Goodbye grit. The East Village, once a haven for artists and squatters, still has more edge than most of Manhattan. But it’s a friendlier edge these days than it’s had in the past.
In this month’s Q&A, The Real Deal talked to brokers and market analysts about the boon in residential development in the neighborhood and about the changes in the makeup of buyers and renters calling the area home. (Think fewer recent college grads and more young families.)
While most of the for-sale residential housing stock in the East Village is still co-ops, that’s starting to change with new projects like the 36-unit Village Green on East 11th Street and the 48-unit 123 Third Avenue, which both sold out in a year. There’s also the Arabella 101, a 78-unit rental building on Avenue D that’s 50 percent leased.
Brokers say those projects and others that came earlier are increasing the livability of the neighborhood, which could lead to higher prices there.
For now, recent market measurements are mixed.
While most brokers that TRD talked to said prices and sales activity are up, Sofia Song, vice president of research at real estate website StreetEasy, said the numbers tell a different story. She said both prices and sales volume are down from the year-ago quarter and are faring worse than Manhattan as a whole.
But she agreed that the housing stock is changing and the area is becoming “less gritty.” And, she said, rentals are going strong.
Brokers say one reason why sales might be down is that inventory is so tight. If there were more properties on the market, there would be more homes selling because the demand is there. One sector that is doing well, they say, is townhouses.
As Jason Haber of Rubicon Property put it, the townhouse market used to be “the domain of Greenwich Village and the West Village until recently.”
The area’s trendy restaurants and shops like Momofuku, Edi and the Wolf, Nicoletta, Dirt Candy and Big Gay Ice Cream are also a big draw. And many of the newer restaurants and retail stores are headed east to the previously grittiest parts of the neighborhood.
For more on new projects hitting the market, the newly proposed nightlife zone and which apartment types are doing best and worst, we turn to our panel of experts.
Jason Haber
Jason Haber
CEO, Rubicon Property
What’s going on with residential prices in the East Village? Are they up or down compared to a year ago, two years ago and during the boom?
Not only are they up over a two-year period, but prices in some buildings have returned to their pre-crash levels. Take a look at sales at 240 East 10th Street, a luxury condo. You can see that prices achieved in August 2007 are once again being achieved.
Which price ranges and apartment types are performing best right now?
You are seeing particular strength right now in the townhouse market. Our firm recently closed on an East Village townhouse that required an extensive renovation in which the house sold at just under $1,500 per foot.
Which price ranges and apartment types are struggling the most now?
Smaller co-op units are lagging compared to the gains made over the last two years by condos. But I’m not sure there is an apartment type in the East Village that I would characterize as ‘struggling.’
How are rentals doing in the East Village compared to sales?
Rents are continuing to climb. Whereas we once saw renters come to the East Village because the rents were more affordable, now they are looking elsewhere as prices have come up.
What kinds of new retail and restaurants are you seeing in the East Village today, and how is that impacting the market?
The East Village is gaining lots of traction from international restaurants. For example, the Momofuku restaurants began in the East Village and continue to attract crowds, both visitors and residents. Additionally, the high-end retail such as Lancelotti, John Derian and John Varvatos has brought more affluent buyers to an area that largely was associated with affordable housing. I see transformation moving farther east as more attractive restaurants and retail such as Edi and the Wolf make their claim.
What are the most surprising trends you’re seeing in the residential market?
There is real demand for luxury single-family townhouses in the East Village. This was the domain of Greenwich Village and the West Village until recently.
Sophia Song
Sofia Song
vice president of research, StreetEasy
How is overall residential sales volume doing in the East Village these days, and how does that compare to a year ago, two years ago and during the boom?
The East Village is faring worse compared to Manhattan overall. Based on the volume of closings in the second quarter of 2012, the East Village is down 35.2 percent from the year prior and 41.2 percent from 2010.
What’s going on with residential prices in the East Village?
Prices are also faring worse than they are in Manhattan as a whole. The median price in the East Village in the second quarter of 2012 was $645,000, which is down 18.1 percent from last year and 18.9 percent down from the peak. In contrast, Manhattan’s median price saw a 3.7 percent increase compared to the prior year … and it’s still only a 10.5 percent decline from the 2008 peak.
