The South Street Seaport had to forgo its usual stream of shopping bag–toting tourists this holiday season as it continued to recover from the devastation it suffered during Hurricane Sandy.
Indeed, while the Pier 17 mall, which juts out onto the East River, has reopened, some of the businesses (along with a bunch of others in the neighborhood) remain shuttered.
“For the first time, I think the South Street Seaport may really sink,” Faith Hope Consolo, chairman of Douglas Elliman’s retail group, told the Wall Street Journal in late November.
This month, The Real Deal checked in with residential brokers who work in the burgeoning area — which has seen a burst of new residential development since the Fulton Street Fish Market relocated to the Bronx in 2005 — to see how sales and rentals are holding up.
Several brokers said that while the area has seen prices and activity steadily rise over the past few years, the residential market has suffered since the storm. That’s partly because many units have simply been pulled from the market with plans to relist in the spring.
“Before Sandy, 2012 was definitely the best year for the neighborhood for both rentals and sales,” said Julia Bryzgalina, the director of sales and leasing at Platinum Properties. “[Following Sandy], sales prices have remained the same for the units still on the market, but about 60 percent of all apartments that were on the market pre-Sandy were taken off.”
Nonetheless, brokers said that recent projects — like 254 Front Street, a high-end rental that opened earlier this year, and 272 Water Street, a condo — have both been test cases that have proven successful. And they predicted that developers will continue to pursue future residential projects in the neighborhood.
In addition, they point to nearby under-construction projects like the World Trade Center site and the Fulton Street Transit Hub, along with planned (though delayed) projects like the Pier 17 redevelopment, as beacons that will draw more residents to the neighborhood.
For more on the storm damage, on future projects and on prices, we turn to our panel of experts.
Julia Bryzgalina
Julia Bryzgalina
director of sales & leasing, Platinum Properties
The South Street Seaport complex and the surrounding neighborhood were pretty devastated by Hurricane Sandy. Have sales and rentals in the neighborhood slowed since the storm?
Sales and rentals slowed down significantly after Hurricane Sandy in the South Street Seaport. That was because many buildings were declared uninhabitable and the restoration has been taking a very long time. In addition, many businesses that gave the South Street Seaport that special character and charm have been out of commission since the hurricane, so not as many people are renting apartments there. The market has picked up a little [more recently], but I don’t expect to see a full recovery until the spring.
How are building owners dealing with prospective renters and buyers in the neighborhood in the wake of the storm?
The most important factor leading tenants and buyers back to the South Street Seaport will be pricing. Landlords recognize that they will need to fill apartments vacated in Sandy’s aftermath and will hopefully provide concessions.
How is the overall residential market holding up there compared to a year or two ago?
The South Street Seaport is a relatively new neighborhood, which formed a couple years after the Fulton Fish Market moved to [the Bronx in 2005]. Before Sandy, 2012 was definitely the best year for the neighborhood for both rentals and sales. [Following Sandy], sales prices have remained the same for the units still on the market, but about 60 percent of all apartments that were on the market pre-Sandy were taken off.
There have been a bunch of new projects and conversions in the northern section of the neighborhood in the last few years, like 254 Front Street, 272 Water Street and Historic Front Street. Are there any other upcoming projects that you think will have a big impact on the South Street Seaport market?
The development of the World Trade Center and Fulton Transit Center will have a hugely positive impact on the South Street Seaport area, both because of the influx of people, which will increase demand for residential units, and because of the improved transportation options. As for residential projects, Metro Loft’s conversion of the AIG Building to a rental property will improve the northern boundary of the Financial District, which will also be good for the South Street Seaport.
What kinds of discounts off asking prices are being seen in the area?
There haven’t been many significant discounts off asking sales prices in the area. Properties were more likely to be taken off the market until the spring than reduced in price. Since the sale prices have been climbing year after year — 8 percent since 2011 and 11 percent since the boom — it’s becoming more difficult for buyers to negotiate.
What’s the inventory like in the South Street Seaport neighborhood these days, and how does that compare to a year or two ago?
The sales apartment inventory is lower in the South Street Seaport than it has ever been. The listings inventory decreased by 25 percent since 2011 and 43 percent since the boom.
What are the most surprising trends you’re seeing in the South Street Seaport area’s residential market?
