when brokers work on commission in lieu of receiving a salary.

Typically, the brokers pay back the loan with earned commissions on commercial lease deals. However, CBRE alleges in the suit that Burgio left to go work for competitor Cushman & Wakefield still owing the company money.

The company is seeking the principal of the loan plus any interest accrued, as well as legal costs and any other damages.

In an unusual move, CBRE also filed a lawsuit in State Supreme Court in December seeking $45 million in damages from four former brokers from Woodbury, Long Island: Jack O’Connor, Brian Lee, Scott Berfas and Dan Marcus. CBRE accused the brokers of orchestrating a group defection on Sept. 8, 2004, when they left for a Newmark office in Melville, allegedly in violation of their employment contracts. The lawsuit also claims the agents took confidential documents and a computer database and failed to provide a list of their pending deals to the firm.

The company also accused one broker of failure to repay a signing loan of $165,000 and another of failure to repay an employee loan of $30,000.

Many commercial brokerages offer their agents draws or signing bonuses, and sometimes those agents defect without paying back the money. A company spokesman said CBRE rarely litigates in these types of disputes.

“We obviously feel strongly that a contract is binding to both parties,” CBRE spokesman Steve Iaco told The Real Deal. “We’ve lived up to our end of the contract, and it’s incumbent on these folks to live up to their end of the contract.”

None of the five accused brokers chose to comment through spokesmen at their new firms. Neither Cushman & Wakefield nor Newmark responded to questions.

Other commercial real estate brokerages, while reluctant to weigh in on the specifics of the lawsuits, said they would be watching the outcomes.

“I will definitely be monitoring them,” said Richard Hodos, president of Madison HGCD. “We do put people on draws and monitor their performance relative to their draws. We do provide bonuses. With that said, we haven’t had any problem.”

Hodos said he hopes the firm’s familial culture and comprehensive benefit package, along with its relatively generous expense reimbursement policy, will attract quality brokers who don’t ask for exorbitant draws or signing bonuses.

He contemplated momentarily whether the practice of fronting brokers big money to lure them aboard might change as a result of the CBRE lawsuits.

“I think quality people will continue to demand certain kinds of things,” Hodos said. “In order to attract the best and the brightest, firms will still have to dig down deep to come up with attractive packages. It has always been that way; it will continue to be that way.”

Peter Riguardi, president of Jones Lang LaSalle New York Region, disagreed, saying the litigation’s outcome could change compensation structures. He said his company is one of few commercial brokerages that has chosen not to offer draws or signing loans, which creates a more team-oriented culture.

Instead, Jones Lang LaSalle offers brokers a salary and bonuses directly tied to production. Young professionals considering either a career in real estate or on Wall Street are particularly drawn to this model, Riguardi said.

“Our employees never owe money,” Riguardi said. “So we sort of look at these problems and are very pleased that we’ll never have them.”

He said he will watch for changes at other brokerages in the wake of the lawsuits.

“Because our compensation formula seems to work the best, we watch with curiosity,” Riguardi said. “We think some of our competitors might change over to our format.”

There were plenty of firsts in new residential development in Manhattan in 2004.

The storied Plaza Hotel went condo for the first time, amid a spate of hotel-to-condo conversions. The heart of Times Square got plans for its first condo development at 1600 Broadway. The developer of 170 East End Avenue hit another first-time record, paying $770 a square foot for a development site alone.

From elegant townhouse transformations to skyscrapers taking shape in the air, The Real Deal tracked new condo and rental projects in Manhattan throughout the past year, and laid them out for our readers.

Looking backwards rather than forward, and with more detail than any map we’ve run before, this installment will be part of our semi-annual review of new projects.

Here is a brief look at developments in different neighborhoods over the past year:

The Time Warner Center spurred new projects at the foot of the Upper West Side, with the entire-block Mayflower hotel site sold to a developer for $401 million. A half-dozen new projects were set to rise west of the massive new mixed-use complex. Even the saturated center of the Upper West Side saw new projects announced, including at 2112 Broadway.

The boundary of the Upper East Side pushed further north, with projects like Glenwood’s Hampton Court opening on 102nd Street, in a neighborhood dubbed ‘Gracie Point’ by the developer but better known as East Harlem. In the heart of the Upper East Side, tony conversion projects like the former Christie’s East auction house at 219 East 67th Street and a former Lyc e Fran ais de New York townhouse at 3 East 95th Street made progress, and some projects took a page from Downtown in billing themselves as “loft-like” spaces.

Projects in Chelsea, like Vesta 24 at Tenth Avenue and 24th Street, which reportedly sold out in a day and a half, showed the neighborhood moving farther west and north. The massive rezoning of the far West Side to the north includes allowances for more than 13,000 residential units, with some developers already announcing plans but most waiting for the final zoning changes.

Thanks to the large amount of Liberty Bond-fueled residential construction in Lower Manhattan, mostly rentals, commercial owners like Brookfield Properties are reportedly growing concerned about the area becoming too residential, according to press reports. Downtown by Philippe Starck at 15 Broad Street, the Sunshine Group’s first marketing foray into Lower Manhattan, raised the luxury bar, while Sciame Development finished up work on a 14-building rental project in the South Street Seaport district, the first step in transforming the area into Wall Street’s “living room,” company principals said.

Go to map

New Jersey’s Hudson Waterfront, once touted as the budget alternative to Lower Manhattan rents, has lagged in leasing activity, but optimists say the area has a solid future.

The Garden State remains highly competitive when it comes to enticing companies that might opt for space across the Hudson River. Jersey City, in particular, has seen rapid waterfront development and has dangled plenty of tax incentives to position itself as an attractive commercial real estate alternative to Manhattan.

For now, New York companies aren’t biting, and big financial service firms are looking to unload prior space commitments.

In 2004, vacancy rates in Jersey City, Weekhawken and Hoboken increased from 14.2 percent to 15.2 percent, according to Cushman & Wakefield of New Jersey. Class A vacancies for the three cities across from New York hit 16.7 percent, considerably higher than Manhattan vacancy rates.

The three cities account for 16,744,094 square feet of Class A office space, and more than 2 million square feet of sublease space remain available in “Wall Street West” as companies such as Lehman Brothers try to unload space and focus on Manhattan.

Much of the spike in availability comes from UBS PaineWebber, which was supposed to occupy the Lefrak Organization’s new Newport Office Center VII. The company now wants to sublet more than 1 million square feet of space. It’s a far cry from 2000, when overall vacancy rates hit a record low of 1 percent. According to Cushman & Wakefield’s latest report, “overall vacancy rates are beginning to moderate despite being at their highest levels since 1993.”

With financial services firms gearing up for renewed hiring in anticipation of increased economic growth, Jersey believers aren’t hard to find.

“I think New Jersey is still pretty competitive and especially Jersey City because it’s all new, it’s got a great transportation system, it’s got shopping,” says Linda Tanaka, director of research for Sitar Company ONCOR International, a commercial brokerage firm. “I think for some people Manhattan still is seen as a target.”

Still, the bottom line is the bottom line. Tanaka says space runs $25.05 per square foot in Hudson County and approximately $30.00 for Class A space. Some waterfront buildings in Jersey City command rates of $40.00 per square foot, still a deal relative to spiraling Midtown rents, where overall average asking prices stood at $45.98 at the end of the year but were much higher for Class A space, according to Cushman & Wakefield.

Mack-Cali Realty Corporation, a dominant commercial player in Jersey City, cast a vote of confidence in New Jersey’s “Gold Coast” when it announced a deal for the state’s second-tallest building, 101 Hudson Street, for $329 million.

The 42-story building is 97 percent leased through 2007 to tenants that include Merrill Lynch, AIG, and Lehman Brothers. Mack-Cali is expected to seal the deal early this year, which would give the Cranford-based real estate investment trust ownership of 25 percent of the city’s waterfront Class A office space.

New Jersey is no longer a punch line for jokes about exile across the Hudson, but some companies believe corporate prestige requires an official address in Manhattan even if lower-level staff is discreetly ensconced across the river.