Which price ranges and apartment types are performing best right now in the area?
Co-ops dominate sale activity in the East Village. They make up 61.4 percent of all residential transactions. Additionally, the area attracts entry-level, first-time buyers with the bulk of sales, 68.9 percent, priced below $1 million.
Which price ranges and apartment types are struggling the most now in the area?
The East Village had only two closings above $3 million. It’s in short supply of high-end listings.
The Arabella 101, a luxury rental, along with 123 Third Avenue and Village Green, have recently hit the market. What impact are those projects and other new residential construction having on the area?
I think [they] add much needed diversity to the East Village housing stock. Ultimately, projects like these will add cachet to the area and will attract a broader range of buyers and renters — not just students and entry-level first-time buyers, but more professionals and young families.
Are there any other upcoming projects that you think will have a big impact on the East Village market?
Yes, 11 Second Avenue. It’s a 64-unit new construction building that will replace an old, three-story rundown building on the corner of Second Avenue and First Street. While it’s not a monolithic building, it continues the gentrification of the East Village. The area is becoming less and less gritty and less and less associated with squatters and artists.
What do you think of the proposed zoning changes that would essentially create a “nightlife district” away from residential development in the East Village?
I think a proposal like this would only increase the livability of a neighborhood, but it would certainly change the character of the East Village. It would increase its appeal to young families, older couples and could drive up residential prices.
How are rentals doing in the East Village compared to sales?
The East Village is doing well in terms of rentals. Median rent in the East Village is currently $3,200, which is 10.3 percent higher than it was last year. Overall, Manhattan median rent is $3,395, but it is only up 2.9 percent from last year.
What’s the inventory like in the East Village these days?
Like everywhere else in the city, the East Village inventory has been declining quite dramatically. In the third quarter of 2012, there were only 182 listings, which was 18.4 percent less than a year ago.
What kind of new retail and restaurants are you seeing in the East Village today?
The East Village has become a foodie’s heaven with the likes of Momofuku, Porchetta, Nicoletta, Dirt Candy, Big Gay Ice Cream and the new Calliope. Many great eateries are going farther into Alphabet City, onto Avenue C and Avenue D.
What’s going on with financing for residential purchases in the East Village?
Buyers are still having a difficult time securing mortgages [in general]. Additionally, the bulk of the East Village market is made up of co-ops, which tend to be slightly more difficult to finance.
Cindy Scholz
Cindy Scholz
senior associate, Citi Habitats
What impact do you think that new residential construction in the East Village is having on the rest of the area?
When I lived in Alphabet City over five years ago, you would never place Avenue D and luxury in the same sentence. [The Arabella 101,] a modern rental building, is thriving in the area, and I think we will see more luxury units like this pop up in Alphabet City.
Are there any other upcoming projects — either residential or commercial — that you think will have a big impact on the East Village?
Yes, 211 East 13th Street is a new condo project that’s been greatly anticipated. Also, 51 Astor Place is a commercial building in the heart of the Village that is going up very quickly. There is still a long way to go on this project, but it will be a prominent fixture in the area upon completion.
What do you think of the proposed zoning changes that would create a “nightlife district” away from residential areas?
A dedicated nightclub district may help preserve the charisma on many residential blocks while centralizing the noise and other issues inherent to the nightlife industry to a more confined area. The East Village is made up of many young renters and owners who frequent bars and clubs. Would they like to reside above one? Probably not, but it is important to have them within walking distance to maintain the fun vibe that lures people to the East Village.
What kinds of discounts off asking prices are being seen in the East Village?
Properties are selling at ask. The days of lowball offers are over. Two years ago, you would be foolish not to submit a bid 10 to 15 percent below ask. I purchased my own condo earlier this year paying slightly above ask. I placed an offer within 24 hours of it hitting the market to prevent a bidding war. Clients who insist on lowballing learn after they lose one or two apartments that they need to be prepared to come in at ask, or just a hair below if they want to compete with other buyers.
Eileen Kim
Eileen Kim
real estate agent, Bond New York
How is overall residential sale volume doing in the East Village these days?
