Don t let the grittiness fool you. While the Lower East Side still has a scruffy look and feel, gentrification is spreading further and further below Houston Street, and is beginning to encroach on the outskirts of Chinatown.
Expanding southward along Essex Street to the Seward Park area abutting East Broadway, the latest push means $1 million condos are going up alongside dilapidated tenements, old Judaica gift shops and warehouses for Chinese import companies. A smattering of hip cafes and shops are following, but this is still wide-open frontier territory for residential development.
“The demographic of the people coming to the area is remarkable,” said Douglas Elliman broker Tamir Shemesh, who represents 7 Essex Street, one of the $1 million, new luxury buildings on the Lower East Side.
Bankers, models and fashion designers are buying into the eight-story building, where 16 floor-through apartments with east and west exposures are selling unfinished for between $500 and $600 a square foot, Shemesh said. The two penthouses are a bit less than $900 a square foot, and are still available for $2.25 million.
Other upscale apartment buildings are going up on Hester, Canal and Orchard Streets, with location apparently dictated by developers ability to find sellers willing to part with their properties.
“People will see that you can get the price per square foot and they will build,” said Shemesh, who likens the area to TriBeCa 15 years earlier. “But this time it s going to happen much faster,” added Shemesh. “Perhaps in the next three to four years.”
What s also driving the expansion is the lifting of price restrictions at Co-op Village, a 4,500-apartment, 11-building complex where prices have increased more than 40 percent in just over three years. Alan Pfeifer of Halstead Property Co. was one of the first to see its potential, and the agency got exclusives on 40 sponsored apartments.
“They re still running under market value,” Pfeifer said. Studios are now selling for about $225,000; one-bedrooms are $315,000; and two-bedrooms $405,000, according to figures from January, the most recent month for which data is available. Prices depend on apartment locations within the building and whether they have balconies.
Pfeifer attributes the below-market pricing to the short length of time the apartments have been on the market and to its relative distance from subway lines.
Maintenance costs, which run between 50 cents to 60 cents a square foot, or roughly $500 for a 1,000 square foot apartment, are also well below market rate. “It s catching the attention of young people who can t afford to pay crazy prices just as they re ready to leave Manhattan and go to Brooklyn,” said Pfeifer.
Hector Cardenas, an artist and broadcast designer, moved to Co-op Village with his wife and baby daughter four months ago, after being chased out by rising prices further west along the NoHo-NoLita area. Cardenas fears what he calls the “SoHoization” of the Lower East Side, but said he takes comfort in the area s remoteness and diversity.
“Artists gave SoHo energy and then merchants followed with the areas next to SoHo – NoHo and NoLita – having the same affect with a little bit of a delay. We lived on Elizabeth and Houston and it changed dramatically. Ten to 15 years ago you couldn t walk down Elizabeth without bringing a knife, I ve been told. And it keeps going – to Ludlow and Clinton but not here. Here it s very diverse. Here there s a strong Jewish population and some Chinese, although they re just up the block. It s quieter. It feels like another city, like Queens.”
But with buildings like AvalonBay Communities Avalon Chrystie Place going up at the corner of Bowery and Houston, it would seem SoHo is marching eastward, beyond NoLita, and further into the Lower East Side. Other additions, like the new glass-sheathed Surface hotel on Rivington Street, seem to point in that direction, too.”
“My sense is it s going to develop an arts district identity kind of like SoHo and TriBeCa, with late night clubs and restaurants,” said Fred Harris, vice president for the New York City area of AvalonBay Communities, a real estate investment trust that is laying the foundations for the first of four buildings planned in and around the intersection of Houston and Bowery.
Yet despite being the first REIT to develop new construction in the Manhattan market, Harris declined to speculate on whether the $150 million deal opens the door to other developers. AvalonBay chose the site because of its proximity to public transportation, and much of the Lower East Side remains underserved by mass transit, Harris said. Additionally, 177 of the 708 apartments will be set aside for tenants who earn no more than 60 percent of the median area income, and a multilevel community and athletic center is planned – a result of what Harris termed a “unique convergence” of city officials, housing advocates and community representatives.
“The larger trend is that most REITs are now in urban areas – Atlanta, Dallas, Miami – but New York is different,” Harris said. “It s tough because of costs and land scarcity, and this neighborhood was appealing because it was virtually nonexistent,” he added.
As gentrification continues on the Lower East Side, don t expect many similarly massive projects to be built from the ground up anytime soon, though. “There simply aren t that many sites of this scale left in the city,” Harris said.