The development of Magnum’s full-service building at 254 Front Street was one of the most interesting events for the South Street Seaport in 2012 because it’s the only full-service rental building in the area. It was a huge success and showed an increased recognition for the South Street Seaport.
What are the biggest challenges to selling residential property in the South Street Seaport area today?
One of the biggest challenges today is explaining how the landlords/developers in the area are planning to improve the buildings to allow them to withstand future natural disasters. It’s also important to help the client who hasn’t seen the neighborhood before imagine what it looks like when the businesses and restaurants function normally.
How much do you think the closure of retail in the South Street Seaport area is hurting the overall market?
The neighborhood has suffered dramatically due to the loss of small businesses and restaurants. They represented a large portion of the South Street Seaport’s charm. This may affect renters who may not plan to stay in the neighborhood for a long time, but should be a positive thing for prospective buyers as they have a short amount of time to get a significant discount on apartments from motivated sellers.
Susie Park
Susie Park
senior vice president, Blu Realty
Have sales and rentals in the neighborhood slowed since the storm?
The Seaport is a small area geographically so we are never oversaturated with inventory. Since the storm I’ve seen a couple of units go off the market, including one at Seaport Lofts. Though there was no damage, we’ve decided to renovate the remaining units before re-listing. No better time to do this than during a downtime like post-Sandy into the holidays.
Did you have properties or listings in the South Street Seaport that were damaged by the storm?
Like most other buildings in the area, 272 Water Street went through basement repairs. No residential units were damaged — not even the first-floor unit in the front of the building, which is close to miraculous. Marketing has been continuous.
What’s going on with residential sales prices in the neighborhood post-Sandy? Are they up or down compared to before the storm and to a year or two ago?
Certainly from a year or two ago, I’m seeing an upward price trend in the Seaport community, which mirrors what’s taken place in the rest of Manhattan. … I haven’t seen any price changes or dips post-Sandy or as a direct result of Sandy.
Which price ranges and apartment types are generally performing best right now in the area?
Two-bedrooms seem to be higher in demand. This goes for any sale or rental in the area.
There have been a bunch of new projects and conversions in the northern section of the neighborhood in the last few years. How are those projects impacting the market?
272 Water Street is pretty close to being sold out. I had two contracts signed post-Sandy that we are about to close very soon.
Do you think the closure of so much retail in the Street Seaport is hurting other businesses?
I believe so. The damage caused from Sandy has really seemed to hurt the businesses in the area. Between tourism drying up, which was the bulk of the income, and the cost of repairs, the businesses were hit much worse than the residential. We have some significant historical businesses that have been damaged; for example, the Bridge Café and the South Street Seaport Museum, which just opened. The good news is that I’m seeing businesses [come back]. Last week, MarkJoseph Steakhouse opened [as did] the popular Cowgirl Sea-Horse, Acqua, Made Fresh Daily and Jeremy’s Ale House. I hope to see the rest open soon, especially those on the Peck Slip, which got hit really badly.
Are there any other upcoming residential projects that you think will have a big impact on the area?
The approved project for the new mall at Pier 17 will certainly contribute to major growth and development in our community. We’ve waited for a long time for this redevelopment at Pier 17, which will not only cater to the tourism in the area — as it is now — but will also bring a lot of Manhattan residents.
How long are properties staying on the market in the area and how does that compare to a year or two ago?
The turnover is increasing. A year ago when I first launched Seaport Lofts, I had a much slower turnover. I think back to a year ago and we had much more curiosity than people looking to buy. Today, my hit rate is much higher, though I may not get as much foot traffic anymore. Buyers who come through the area now have done their research and are more serious.
What are the biggest challenges to selling residential property in the South Street Seaport area today?
My biggest challenge has probably been getting people outside of the Seaport to understand and to educate them about what’s going on down here.
Jackie Chan-Brown
Jackie Chan-Brown
senior associate, Citi Habitats
Which price ranges and apartment types are doing best and worst in the neighborhood?
Considering the recent clean-up efforts going on in the South Street Seaport area, apartments are moving surprisingly fast. That being said, there will always be a segment of the population that has hesitation about the area after the recent storm, especially those with children or other family members that may be more vulnerable in the case of an emergency. For that reason, larger apartments have had a slight decline in demand. However, people tend to have short memories.
Are you concerned that developers will shy away from the area for fear of future storms?