Goldman Sachs, which constructed the Garden State’s tallest skyscraper, only occupies part of its 1.36 million square feet at 30 Hudson Street. The financial powerhouse plans to build a new headquarters in Battery Park City, but gives no indication that it will abandon its gleaming Gold Coast tower.

“Many companies feel it’s perhaps important to have a front door in Midtown but the cost of occupancy and the availability of a well-educated labor force has given pause to many companies to execute leases on the Jersey City side,” explains Mitchell Hersh, Mack-Cali’s president and CEO.

In early January, Mack-Cali announced that Morgan Stanley extended its 306,170-square-foot lease at Harborside Plaza 2 through 2013. Pharmaceutical company Forest Laboratories added more than 36,000 feet to its 180,072-square-foot space at Harborside Plaza 5. Amdocs, the software provider, also signed a 10-year lease there, for 18,655 square feet.

“At this juncture it’s absolutely not all financial services and that’s a very good thing,” says Hersh. “I’m not writing New York off. It’s still the financial capital of the world, but Jersey City also has a very high level of attractiveness.”

The rest of Bergen County and neighboring Monmouth County are, according to Tanaka, “very hot.” With average rents of $22.58 per square foot, Monmouth has one of the lowest vacancy rates in the state. In Essex County, Newark seeks to cast itself as a destination.

But Somerset County is having trouble filling its abundance of “old-fashioned headquarters space” like the former AT& offices. The latest Sitar-Rutgers Regional Report put Somerset’s vacancy rate at 40 percent.

That is expected to drop when Citigroup moves 1,600 back-office employees from New York City into Lucent’s former corporate campus in Warren Township.

According to a recent Newmark Office Market Report, “New Jersey’s real estate market was defined in the third quarter” by this 800,000-square-foot lease, “one of the biggest office leases in New Jersey in years.”

The company says tax breaks such as New Jersey’s Business Employment Incentive Program (BEIP) have proved key to luring business across the Hudson.

“There hasn’t been over-construction,” Tanaka points out. “There’s been constraint in building office space so once the economy picks up, the space should fill up pretty readily.”

The Real Deal

Financial service firms trying to get a leg up on the competition for office space spearheaded a flurry of year-end leasing deals that boosted Manhattan office occupancy rates for December 2004 and the fourth quarter to the best level in three years.

Both Lehman Brothers and Wachovia Bank closed big deals in Midtown, and Morgan Stanley took nearly 450,000 square feet Downtown. Financial firms are facing off against law firms, the top space takers over the past two years.

The class A office vacancy rate for Manhattan was 9.8 percent in December, compared to 10.3 percent in November, an improvement of 0.5 percent, according to Colliers ABR.

The holiday month was the first time the office vacancy rate had fallen below the 10 percent threshold since September 2002, when the rate was 9.9 percent, the report said.

For the entire year, about 29 million square feet of office space was leased by businesses in Manhattan, 9 million more square feet than in 2003, according to a Cushman & Wakefield report.

The C & W report put the overall vacancy rate for all classes of space at 11.1 percent at the end of the year, its lowest level in nearly three years.

The C & W report also said that despite declines in available space, overall average rents in Manhattan actually fell to their lowest price in five years, averaging $39.47 per square foot.

“The large amount of office space available on the market over the last 18 to 24 months has been a catalyst for lower rent prices,” said Jim Delmonte, director of research at C & W. “But that’s not going to continue in 2005 because available subleases are being absorbed by financial and legal firms.”

The Colliers report had a more positive take on rent prices for class A space, finding average asking rents rose to $48.49 per square foot in December, up from $47.95 per square foot the month before.

Financial services companies and law firms are locking in large blocks of 100,000 square feet or more in an attempt to circumvent anticipated rising rents and the need for additional space to accommodate the future hiring of employees.

In the late 1990s, financial service firms were often outbid by Internet companies flush with cash. Today, their competition is no longer high-tech companies, but law firms, according to Robert Sammons, director of research at Colliers.

Midtown

Midtown was the big winner during the holidays, as Lehman acquired a 306,700-square-foot location at 1301 Sixth Avenue, and Wachovia took 180,000 square feet in the Seagram Building at 375 Park Avenue.

“Financial companies have been interested in renting more space because of the upturn in the economy. They don’t want to be caught short-sighted,” said Sammons.

The Midtown class A vacancy rate fell to 8.9 percent, the lowest since October 2002, when the rate hit 8.8 percent, according to Colliers.
In addition to big leases, boutique financial firms, including hedge funds, were rushing to gobble up space.

“Small hedge fund businesses are fond of the Plaza and Grand Central area because they’re more prestigious, likely to impress their client roster and because many of the owners live on the Upper East Side, Westchester or Fairfield County, which is convenient to Grand Central and Metro-North,” said Sammons.

Unlike other parts of town, increased leasing activity in the Midtown area drove prices up by 9.9 percent over the past year.

For year-end, the class A average asking rent reached $57.35 per square foot from $57.48 per square foot in November and $52.37 per square foot in December 2003, according to Colliers.

Midtown South

Midtown South, from Canal Street to the mid-30s, was not left out of the improved leasing climate.

Its overall vacancy rate (for all classes of space) fell to 11.4 percent in December from 11.6 in November, due to a lot of small deals.

Average rent price dropped to $30.56 per square foot in December from $31.10 in November, according to Colliers.

“Certain blocks of buildings on Hudson Street dropped their prices slightly,” said Sammons. “One block lowering its office rents can affect an entire neighborhood.”

Downtown

Below Canal Street and Chambers Street, Downtown office vacancy rates benefited from several large deals.

Morgan Stanley took a 447,000-square-foot block of long-term sublease space at 1 New York Plaza, and TD Waterhouse consolidated from two other downtown locations by closing on 137,000 square feet of space at 32 Old Slip.

These deals helped the class A vacancy rate drop to 13.2 percent from 14.4 percent in November, the Colliers report said. The average asking rent price for class A space increased to $33.56 in December from $33.12 in November.

Analysts and experts agree that increased leasing activity is expected to continue through 2005 providing there is no sudden economic downturn or another terrorist attack.

“We expect demand to shift Downtown as space gets leased up in Midtown. If operations want to stay in Manhattan, the Downtown area may contain the only available office space left,” said Delmonte.

The December 31, 2004 expiration of the WTC Small Firm Attraction and Retention Grant Program also helped push down the vacancy rate, as applicants rushed to file paperwork before the deadline for financial aid.

“They wanted to lock in rent prices while they could get those incentives, but it’s only good for those companies that have less than 200 employees,” said Sammons.

Tenants who signed leases prior to New Year’s Eve last year have until April 1, 2005 to turn in documents to qualify for a grant with the expired incentive program. The Lower Manhattan Economic Revitalization Plan and other discretionary grants remain in place.

The largest rezoning in recent city history has this town’s real estate players limbering up for a race to some of the last developable plots on Manhattan’s far West Side.

But no one wants to get there too soon, before the future of the property they’ve been eyeballing has been determined. The $3 billion rezoning of the area known as Hudson Yards was approved by the City Council in a vote on Jan. 19, but that’s not the end of the story.

Although the fate of a controversial proposal to build a $1.4 billion football stadium remains uncertain and will be considered separately, rezoning means that 59 blocks of factories, brick warehouses and parking lots between 28th and 43rd streets from the Hudson River east to Seventh and Eighth avenues get redesignated a high-rise business district.

Included in that rezoning are, among other delectables, 24 million square feet of office space and 13,600 residential units. There is also the expansion of the No. 7 subway line, part of the rezoning plan, and the already approved expansion of the Javits Convention Center, where construction could begin this year.

Developers and brokers have been tickled by the possibility for new projects in the area. Much of the recent focus has been on condos, and existing plans for office towers are being modified to include apartments because of the hot residential market.

Vornado Realty Trust, which generally remains close-mouthed about development plans, broke its silence to say it intends to expand west to Hudson Yards from the Penn Station area, where it’s one of the biggest landowners.

With an uneven office market, developers may look past commercial zoning and take a more creative approach to the area’s facelift.

