Bigger may be better among developers riding the wave of the city’s boom market, who are finding that larger projects mean larger returns.
According to government data, the average number of units in new buildings in Manhattan has increased 35 percent, and a spate of 700- 800- and even 900-unit residential developments supports the notion that size matters.
Statistics from the U.S. Census Bureau show that new buildings in Manhattan averaged 81 units this year to date, while the average over the past five years was only 60 units. In Brooklyn, the average is now six units a building, up from the preceding five-year average of four units.
“You’re better off, if you can afford it,” said Yair Levy, principal of Y.L. Real Estate Developers, which is converting the Sheffield, an 845-unit rental building on West 57th Street to condos. “People who can afford it, like me, prefer to do one big one instead of a lot of small ones.”
Jeffrey Levine, principal of Douglaston Development, which is constructing 555 West 23rd Street with 336 units and 325 Fifth Avenue with 250 units, put it differently: “If you believe something works, why not believe it could work in a big way?”
Despite the data, developers see the expansion of building size as an anecdotal phenomenon, and nobody interviewed for this article said they wholeheartedly believe residential developers are building any bigger in New York City, particularly when the outer boroughs are taken into consideration. David Picket, CEO of Gotham Developers, which has a planned project of at least 2 million square feet in East Harlem, said he’s observed quite the opposite.
“There are a lot of small sites getting built that’s my take,” he said. “If it’s not at least 150,000 square feet, I’m not interested, and I’m getting tired of telling brokers ‘no’ when they call me.”
The whole phenomenon may be a chance occurrence, said Jules Demchick, president of JD Carlisle Development Corp.
“As to why suddenly there’s 500 units, 300 units, 400 units, it’s coincidental that those projects are showing up at the same time,” he said.
In 2001, Carlisle completed the Pennmark, with 333 units at 315 West 33rd Street. The company now has 478 units planned for a site at 625 West 42nd Street; 292 units at Third Avenue and 23rd Street; and 320 units at Sixth Avenue between 29th and 30th streets.
One reason for the surge in big projects could be that developers are hitting pay dirt successfully completing assemblages of buildable, but increasingly pricey, land sites after many years of effort.
“It’s difficult for somebody to make sense of where land prices are today,” said Robert Knakal, chairman and founding partner of Massey Knakal Realty Services. “So the technique of averaging your price down by acquiring air rights or inclusionary rights is naturally adding to the size of developments.”
Demchick said some large projects may have to do with the rezoning of Hudson Yards and other areas of New York for residential development, which has added land by rezoning industrial areas or added floor area.
“Until Hudson Yards passed, there weren’t a lot of large sites available,” he said.
Economies of scale are appealing, said Christopher Albanese, principal of the Albanese Organization, which built the 300-unit Vanguard Chelsea in 2000; the 293-unit Solaire in the Financial District in 2003; and the soon-to-be-completed 253-unit Verdesian nearby.
“It takes the same amount of time and effort for a building that’s 200,000 square feet as one that’s 400,000 square feet,” he said.
Miki Naftali, president of Elad Properties, which is marketing The Link, a 210-unit building at 310 West 52nd Street, said developers can provide more amenities in a larger project, where the costs can be spread over a larger number of units.
“You have much better efficiency vis- -vis the common spaces,” he said. “It’s much easier to create a very nice package of amenities for 200 units as opposed to 50 units.”
That efficiency also pertains to operating and maintaining the building, he said.
Naftali said he doesn’t believe developers are building any bigger, though a casual observer of the market might perceive that many larger projects are now condominiums, rather than rentals.
“Five, six, seven years ago, most of the big developments were rentals,” he said. “But if you really analyze the market, I think most of the projects done five, six, seven years ago were rental properties not just big ones.”
Gargantuan projects, which are often loaded with amenities, can be a boon when it comes to sales, but they can also be a burden.
“At some point, the building becomes bigger than the residents want it to be, and that’s much more the case in condos than rentals,” said Jon McMillan, director of planning at Rockrose Development. “It’s hard to say where that point is.”