There are no signs that I can see that developers will shy away from the area. Let’s remember that the new World Trade Center will soon be completed, bringing many thousands of new people to the area to work. Many of these people will want to live close to their workplace. This can only serve to strengthen the adjacent markets. Also, the Fulton Street Transit Hub is nearing completion. Developers are keenly aware of these factors, and it can only serve to whet their collective appetites. What they will do is build smarter, and make sure new buildings are built to better withstand extreme weather conditions. For example, move electrical systems and boilers out of the basement and install backup generators. While not as sexy as sweeping views and luxury amenities, these features may prove to be big selling points in the future.
Are there any other upcoming residential projects that you think will have a big impact on the area?
There’s 116 John Street, which is currently being converted to luxury rentals.
What are the biggest challenges to selling residential property in the South Street Seaport area?
The distance from the subways and from convenience stores. However, I believe that when the Fulton Transit Hub opens in 2014, many buyers will be drawn to the Seaport area for precisely those reasons: The transit system will bring more crowds and they may prefer to be in a calmer, more serene environment.
Sharon McGrail
Sharon McGrail
vice president, Bond New York
What’s going on with residential sales prices in the neighborhood post-Sandy and compared to the last few years?
Historically, residential sales slow in the last quarter of each year through the second quarter of the following year, so it’s hard to say whether sales have slowed due to Sandy. But from what we can tell, the market is behaving as it would at this time of year.
There have been a bunch of new projects in the northern section of the neighborhood. How are those projects impacting the market?
The development of 272 Water Street and 254 Front Street have had a tremendously positive impact on the market. They were filling a need for new rental inventory that had gone down in prior years because of the focus on new condo developments and conversions.
What impact will the closure of so much area retail have on opened businesses?
The closure of [stores at] Pier 17 will have a direct impact on any neighboring retailers that are now up and running, because they were highly reliant upon the attraction of tourists to Pier 17. The temporary, and possibly permanent, closure of the shops and restaurants on Front Street and the neighboring streets will have an impact on the residents of the South Street Seaport area. It’s a very tight area, specifically historic South Street Seaport. [Residents may have to] wait till next spring to walk out their door and get a cup of coffee or a glass of wine, but there’s a lot of retail in Lower Manhattan; you just have to go a little bit further. I spoke to the people at Joe’s Coffee on Front Street and from what I understand they are looking to reopen in April. The South Street Seaport Museum opened in mid-December and Abercrombie & Fitch has reopened already.
How are rentals doing in the neighborhood compared to sales?
Since late 2008, rentals have been stronger than sales, due to the downturn.
Marc Palermo
Marc Palermo
managing director, Warburg Realty
Have sales and rentals in the neighborhood slowed since Hurricane Sandy?
Immediately following the storm it was horrendous. So much had been lost and there wasn’t a light, but since then I have actually seen an uptick in business. Immediately after the storm I had several displaced clients who would never live anyplace else and needed a place to live. I also have new clients that see it as a good time to purchase.
Did you have properties or listings in the South Street Seaport that were damaged by the storm?
Yes, I did, and thankfully everyone is safe. For the most part the damage was to the common elements of the properties, such as lobbies, elevators, electrical systems, boilers, etc.
Which price ranges and apartment types are generally performing best right now in the neighborhood?
My clients have been looking for homes priced between $1.7 million and $2.5 million, for two- to four-bedroom, family-size lofts. The Seaport and FiDi are the best values in New York City.
Which price ranges and apartment types are struggling the most in the neighborhood?
I don’t think that any are struggling, but if I had to pick one it would be one-bedrooms. They tend to be on the larger side and that puts them out of reach for the students who also live in the neighborhood that prefer to share a two-bedroom.
David Wanamaker
David Wanamaker
senior vice president, Douglas Elliman
Which price ranges and apartment types are generally performing best right now in the neighborhood?
In general, prior to Sandy, the rental market was very strong with buildings along Front Street seeing very little to no vacancy overall. The sales inventory is usually small due to the area’s limited size, so things move very quickly if priced right.
Are you concerned that developers will shy away from the area?
There are very few development sites left in the historic district — storm or no storm. South Street from Beekman Street to the north is the last real place that could be exploited in a real estate sense, but there are still barriers there where landmark guidelines exist.
What’s the inventory like in the neighborhood these days?
Seaport inventory is always very limited. I think currently there are only around a dozen listings on the market in total priced from around $700,000 to almost $5 million.