Eric Anton, senior managing partner at Eastern Consolidated Properties, said developers are looking at buying combinations of small plots andécorner lots for condominiums.

“Everything on the drawing boards right now is condominium, because the market is so strong,” Anton said.

He also said big hotel projects could take a back seat to smaller hotel undertakings such as a Motel 6 or a Howard Johnsons.

Asher Alcobi, founder and president of brokerage Peter Ashe, is more bullish on hotels, however.

“The hotel market at the end of 2004 was exceeding the numbers of 2000, which was the best year for the hotel industry,” he said. “My prediction is that we will see something we haven’t seen for a long time in New York, which is construction of hotels. And I predict it will happen there.”

Alex Twining, president of Twining Properties, recently joined forces with The Related Companies and MacFarlane Partners to develop a tower with retail, rental and condos at 440 West 42nd Street.

Twining said he doesn’t believe that full-on development of office space is the way to go.

“If there’s no market to fill the buildings, then you’re taking on risk to go buy a piece of land that you may be sitting on a long, long time,” he said.

Twining said he believes residential development, generally condominiums, but perhaps a blend of office and residential, will move south from 42nd Street and outward from Penn Station, where there are existing critical masses of residential and office space.

Others see the expansion of residential Chelsea northward into the rezoned Hudson Yards, which currently has around 20,000 residents.

“This neighborhood is Chelsea of five or six years ago,” said Alcobi. “Five or six years ago in Chelsea, you could have bought for no money. Today, it’s one of the most desirable areas and most expensive in the city.”

The rezoning includes plans for 3,400 affordable housing units out of the total 13,600, which has community activists pleased.

“The community is really excited that the final rezoning plan apparently involves a really significant plan for affordable housing,” said John Raskin, an organizer for the Hell’s Kitchen/Hudson Yards Alliance.

The massive 75,000-seat Jets stadium remains the big piece of Hudson Yard’s future still up in the air. But Twining believes the sports complex and convention center could do more harm than good.

“One of the missed opportunities is that you also have the river there,” he said. “Yet the premise of the city’s plan is to extend a giant wall or convention corridor so all those blocks that could be incredibly valuable prime residential property overlooking the river will not happen.”

The Real Deal

The scorching hot pace of the Manhattan apartment market cooled a bit in the last three months of 2004, but prices still closed out the year 15 percent above the end of 2003, according to a recent report.

The average apartment price dropped 2.6 percent to $1,041,430 in the fourth quarter, down from $1,069,445 in the preceding three-month period, according to the Douglas Elliman Manhattan Market Overview, compiled by appraisal firm Miller Samuel.

Prices increased by 15.3 percent over the fourth quarter of 2003, when the average price was $903,259. The average price first hit the $1 million mark in the second quarter of last year.

Inventory took a noticeable drop in the last few months of the year, with listings plunging to 3,922 from 5,112 the previous quarter, a 23.3 percent decline. Listings were down 19 percent compared to a year ago.

Jonathan Miller, president of Miller Samuel, said he was optimistic about the market as a whole, despite a drop in listings.

“There’s a smaller supply of apartments than there was a year ago but we’re poised for a better economic situation in terms of personal income,” said Miller.

Although the sale of a Fifth Avenue apartment to Rupert Murdoch for $44 million broke a price record in mid-December, another sale at the end of the month the $45 million purchase of the waterfront estate called Burnt Point in the Hamptons took the title of the most expensive home buy ever in New York State. Pharmaceutical distributor Stewart Rahr acquired the 18,000-square-foot property from David Campbell, a commodities trader.

Brokers said the high-end market was revitalized by both big purchases, and that the outlook is good for purchases made with Wall Street bonuses. Once Wall Streeters’ checks are cut, a market surge is expected in February.

“Wall Street bonuses are up 10 to 15 percent,” said Miller. “We will see that reinvested in Manhattan real estate by the end of first quarter 2005.”

New York State Comptroller Alan Hevesi pegged Wall Street bonuses at a more modest 8 percent increase over 2003. Overall, there are some 158,000 recipients of bonuses in the city this year, the Comptroller’s office found.

Foreign buyers looking to realize gains against the weak dollar are also a source of anticipated activity. Jim Mazzeo, president of Weichert Realtors, Mazzeo Agency, said the emerging influence of Korean and Chinese purchasers is even more important than continued activity by Europeans bolstered by a strong exchange rate.

“The European dollar is more a factor on commercial sales by foreign companies, but individual apartment sales are driven by the Asian dollar,” said Mazzeo. “The economic factors that are affecting us are not affecting the Koreans or Chinese. They are buying condos, which is fueling condo conversions.”

The buying frenzy may slow somewhat if interest rates rise this year, a distinct possibility. In 2004, the Federal Reserve Board raised the federal funds rate five times by .25 basis points.

“I think the interest rates have to go up, the way we are borrowing money,” said Mazzeo.

Miller said the market continues to be mortgage-rate driven, thanks to still-low interest rates.

“In the last month of 2004 we saw them rise modestly, but they are still at low levels, which fueled apartment sales in late December and early January,” he said in mid-January.

Will prices keep rising? Dottie Herman thinks so.

The CEO of Douglas Elliman expects apartment prices to continue rising in 2005, though not as much as the previous three years. Overall, the outlook for 2005 is optimistic despite some unresolved issues.

“We still have the Iraq war to be concerned about,” she said. “We’re also concerned about potentially rising mortgage and oil prices. These are worrisome but 2005 should be better than 2004.”

The Real Deal

Developers love the cachet and cash that a famous architect’s name brings to new construction in New York, but a look at some recent projects shows there’s sometimes a sizable gap between the luster a star performer lends and the labor he or she performs.

A growing number of high-profile developments reflect the increased pace of big-name branding in Manhattan: 165 Charles Street designed by Richard Meier, The Related Companies’ Astor Place tower designed by Gwathmey & Siegel and the Michael Graves-designed 425 Fifth Avenue are some of the latest entrants in a pricey marketing war aimed at wealthy buyers.

But with many architects licensing their names to expensive developments, some may be contributing only design sketches, leaving the rest of the work of building to subordinates. While their names grow valuable as luxury brands, there may be some natural limits to the practice.

Skeptics suggest that using a top name primarily as a branding device, rather than an actual creative force, could dilute both project quality and brand impact. Developers say this is an increasingly important consideration in picking an architect.

“We’re in the process of deciding between two architects for a new project of ours,” said David Wine, vice chairman of Related, one of the first Manhattan developers to leverage the allure of tony architects in the late 1990s. He said the company views its associations with top tier architects as an extension of its own reputation.

“One of the questions we’re asking is, who is actually going to be spending time? Because we don’t want the name without the work,” he said.

For lesser-known developers, the marketing of a famous architect’s name may have little bearing on the designer’s actual role in the process. Much of the work may be done by a nameless, faceless contract architect. Some architects worry that this may discredit the business in the long run. After all, a 50-story building is different from the suit produced by a house of couture whose cloth selection may be relegated to the celebrated designer’s assistant.

“If a jewel is not executed properly, it shows its weaknesses very quickly when it falls out of the setting,” said Richard Hayden, chief executive officer of Swanke Hayden Connell Architects. “But it’s a different kind of responsibility than if the façde starts to crack. The cachet of selling a name may have weaknesses that don’t show up in a short time in our business. It’s more like five, 10 or 15 years.”

Bassie Deitsch, director of marketing at Boymelgreen Developers, which worked with designer Philippe Starck on its condominiums at 15 Broad Street, said having a big-name architect inspires confidence in buyers purchasing apartments before construction is finished.

“A well-known architect or designer adds credibility to a project as well as a level of status, so that the buyer does not have to question the quality and value of their investment,” she said. “This is especially important when you are selling a product that does not exist at the time of sale.”

But while it may be a key to preconstruction sales, the effect on resales is harder to gauge. In other parts of the country, buildings designed by venerable architects such as Ludwig Mies van der Rohe and Frank Lloyd Wright have been hard to sell, but the jury is still out on how the contributions from the more recent crop of high-profile designers will hold their value.

