Selling a luxury condo in Brooklyn? You could be in for a long wait

Analysis shows the average condo selling for $2M and up stays on the market almost 250 days

New York /
Nov.November 13, 2017 07:00 AM

One Brooklyn Bridge Park and Brooklyn townhomes

Pricey condominiums used to belong almost exclusively to the Manhattan real estate market, while high-end real estate in Brooklyn was dominated by the borough’s famed brownstones.

But the transformation of Brooklyn into one of the country’s hottest real estate markets has helped to upend this, with luxury condo developments like the PierhouseOne Brooklyn Bridge Park and 51 Jay Street now lining the borough’s waterfront. And while prices at the top end of the market still lag far behind their Manhattan counterparts and tend to take a while to sell, they have become a viable option for New Yorkers looking to experience something other than vertical living in the outer boroughs.

“Demand is very strong for the right kind of product in the right location and the right quality,” said David Schwartz, principal at Slate Property Group. “I think the developers who have done that have done very well in Brooklyn.”

A lengthy wait

Luxury condos may not be anathema to Brooklyn anymore, but brokers and developers looking to sell them should still steel themselves for a long wait.

Overall, Brooklyn condos stayed on the market for an average of 106 days before closing during 2017’s third quarter, while the units asking for $2 million or more that haven’t sold have stayed on the market for more than twice as long at an average of 249 days, according to data from appraisal firm Miller Samuel. Price cuts are a much bigger factor at the top of the market as well, with sellers taking an average price cut of 24 percent on listings for $2 million or more during the third quarter of 2017 compared to an average price cut of just 5 percent for all condos throughout the borough, the firm found.

Sarah Burke, the managing director of new development in Brooklyn for Douglas Elliman, said there were multiple reasons why condos at the higher end of Brooklyn’s market could take longer to sell and be more vulnerable to price cuts. These include a general trend toward selling a project’s more expensive penthouse units later on, at which point it is less important to ensure that every unit is selling at its asking price, as well as a much larger buyer pool at the lower end of the market.

“Under $1 million, you’ll see things fly off the shelves just because of the price point,” she said. “The less expensive things open up to investors, people buying a second home or people buying for kids in the future, so you have just a whole extra set of buyers.”

Deborah Rieders, an agent with the Corcoran Group, said she has occasionally found the opposite to be true in her experience due to simple supply and demand. If she is selling a Brooklyn condo with 20 units for $1 million and one $5 million penthouse, for instance, the prospective penthouse buyers will be much more eager to close the deal, while the other buyers will wait around for longer knowing they have the luxury of numerous options.

“If you have 20 of them, and buyers have more choice, they’re going to take their time,” she said, “and they’re not going to feel the urgency to make an offer.”

Rieders is part of the Corcoran team trying to sell an 8,500-square-foot condo at One Brooklyn Bridge Park for $19.5 million, which pencils out to $2,294 per square foot. The unit is the most expensive condo in Brooklyn currently listed on StreetEasy, and Rieders said its size made it a fairly new type of development for the borough.

“We suddenly have larger condos to sell than we’ve ever had to sell,” she said. “Usually, we just had townhouses. We’ve never had four bedroom and up condos.”

Condos vs. townhouses

Despite the emergence of the Brooklyn condo market, the borough’s brownstones still have a strong gravitational pull on buyers. Schwartz pointed to this competition as one of the reasons why the higher end condo units can take longer to sell.

“As you start getting into the $3 million dollar range, you’re really starting to compete against the townhouse and brownstone buyers,” he said.

Though some pine for the borough’s traditional brownstone living experience, many end up finding the full-service aspect of condos more enticing, especially given how difficult it can be to renovate a townhouse, according to Burke.

“It’s kind of nice to have services and a doorman and views—things like that,” she said.

“But the streets of Brooklyn are probably best known for their beautiful brownstones and gardens and the tree-lined streets,” she continued, “so there’s an appeal for both.”

One of the strongest appeals of townhouses is the independence they offer to residents, Rieders said. The idea of living in their own building as opposed to sharing it with dozens of other people is a very attractive one.

“In some cases, people really want the autonomy of a townhouse,” she said, “but I think now that we finally have bigger apartments out here, I think some buyers, they’re gravitating more toward the full service experience.”

But houses still have a clear advantage over condos when it comes to size. Rieders’ unit at One Brooklyn Bridge Park is currently the largest unit listed on StreetEasy at 8,500 square feet, while multiple townhouses are available in the borough for more than 10,000 square feet.

Oftentimes what makes people switch from a townhouse to a condo is the search itself, according to Schwartz, as the idea of a charming life in a Brooklyn brownstone can be much more attractive than the reality.

“You don’t have a doorman. You don’t have a lot of amenities. You don’t have an on-site super and handyman. There’s nobody to help with the door when you’re coming in with a stroller,” he said. “There are some people that are fine with that, but there are some people that realize when they get to look at it that it’s often easier to live in a condo building.”

Brooklyn vs. Manhattan

A relatively common occurrence in the real estate world these days are stories about how Brooklyn has gotten so expensive, people are moving to Manhattan. And while this may be true on an anecdotal level, overall, prices in the Manhattan condo market are still miles ahead of their Brooklyn counterparts.

Average condo prices in Brooklyn have increased from roughly $680,000 to $1.1 million over the past five years, while the average prices in Manhattan have gone up from roughly $1.8 million to $2.7 million over the same time period, according to data from Miller Samuel. The average price difference between the two has always been at least $1 million, and the distance gets even starker at the top end of the market.

Since 2012, the top five sales in Manhattan were all at or above $70 million, with the top spot going to the roughly $100 million sale of PH90 at One57 in 2014. None of the top five Brooklyn condo sales come even remotely close to this, with the current record going to the March 2017 sale of PH16 at Dumbo’s clocktower building for about $15.3 million.

“There’s no comparison,” said Miller Samuel CEO Jonathan Miller. “They’re not in the same universe.”

“The high end of the Manhattan market is far more distant from the bulk of the market than Brooklyn’s high end is,” he continued, “and I don’t think we appreciate the scale of that difference.”

And when prices do start to overlap, Manhattan tends to win, according to Michael Falsetta, executive vice president at appraisal firm Miller Cicero.

“At the very highest end of the Brooklyn market, it’s not as strong as the rest,” he said. “Where pricing tends to overlap with Manhattan, that is not as strong as the rest of the Brooklyn market.”

Schwartz characterized the Manhattan condo market as popular with foreign buyers and filled with units that sell for prices at “numbers that you pull out of the sky that are not numbers that people are earning.” He maintained that, at least for condos, the more standard pattern of people getting priced out of Manhattan and heading to Brooklyn was still in play.

“I think a lot of folks that in previous generations might have been buyers in the Village or Tribeca or Soho or other East Village neighborhoods realize that what they were getting in terms of space but also quality of life is really important,” he said, “and seeing that that value proposition in Brooklyn has been great.”

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