“It’s a little early to tell, because this is a recent phenomenon,” said Jonathan Miller, president of appraisal firm Miller Samuel. “Just in preliminary sales, we see that they do retain their value. I guess I’d equate it to architects of an earlier era like Rosario Candela, where those architects are still touted when properties are marketed today.”

The West Village, whose quaint tree-lined streets have always been a popular destination for the moneyed and stylish, remains a locus of frenzied sales activity, to the point where 142 West 10th Street, its newest luxury condominium project, had 600 serious inquiries and multiple offers for each of its four units before it had been on the market for a week.

Shelley O’Keefe, the Corcoran agent for the building, said 350 people attended the project’s early January open house, and that interest prompted developers Blesso Properties to amend the offering plan and increase prices by 15 percent.

Blesso converted the Federal- style walk-up in the Greenwich Village Landmark District from middle-income rentals to luxury condos. Prices for the quartet of two-bedroom units in the building, whose ground-floor tenant is the restaurant Marco New York, were listed from $1.295 million to $1.950 million, according to Corcoran’s Web site. Steep, but three of the four apartments have two bathrooms and outdoor spaces.

The most unusual feature of the building is the carriage-house apartment, a small addition on the first floor that extends the entire length of the site and has its own roof terrace. “The carriage house has the charm of a small private house in the West Village,” said O’Keefe.

Architect Gonzalo Fernandez of Scarano & Associates Architects did the interior design work, preserving the floors but stripping out the partitions in each apartment. “There was a big change in layout,” he said. “In the living space we preserved some of the brick walls wherever we could to bring out the charm of the building while bringing it into the 21st century.”

That translates into a typical list of luxury finishes: state-of-the-art appliances, marble countertops, Italian custom-design cabinetry and Jacuzzis for the master bathrooms.

“A number of people from the buildings that border it and across the street came and looked at the apartments during the open house and were impressed,” said O’Keefe.

The only outside change made to the building was approved by the city’s Landmarks Preservation Commission. “We took the old ugly pink- and-white paint off the outside and restored the natural color of the brick so it fits in more with the historic nature of the neighborhood,” said Fernandez.

Designers spared the original Carrera marble-and-soapstone mantles for the fireplaces, which were reopened and made to work once again.

Tim Melzer, a vice president with Douglas Elliman, had a client put in a bid of $5,000 over the $1,395,000 asking price for one apartment before the offering plan was amended.

“There were 11 offers on that apartment all over the asking price,” he said. “It is really charming, on a great street in a central location, but it is tough to get a condo in that area. There are a lot of rental-protected people that have been in the neighborhood for 30 to 40 years.”

The heart of the West Village has always been popular and O’Keefe said the possibility of oversaturation doesn’t exist because the demand for the West Village is so strong, and inventory remains low.

“The reason this one is doing so well is it has historical appeal, they are condos, the finishes are high-end and it’s the West Village,” she said.

While demand is high, Melzer said the neighborhood has room to grow in comparison to uptown.

“I think there is time left if you compare the West Village in terms of population with the Upper West or East sides which are packed with people,” he said. “In the West Village the buildings are lower. There is room to continue, but there is a lack of empty lots or buildings to be developed. We are coming to the end of that phase here.”

In the meantime, the lack of inventory could push prices higher.

“There is no inventory all over the city, especially Downtown,” said Leonard Steinberg of Douglas Elliman. “There is so little that you have to be concerned about what is going to happen to pricing next.”

The Real Deal

West Street project mirrors Meier’s affection for glass facades [more]

Dumbo
133 Water Street
The 12-story, 52-unit condominium will be Dumbo’s first building erected from the ground up in a century. Charles Diehl of Scarano & Associates Architects designed the building, with a concrete façde on its lower floors and the top eight stories clad in glass. Andres Escobar is designing the interiors, hallways and lobby.

Greenwich Village
142 West 10th Street
Renovated Federal-style townhouse designed by interior architecture division of Scarano & Associates Architects. Marketing began during the first week of January. The building includes four condo units two duplexes, a single-floor unit and a penthouse. Three of the four units have outdoor terraces; the penthouse has a 900-square-foot roof terrace. Each of the four units has two bedrooms, two wood-burning fireplaces, five-inch-wide oak plank floors, exposed brick walls and multiple skylights. Contact: Shelley O’Keefe, Corcoran, 212-343-5408.

Harlem
Gateway Condominium
2098 Frederick Douglass Blvd.
Second phase of the project includes 42 condominiums in renovated prewar building. Matthew Gaetano is the developer. Studios to three-bedroom apartments are asking $275,000 to $1.1 million. Sales and marketing agent Halstead Property reports that 70 percent of the units had contracts within two weeks. Project is expected to be completed by the first quarter of 2006. A first phase of the project involving 33 units has already been completed. Contact: Norman Horowitz or Stephen Kliegerman, Halstead, or visit gateway-condo.com

Prospect Heights
The Washington Building
35 Underhill Avenue
The 39-unit condominium building will be one of the first new residential projects in Prospect Heights in recent years. The two-tower building (a four- and a six-story tower) is being designed by Scarano & Associates Architects. Units will range from 630-square-foot studios to 1,500-square-foot three-bedroom apartments. Units are now for sale; construction is not yet completed. The developer is 630 Realty LLC.

Midtown South
Empire Lofts
13 East 30th Street
Landstorm Development has converted the prewar building into six full-floor loft condominiums. Prices for the 1,400-square-foot units range from $1.7 million to $1.9 million. Marketed by Manhattan Apartments. Contact: Michele Peters, 212-378-2696, or visit manhattanapts.com.

Midtown
St. Regis Hotel
2 East 55th Street
Renovations will create 33 hotel/condo units, ranging from studios to two-bedroom suites. Most condos will include crystal chandeliers, prewar crown moldings, wainscoting, custom millwork, butler’s pantries and Sub-Zero appliances. Buyers are limited to 180 days occupancy annually.

Times Square
Orion Condominiums
350 West 42nd Street
New project marketed by Corcoran. A sales center was scheduled to open for the project last month, according to a website for the project at orion42.com. Contact: sales center, 212-245-8200.

Midtown
Park Avenue Place
60 East 55th Street
More than 30 percent of the units have already been sold in the 45-story, 76-unit condominium tower, which will be ready for occupancy in May 2005, according to The Marketing Directors. Studio to three-bedroom apartments and a duplex penthouse are asking $675,000 to $9 million. Kohn Pederson Fox is the design architect. Contact: Carolyn Sebba, Park Avenue Place sales office, 212-813-9055, or visit parkavenueplace.com.

Upper West Side
The Grand Tier
1930 Broadway
Developer Glenwood has reopened its latest residence for leasing after a first phase this summer, in which 65 percent of the apartments were rented. Units include one-, two- and three-bedroom apartments, duplexes and penthouse floor-through units. Contact: Glenwood, 1-877-535-0500.

New Development From Previous Months

Atlanta

Residential/Commercial
Construction or conversion of more than 2,300 condo units worth $1 billion have either started or are now breaking ground as that market sizzles, according to a report by Central Atlanta Progress, a local business group. In the Buckhead neighborhood, Regent Partners recently announced it is dropping an office project in favor of a mixed-use project with luxury condos on its top floors, according to the Atlanta Journal-Constitution.

Commercial
The expected scant increase in new office space is expected to drive down the vacancy rate in 2005, according to commercial real estate firm Richard Bowers & Co. Only three new buildings, totaling 640,000 square feet were delivered in 2004, including the SouthTrust building at Atlanta Station, which accounted for 500,000 square feet. About 320,000 square feet of new construction will be available this year, according to Globest.com.

Boston

Residential
The average rent for a new apartment is $90 a month lower than two years ago, a sign of continuing softness in the rental market, according to a recent study. The average asking rent for Boston apartments of all sizes was $1,775 a month at the end of 2004, down from $1,865 in October 2002, according to Northeast Apartment Advisors Inc.

Residential
After dropping for two months, the number of single-family homes changing hands in Massachusetts jumped in November. There were 4,063 sales, with some brokers attributing the earlier declines to the presidential election and the Red Sox’s World Series win. The median home price surged to $345,950, up 14.6 percent over the same time a year earlier, the Boston Globe reported.

Commercial
Downtown Boston’s office vacancy rate hit a 25-year high of nearly 20 percent in 2004 at a time when the national economy was supposed to be in recovery. About 11.9 million of the city’s 58 million square feet of office space is now vacant, according to Spaulding & Slye Colliers International. The acquisition of FleetBoston Financial Corp. by Bank of America, insurer John Hancock Financial Services purchase by Canadian giant Manulife Financial Corp. and cutbacks by State Street Corp. contributed to the rise.

Chicago

Residential/Commercial
A massive 28-acre mixed-use complex Downtown is nearing completion under the auspices of the Magellan Development Group. The centerpiece of the project is a six-acre public park, called Lakeshore East, which will include a dog park, sports fields and sitting areas. The complex will include four residential towers, including a 549-unit rental building and a 29-story, 209-unit condo high-rise, Realtor.org reported.

Residential
For years, the development community would recirculate buzz about Uptown as a district poised for revival, and it seems to be happening this year. While the North Side neighborhood has seen considerable gentrification over the last 10 years, there is a critical mass of expensive projects developing in the area, one of the most racially and economically mixed Chicago communities. There are at least 21 new-construction projects and 26 conversions underway, with new construction selling from $250 to $290 a square foot, according to a story in the Chicago Tribune.

Las Vegas

Residential
The length of time it is taking to sell homes in Las Vegas continues to increase as supply surpasses demand. Of the 2,522 homes listed in the area’s Multiple Listing Service that sold in December, 15 percent of them had been on the market for three months or more, up from 10 percent in November, the Greater Las Vegas Association of Realtors reported.

Residential/Commercial
About 3,700 apartment units are expected to be built in Las Vegas in 2005, compared with 3,500 built in 2004, according to CB Richard Ellis. Around 12,000 apartment units are in the process of being converted to condos. Sales are expected to be robust in 2005, but not on the volume that was experienced in 2004.

Commercial
Small office buildings, the hot product of 2004, are on the verge of being overbuilt, local brokers say. There is 7.1 million square feet of office space planned or under construction in the Las Vegas Valley, of which 2.3 million square feet is small office buildings for sale, according to In Business Las Vegas.

Los Angeles

Residential
Nearly three-quarters, or 74 percent, of home sales in California last year involved baby boomers, according to a California Association of Realtors report. Of those buyers, 50 percent were upgrading to larger dwellings. A typical California home seller was married, 47 years old, earned nearly $135,000 annually and had sold a home at least once before, the survey found.

Residential
While final numbers aren’t in yet, the California Association of Realtors forecasted a 3 percent increase in home sales in 2004 over 2003′s record 601,800 sales. For the year, the median price of a single-family dwelling was expected to rise 22 percent over the previous year to more than $450,000 which would represent a new high.

Miami

Residential/Commercial
Downtown Orlando had four condominium communities prior to a building frenzy that began in 2000. Since that year, 3,596 new and converted units in 19 projects have been announced. Some attribute the downtown condo boom to rising land costs and lengthy commutes, according to the Orlando Business Journal.

Philadelphia

Commercial
After considerable controversy, a 57-story, 1.2 millon-square-foot office tower that will serve as the headquarters of the Comcast Corp. broke ground last month at 17th Street and JFK Boulevard. Developer Liberty Property Trust had sought to have the building, One Pennsylvania Plaza, designated as part of a Keystone Opportunity Improvement Zone, but existing landlords said the project would have had an unfair competitive advantage by giving all tenants who moved in tax abatements. The measure was eventually defeated by the state’s General Assembly in November, though the project is getting $30 million through a separate program.

San Francisco

Commercial
In what is believed to be the largest single lease deal ever in the Bay Area, biotech company Genentech signed a 780,000-square-foot lease with Slough Estates in South San Francisco in late December. Three buildings will be built by Slough for the biotech company on East Grand Avenue over the next four years. The largest previous deal in the history of San Francisco was done in 2000 when JP Morgan H & Q leased 665,000 square feet at 560 Mission Street.

Residential
An estimated 135,000 Bay Area homes and condos changed hands in 2004, the highest number ever, according to DataQuick Information Systems. The price for a single-family home in the region hit a record $560,000. In November. In Marin County, the median price for a single-family home was a staggering $837,500.

Seattle

Residential
Sales of homes worth more than $1 million in King County, where Seattle is located, increased 48 percent in 2004, according to Windermere Real Estate. King County saw 709 single-family homes worth more than $1 million sold in 2004, compared with 479 in 2003, according to the Puget Sound Business Journal.

Commercial
Pension and investment manager TIAA-CREF nabbed one of Seattle’s newest office buildings, the IDX Tower, for a record $411 per square foot. The fund manager bought the 845,533-square-foot, three-year-old Downtown office building, which is 96 percent leased, for $348 million as part of a five-building package worth $1.47 billion, Globest.com reported.

Washington, D.C.

Commercial
Pension and investment fund manager TIAA-CREF bought a package of five buildings for $1.47 billion in the final days of 2004 (mentioned above), an acquisition that included the highest price paid for a single Washington D.C. building last year. The investment fund paid $461 million for 1001 Pennsylvania Ave. NW. The 802,000-square-foot office property was sold for $575 per square foot. The average sales price for office buildings was $364 per square foot in the District last year, compared with $323 per square foot the year before.

Residential/Commercial
The 2004 third-quarter average home price in the D.C. metropolitan area surged 24 percent from the same period in 2003, according to the Office of Federal Housing Enterprise Oversight. That is considerably higher than the nationwide quarterly increase of 13 percent. While similar gains aren’t expected in 2005, experts predict tens of thousands of jobs will be created in the area this year, mostly by the federal government and federal contractors, which will keep the market strong, according to the Washington Post.

New Yorkers love a bargain, but news of a good deal usually means one has to act fast to find a cheap place to live.

Astoria, the traditionally Greek neighborhood in Queens, proves a happy exception to the rule. After a half-decade as a somewhat second-tier destination for new arrivals and refugees from high Manhattan rents, the increasingly hip ‘hood still has plenty of low rents, bargain sale prices and plenty of space in the brick-faced apartment buildings flanking its tree-lined boulevards.

“Once my boyfriend and I decided to move in together, we realized that neither of our apartments were really big enough for two, and we started looking all over Manhattan and in Brooklyn,” said Astrid Conway, an advertising copywriter and recent transplant to Astoria. “What we could get with our budget was totally depressing, but when we visited Astoria we just couldn’t believe what we saw.”

What they saw is a lively, multi-ethnic neighborhood a 15-minute subway ride from Midtown, but with comparative price differences that are a happy shock to prospective arrivals. While tiny one-bedroom rentals in many parts of Brooklyn and Manhattan average upwards of $1,800 a month, a similar space in Astoria rents for around $1,100.

The cost of buying is also a relative bargain. According to Jorge Alberto Perez, a sales associate for the Corcoran Group, the Manhattan-based brokerage which has begun diverting some of its clients looking for more affordable housing to parts of Queens, buyers can double their space for the same price. He said one client who had logged months of fruitless searching for a two-bedroom condo in Manhattan found a three-bedroom home with a backyard and balcony in Astoria for $570,000.

“There’s so many great values out there, it’s like the wild, wild west of New York City real estate,” said Perez. “When I take my clients here, they just can’t believe it. The difference in what you get for the same amount of money is amazing.”

Indeed, in the last several years as Manhattan and Brooklyn prices have rocketed upwards, a survey of a half-dozen Astoria brokers indicates that over the same period the cost of renting or buying in Astoria has not dramatically changed.

Housing options are also expanding as a handful of new buildings go up and former warehouses and factories get converted into apartments. Local brokers said nearly all these new apartments are slated to be rental properties. New buildings, like the condos being developed by Bridgeside Developments on Astoria Boulevard, are primarily concentrated on commercial avenues. Several factories and warehouses are also being converted for residential use. Particularly active is the Pistilli Realty Group, which is converting several industrial buildings into condominiums.

“After Sept. 11 rents rose about 10 percent, but since then they have stabilized,” said Demetrius Partridge, an Astoria broker. “There’s a lot of interest here, and nothing stays on the market too long.”

What is changing in Astoria is the demographic make-up of the community. For decades this enclave of blue-collar workers, Greek-Americans, and immigrants, particularly from South Asia and Brazil, was often perceived by professional New Yorkers as being situated on the wrong side of the tracks. At best, it was an interesting destination for an afternoon’s anthropological walkabout, but not a serious place to consider moving. Over the past five years or so, plenty of Astrid Conways have colonized swathes of the neighborhood, slowly injecting it with elements of the edgy panache of Park Slope or Williamsburg.

“I’d say that recently most of my clients have been young Americans,” said Partridge.

Beyond the inexpensive rents and its proximity to Midtown Manhattan, what is attracting them are Astoria’s numerous cultural offerings, like the Museum of the Moving Image and the Socrates Sculpture Park. Commercial thoroughfares offer diners a virtual United Nations of restaurant options. In the last two years residents say the range of commercial choices has expanded as shops replace corner delis, while garages close and mutate into hip bars with black lights, live-music nights and visiting DJs.

“It’s amazing because when we get up on weekends we have just as many restaurant choices as we did where we lived in Manhattan,” said Conway. “We don’t feel like we really have to leave our neighborhood to do something interesting.”

While Astoria’s real estate prices have largely remained stable since 2001, many brokers predict an escalation as interest in the neighborhood grows.

Just as gentrification is altering Williamsburg, Greenpoint and Long Island City, brokers said Astoria, with its abundance of Tudor apartment buildings and convenient subway access to Manhattan, is poised for a boom. If New York wins the 2012 Olympics, Astoria will be thrust into the spotlight, as large stretches of its waterfront become venues for rowing and swimming.

“The value of property will go up, as more and more Manhattan money comes into the neighborhood,” said Perez. “What’s happening in Astoria is still a bit of a secret, but that information will get shared.”

The Real Deal

South Street Seaport, a district built around a collection of weathered 18th-century buildings and tucked among Manhattan’s skyscrapers, saw its best days decades ago, but developers hope a few high-profile projects will transform the former working port into a top destination for condo buyers and renters.

Despite fitful moves toward a makeover, including the long-sought relocation of the Fulton Fish Market to the Hunts Point Food Distribution Center in the Bronx, and the creation of a maritime museum and a seaside mall several decades ago, the East River enclave northeast of the Financial District has never quite hit a sustained period of development into a more complete residential and commercial neighborhood.

Several new residential developments are planned for the Seaport, and they are expected to benefit from this year’s final departure of remaining vendors at the Fulton Fish Market, as well as possible changes to the seaport itself and full-blown renovation of the East River waterfront.

A year ago, only about 575 residential units had been added to the 12-block seaport area since the 2000 census, but in the neighboring financial district, about 5,800 units were created or under construction. Sciame Development, currently the seaport’s largest developer, would like to bring Downtown dwellers to the Seaport.

“You see in the financial and insurance districts a real critical mass of residential activity,” said John Evans, vice president of Sciame Development, which is bringing its first large project to market in March. “What we’re hoping is that the seaport becomes the living room for that community. It’s where they find their open space and their sense of scale and sense of place.”

Sciame’s Historic Front Street project will restore 11 buildings and add three new ones, creating 96 rental units. Mostly one- and two-bedroom rental apartments, they will range in size from 600 square feet to 1,400 square feet. Other developers, including Zuberry Associates LLC and the Durst Organization, which are working with Sciame, believe the one-bedroom units may pull in $2,400 to $3,000 a month, while two-bedroom apartments may go for $3,500 to $5,500 a month.

There will be four penthouses, and several of the units have 500 to 700 square feet of outdoor space. The 18th-century warehouse facades have been maintained and strengthened, and the interiors have preserved timber framing, masonry walls and industrial hoists in spaces once used by merchants, sail makers and ship chandlers.

But the buildings also have “green” geothermal heating systems, hardwood floors, stone counters, marble baths and stainless-steel appliances, Evans said.

The project will also add 13,000 square feet of retail space.

“We’re going to have East Village-style eclectic restaurants and neighborhood services,” predicts Rob Frischman, a broker with JDF Realty.

Frischman said he is currently talking with restaurants like Two Boots Pizzeria, Hearth and Petrosino about opening branches, and has also spoken with a veterinarian and a jewelry store. Rents are $60 per square foot for an interior space or $100 per square foot for the two corners at Front Street and Peck Slip.

Sciame is also developing an innovative project designed by prominent architect Santiago Calatrava, an 835-foot-high tower at 80 South Street called “Townhouses in the Sky.”

Calatrava’s design is showpiece architecture, with 10 of the planned 12 stacked cubes designated for residential use and running as much as $35 million for 2,300 square feet of space, each with a 45-foot ceiling. The cubes will be 100 percent raw space that can be designed any way the buyer desires since each cube is structurally independent, Sciame said. If the bold design gets built, it will be the Seaport’s first super-luxury development.

“He’s pushed the limits of engineering today just the way they pushed the limits of engineering when they built the Brooklyn Bridge, which this overlooks,” said Sciame’s principal, Frank Sciame.

The future of another planned residential project remains uncertain. The Milstein family wants to build a 23-story building with 450 rental units at 250 Water Street, the Seaport’s largest vacant lot. Height restrictions in the historic zone bound by the Brooklyn Bridge down to Fulton Street and from South to Pearl streets limit construction to 120 feet. The zoning rules, passed in 2003, represent a 25 percent increase over the tallest building in the seaport, which is 91 feet.

The Milsteins sued to block the rule, but a judge in September ruled in the city’s favor. The Milsteins appealed in December, but face a possible city claim to the lot as a school site, a move that would be done under eminent domain.

Adding to neighborhood uncertainties is a planned overhaul of the East River waterfront so far a nebulous list of fixes that include building a wading pool among the cobblestones of Peck Slip, an esplanade under the FDR Drive and narrow residential towers in the center of the eight-lane highway.

Also uncertain is the direction of the South Street Seaport Mall, a recent acquisition of Chicago’s General Growth Properties, the largest mall owner in the country. Their recent buyout of the mall’s operator since the 1970s, combined with the departure of the fish market, leaves the tourist attraction’s future development open to speculation. The new owners have said nothing of their plans other than that they will “reflect the ambiance of the area,” according to company spokesman David Keating.

City officials remain mum on whether a rumored collaboration with The Related Companies, which proposed bringing the Cirque du Soleil to the seaport, may be dead.

The Real Deal

The legislative debate over new, stringent lead paint regulations ended last summer when the New York City Council overrode Mayor Michael Bloomberg’s veto and put a rigorous new law into place. But its practical effects remain hazy, as unhappy commercial brokers and landlords await an accurate measure of its costs, which have proved hard to quantify in a robust market.

Though the council voted 44-5 to pass Local Law 1, opposition from commercial brokers and landlords never wavered, and they braced themselves for higher liability insurance and greater administrative overhead costs. Backers cited an urgent need to cut children’s exposure to lead-based paint in older buildings, while opponents worried it would bring sales of those properties to a halt.

Commercial brokers call the current climate one of the hottest markets ever, and say demand remains undiminished. According to commercial real estate firm Cushman & Wakefield, investment sales activity in Manhattan alone hit $14.5 billion in 2004, surpassing the record set the previous year.

“We haven’t seen any decline in developments or the price of buildings,” says Marcia Rose Yawitz, senior director at commercial real estate investment banking firm Eastern Consolidated. “If there’s any resistance to buying, it’s from people waiting for the market to cool off, not people concerned about lead paint.”

Brokers believed the new regulations would cause the cost of buildings built before 1960 which constitute two-thirds of the city’s housing stock to skyrocket based on insurance costs. But demand remains high even in neighborhoods that have higher levels of lead paint risks, Yawitz says.

Opponents had charged that the new law needlessly targeted buildings outside of the city’s “lead belt” the regions most impacted by lead poisoning cases. They include Bedford-Stuyvesant and Bushwick in Brooklyn, South Jamaica in Queens and Mott Haven in the Bronx. But a shortage of apartment inventory, resulting in low vacancy levels, has further propelled building sales.

“Some of the more marginal areas with primarily tenement-housing stock are still selling well. Even since the law, we’re seeing prices that are very high for historical standards,” Yawitz says.

Though prices aren’t falling because of the law, market veterans remain leery. Robert Knakal, chairman of Massey Knakal Real Estate Services, says in time, the cost of the new law will become clear.

“The effect of the law on the market hasn’t been felt yet. I don’t think it has seeped into the psyche of the average building owner yet,” he says. “People overlook a lot of things when the market is going well. When the market turns, people will see this as an important point.”

The new law requires landlords to inspect every property and identify tenants under age 7. These dwellings must be inspected annually, and if a lead hazard like flaking paint is found, they have three weeks to complete repairs. The previous law said a landlord could be fined if a child tenant contracted lead poisoning in a building constructed before the 1960s the building was presumed to be the source. The new legislation extends this assumption to civil courts, potentially exposing landlords to large civil suits.

For their part, insurance rates related to liability have yet to become a major factor. Knakal believes that the costs of the new liability will become more apparent once the first major civil suit is filed against a building owner. That will also alert insurance companies to the scale of potential liability, and drive up premiums.

Knakal says he’s surprised the effects of the lead law haven’t been felt yet.

“This law imposes significant burdens on owners. And insurance expenses are up from where they were two years ago by a significant multiple,” he says. “Overall, the costs of building operations have skyrocketed, and yet building prices are still up.”

But Harlem Councilman Bill Perkins, who sponsored the bill, says his efforts have been vindicated.

“The sky has not fallen,” he says. “Quite the opposite, children are being saved from being poisoned, and the city is enforcing lead laws for the first time.”

The Real Deal

High Line transfer rights mulled
The Department of City Planning last month began public review of a proposal to allow the owners of land beneath and adjacent to the former High Line railway to transfer rights to nearby sites. The proposed Special West Chelsea District roughly encompasses the area bounded by West 17th and 30th streets between Tenth and Eleventh avenues. The plan would address the concerns of landowners that seek the former elevated freight rail line’s demolition, according to the city.

Waterfront park planned in Harlem
Groundbreaking could take place this spring on a sports and recreational space along the Hudson River from 123rd to 133rd streets. The blacktopped site will be transformed into a fishing pier, walkway, bike path and possibly a kayak launch site, the Post reported. Community Board 9 in Harlem and the city have been working on the project for three years.

West Side rezoning approved
The City Council approved the rezoning last month of 42 blocks of the far West Side for office towers, housing, parks and a new boulevard, in one of the largest rezonings in recent city history. The issue of a new stadium for the Jets will be considered separately.

Court rescues East Village landmark
In a legal first, the New York City Landmarks Preservation Commission won a ruling from a State Supreme Court judge ordering the owner of the broken-down Samuel Tredwell Skidmore House at 37 East Fourth Street to permanently repair and restore the exterior. City officials said the case was the first in which the landmarks commission sued to compel the owner of a historic property to maintain a building.

Tax-free apartment snafu
Thousands of city apartments are being kept off the tax rolls thanks to a glitch in the city’s Finance Department computer system. Tax-exempt apartments owned by low-income seniors and veterans were not restored to taxable status once they were sold, a mistake which has cost the city at least $15 million a year, the Post reported.

Building on Red Hook ship terminal begins
The city will begin construction this month on a $30 million passenger terminal for luxury ships at Piers 11 and 12 in Brooklyn’s Red Hook, as part of a $200 million effort by the Bloomberg administration to make the city friendlier to the booming luxury cruise industry.

Governor angers owners
Gov. Pataki’s proposal to build an $840 million West Street tunnel that would sink the six-lane highway under a landscaped median is angering some local property owners, especially a new plan to extend it two blocks north to Murray Street, at the foot of where Goldman Sachs plans to build a new headquarters building.

New tunnel to Jersey?
The directors of the Partnership for New York City, a powerful group of New York business leaders, would like to step up plans to build a $5 billion rail tunnel under the Hudson River from New Jersey to a new train station under Macy’s on 34th Street.

New York City is worth more today than any time in history, the city Department of Finance has determined a whopping $616 billion.

The tentative billable assessed value for the fiscal year 2006 that begins July 1, 2005, is $110.2 billion, also the highest on record and 7.65 percent more than last year.

What is known as the “actual” assessment totals up to $123,593.8 billion. The good news is that this trend will probably continue upward, which gives the city more borrowing power. The bad news is that the city is just as likely to try to raise more money from taxes paid by property owners as through its bankers, which means taxes are also likely to rise.

This should be no surprise to anyone who follows real estate. If apartment and office rents are climbing, so are owner revenues, and that shows up as a higher assessment. A state law ensures co-op and condo apartments are not assessed based on their sales value but on the value of the income of a comparable rental. But as luxury and rent-regulated rents also increase, those property classes have also seen pronounced upticks: Billable assessments for Class Two are up 9.08 percent, with condos seeing an 11.77 percent rise and co-ops a 7.65 percent rise. Rental buildings are up 9.06 percent. If the building is a condop, it was hit harder: 12.8 percent is the change over last year in billable assessed value.

Finance Commissioner Martha Stark also changed the equalization rate for Class One homes, recognizing that some have been assessed in an unequal manner. About 30,000 properties have seen changes, primarily in areas with a lot of new construction. The entire Class One bracket rose 5.57 percent in billable assessed value with condominiums being brought down 9.06 percent.

Stark said she hasn’t seen “any evidence” to chase down Class II and Class IV rates. Many in the property-tax business, including appraisers and lawyers, believe the number is closer to 30 percent than the 45 percent equalization rate used for those classes.

Commercial property was up 7.62 percent citywide in billable AV and 12.68 percent in its actual AV. Commercial condominiums experienced the bulk of that increase, a whopping 22.13 percent in actual AV and 15.03 percent in billable. Should we blame it on the value kicking in on the Time Warner retail block? Why not? But if you had any kind of store property, the AV went up 19.45 percent in actual and 9.93 percent in billable.

Also, even though the number of vacant parcels dropped due to development by about 100 in commercial zones, due to the increase in the prices people were paying to buy the land, the value of the remaining 9,234 parcels rose by 21.20 percent in actual and 7.63 percent in billable AV. With vacant residential land assessed in a different manner, even though nearly 1,300 parcels were developed, their total actual and billable AV dropped 1.15 percent, but that drop is not likely to be reflected in the value of an individual parcel. The good news for developers is that there are 26,160 parcels left.

Owners can file an application to correct the tentative assessed value with the Tax Commission. These applications are technically filed at the Department of Finance and moved over to the Tax Commission for hearings.

Applications are due Tuesday, March 1, for Class One properties while all others have until Tuesday, March 15.

If you miss the deadline, don’t complain when you get your tax bill in June. Not only is it too late in June, but years ago, the New York State Supreme Court shot down a case where applications were attempted to be filed a few minutes after the door closed at the end of business. Like the New York State Lottery, you have to be in it to win it.

Are low monthly payments on a home mortgage always good?

Are you kidding me? Of course they are, you might answer.

But a new report issued by a Wall Street firm suggests that some low-payment loans in today’s hot housing market could prove to be highly toxic to borrowers who don’t really understand the risks they entail.

The report is from Dominion Bond Rating Service, a company that evaluates the risk characteristics of mortgage securities purchased by deep-pocket investors. Those bond investors now provide most of the funds loaned to American home buyers, and they view defaults and foreclosures as dread diseases to be avoided.

Dominion’s study focused investors’ attention on two widely used loan features that reduce buyers’ monthly payments or allow them to fudge their incomes: interest-only loans and no-documentation “stated-income” mortgages.

“Some of the new mortgages we see are very scary,” said Susan Kulakowski, a Dominion vice president and co-author of the report. “They allow people to qualify solely on the basis of a low initial payment,” rather than what they can truly afford to buy at current interest rates.

Then the mortgages morph into money-gobbling monsters that can push consumers into payment shock, default and foreclosure almost overnight.

Kulakowski is especially concerned by a bumper crop of short-term “hybrid” interest-only loans now flooding the market to help consumers with marginal credit or incomes buy houses. Interest-only mortgages require no paydown of principal no reduction of your actual debt for a set period of time at a low fixed rate of interest. Payments during the initial period typically are set well below what a borrower would pay on a conventional 30-year fixed-rate loan.

At the end of the initial period, which may be as short as two or three years, the loans convert to fully amortizing adjustable rate mortgages at prevailing market rates. Principal reduction now kicks in, but because of the compression of the payback period 25 to 28 years and the addition of principal to the payment mix, the total costs can suddenly balloon by anywhere from 50 percent to 70 percent.

Marginally qualified home buyers jolted with such payment increases within 24 to 36 months of their purchase “are very likely,” according to Kulakowski, to be pushed beyond their ability to pay the loan. Their only alternative may be to refinance, but since they may still not be able to afford market-rate payments, they could be stuck over their heads in house debt.

As an example of the problem, Dominion’s report tracked a popular “3/1″ interest-only hybrid closed last September through a projected payment scenario over the next 10 years. The original loan was for $350,000, at an enticing 4 percent payment rate for the initial fixed period of 36 months. (The “3/1″ designation refers to the initial three-year period of fixed payments on interest only, followed by conversion to a market-rate adjustable whose rate changes once a year for the remaining 27-year term.)

The buyers’ initial-period payment, which they used to qualify to purchase the house on their then-current income, came to just $1,167 a month. That is $773 a month lower than they would have to pay on a competing 30-year fixed-rate mortgage of $350,000 at September’s lowest-available 5.28 percent rate.

What happens to the buyers’ loan after the 36th month? Their payment in the 37th month rockets to $2,184 an overnight increase of $917 that would put a severe strain on most new homeowners’ budgets. In a faster-rising rate environment, the shock would be even worse. By year 10, according to Dominion’s projections, the owners would be paying close to $2,700 a month.

America’s homeowners have grown their equities by a mind-numbing $5 trillion since 1995, thanks to a 70 percent average jump in the values of their houses.

Guess what they’ve been doing with that wealth? Right: Buying cars, buying vacation property, paying kids’ tuitions, taking overseas vacations.

But some of the smartest of them, according to new research, have been liquefying part of their equities and plowing it back into their homes at a dizzying pace nearly one-quarter of a trillion dollars of home improvements a year. Those home improvement investments, in turn, usually help pump up the values of the homes even further.

Rather than the modest fix-up and do-it-yourself remodeling typical of decades past, owners today are focusing on high-end kitchen transformations, multiroom home additions, lavish bathroom and spa installations, entertainment rooms and other upscale renovations. Think big ticket.

Baby boomer homeowners those born between 1946 and 1964 are especially prone to think and spend big: Six in 10 of them completed a home renovation project in 2003, and they spent a prodigious $72 billion feathering their nests. That accounted for over half of all remodeling expenditures made on homes in the United States that year, according to a new report by Harvard’s Joint Center for Housing Studies.

Generation Xers those homeowners born between 1965 and 1974 are rapidly catching up to the boomers. From 1995 to 2003, the number of Gen Xers who own homes tripled, and their remodeling project expenditures soared more than fivefold. Already, they are beginning to rival baby boomers in average per-household expenditures on home renovations.

But there’s a key difference in the way boomers spend on their home improvements compared with the Gen Xers: Boomers not only spend more, they delegate more, rely on professional contractors more. Whereas 41 percent of Gen Xers’ home-improvement spending goes toward do-it-yourself projects, barely 26 percent of boomers’ outlays involve any form of do-it-yourself elbow grease.

And who said Gen Xers are slackers?

The new Harvard study, which primarily focuses on the country’s recent home-improvement boom, also sheds light on major demographic and social stratification patterns under way. Renovating your home, it turns out, says a lot about who you are and what you’ve already got:

The gap in incomes between households at the high end of the wealth spectrum and those at the low end is widening steadily. The average income of the top 20 percent of households is now 15 times those in the bottom 20 percent. In 1975, by contrast, the gap was less than nine to one.

Ninety percent of American households with incomes in the highest quarter own their own homes versus just 49 percent among those in the lowest quarter. Even among homeowners, the disparity between high income and low income households is vast. While only one of four homeowners is in the top 20 percent of all income earners, upper-bracket owners spent $69 billion on remodeling in 2003, nearly half of all home-improvement spending in the country that year.

Minority and immigrant families are relative latecomers to the American home equity party, and account for barely 15 percent of all home-improvement spending. But they represent the cutting edge of new homeownership growth they were 35 percent of all first-time buyers in 2003 and they’re likely to play steadily larger roles in housing renovation investments in the years ahead.

Home equity growth among all categories of homeowners has powered consumer spending in recent years, and greatly softened the impact of the recession of 2001-2002. Not only does home equity produce a psychological “wealth effect” on owners giving them confidence to buy goods and services but it also produces ready cash.

Homeowners pulled out $333 billion in home equity via cash-out refinancings between 2001 and 2003 nearly triple the level of the preceding three years. One-third of all cash-out proceeds went toward home improvement and remodeling.

Homes in the highest-cost bracket those valued at $400,000 and up represent just 11 percent of the total owner-occupied housing inventory. But the owners of those homes completed more than 800,000 room additions in 2002-2003, roughly 43 percent of all expenditures in that category for the year. The same 11 percent of high-cost homes accounted for disproportionately large shares of all kitchen remodelings (33 percent) and bathroom makeovers (32 percent).

But don’t ask the owners of those high-priced houses to do much in the way of fixups on their own. Of the $40 billion they spent on improvements in 2003, 85 percent went to professional contractors. Owners of homes worth $100,000 or less, by contrast, were far more active do-it-yourselfers, spending over one-third of their remodeling dollars that way.

Ending months of speculation, top retail broker Faith Hope Consolo and leasing partner Joseph Aquino joined Douglas Elliman last month, where they will head up an expanded retail division.

The pair defected from Garrick-Aug, where Consolo founded the company’s international division in 1987. Consolo and Aquino will now serve as chairman and executive vice president, respectively, of the division at Douglas Elliman, the residential brokerage which has done only a tiny amount of retail business in the past.

Consolo is bringing a staff of 12 to her new company, which had five retail brokers previously.

She said she had been approached by dozens of companies over the years, but decided to make the move after she met Elliman CEO Dottie Herman at PR mogul Howard Rubenstein’s 50th anniversary party at Tavern on the Green last summer.

“When Dottie and I first met, we knew immediately that we could harness the tremendous resources of Prudential Douglas Elliman to build the ‘You Need Faith’ brand to a new level,” said Consolo.
Real estate consultant, educator and The Real Deal columnist Esther Muller, who introduced the pair at the party, said they are a “great match, and they have a lot in common.”

“It will be exciting to see what these two divas of real estate do together,” she said.

The marriage of residential and retail real estate provides for good synergy, Muller said.

“Today’s current trend is mixed-use properties,” Muller said, citing examples like the Time Warner Center. “Also, Douglas Elliman manages over 200 apartment buildings,” many with retail components. “Now, they will be able to be under one umbrella.”

One player who wasn’t pleased with Consolo’s move was Garrick-Aug chairman and CEO Lawrence Selevan, according to a story in the New York Sun. “I’m quite offended she did this before we had a final chance to talk, but somehow I’m not surprised,” he reportedly said.

News of Consolo’s move was apparently released prematurely, and Selevan responded by locking the broker out of her office, the story said.

Consolo and Aquino, who have done deals with the likes of Cartier, Alfred Dunhill, Godiva and Jimmy Choo, in 2004 alone brought a number of luxury retailers to their New York flagships, most notably Judith Leiber to 680 Madison Avenue and Searle to 635 Madison Avenue. The pair also represented the landlord exclusively in bringing Barneys Co-Op to its first Upper West Side store, A Bathing Ape in making its U.S. debut in Soho, and Lacoste, in opening its first Soho store.