Inventory is really tight right now. In the third quarter, there were 74 sales, but I think that number would be higher if there was more inventory. By comparison, in last year’s third quarter, there were 95 sales, in 2010’s third quarter there were 66 and in 2007’s there were 138. [But] anything priced well now is going into contract in four to eight weeks.
Which price ranges and apartment types are performing best right now in the area?
One bedroom co-ops between $500,000 and $1 million.
Which price ranges and apartment types are struggling the most now in the East Village?
Anything under $500,000 and between $1 to $2 million. Also, studios and two-bedrooms.
Are there any upcoming projects — either residential or commercial — that you think will have a big impact on the East Village market?
There are several. For example, 74–84 Third Avenue is a doorman rental building with 94 apartments coming online in 2013. There’s also 21 East First Street, a new condo on the cusp of the Lower East Side with 64 apartments coming online in 2013, and 316 East 3rd Street, a new rental with 33 apartments coming online in 2013. There are also a slew of smaller developments and conversions and renovations popping up. And, 51 Astor, the new 400,000-square-foot office building going up, could be the kind of neighborhood-changer in the East Village that the Time Warner Center was for Columbus Circle.
How are rentals doing in the area?
Rentals dominate the East Village. There were 818 rental deals versus 185 sale deals in 2012 to date.
What kinds of discounts off asking prices are being seen in the East Village?
Prices are no longer very negotiable, and apartments are now trading at about 2 percent below ask. During the same period last year, apartments were trading around 5 percent below ask.
How long are properties staying on the market in the East Village?
Anything priced well is going into contract in one to two months. In the last couple of years, a lot of properties would sit on the market for a year, sometimes longer.
What are the biggest challenges to selling residential property in the East Village today?
The lack of inventory.
June Phillips
June Phillips
senior vice president, Halstead Property
Which areas of the East Village are seeing the most activity?
Between Avenues A, B and C is where I am seeing a lot more activity lately, but there is not much on the market. I have one listing at the Fillmore and it’s been on the market for quite a while. There are 10 on the market right now in the A Building. At 123 Third Avenue, there are two listings.
What’s going on with residential prices in the East Village today?
At one property I have, 525 East 11th Street, we have a 799-square-foot [unit] listed for $918,000. We’re asking $1,150 a square foot, which is a little under market because we want to draw customers since it hasn’t moved. The average in the neighborhood, depending on the grade of the apartment, is about $1,350 a square foot.
How is the new residential development in the area impacting the market?
It’s been wonderful — it has brought people down there. I do broker open houses, and 50 percent of the brokers haven’t ventured past Avenue A, especially on the rental side, because people are going to rent and eventually they’re going to buy.
What kinds of new retail and restaurants are you seeing in the East Village, and how is that impacting the residential market?
We are seeing a lot of new little restaurants and retail shops. They are geared toward skateboard shops, consignment shops and little boutiques. … Where I see the most change from 10 or 15 years ago is from 13th Street to Ninth Street and from First Avenue to Avenue C. That little area has changed a lot, especially in and around Tompkins Square Park.
What are the biggest challenges to selling residential property in the East Village?
The stigma that still exists: getting people east of First Avenue. Once people walk down there and get into properties, they see what a wonderful neighborhood it is. There is a uniqueness that you don’t see anymore on the Upper East Side; even the West Side is changing. It is a neighborhood that is not as Hollywood as the West Village — it’s just a real comfortable neighborhood. The challenge is getting people there.
Who are the most active buyers/renters in the East Village right now, and how does that differ from the past?
There are a lot of first-time buyers and couples, whereas maybe 10 years ago or even five years ago the rentals and a few sales in the walk-up buildings were people just out of college and students. Hipsters are still there — it still does have an edge, but it’s a friendly edge. No one is pushing them out, you don’t get the feel that they are being displaced.
Jacqueline Urgo
president, the Marketing Directors
How is overall residential sale volume doing in the East Village these days?
Sales volume has been climbing over the past few years, but the numbers don’t truly reflect the full potential of the neighborhood as activity has largely been hampered by a lack of existing inventory. Residences that hit the market generally change hands in short order, and the tightening rental market is pushing even more residents toward ownership.
How have new residential projects in the area impacted the market?
The success of these buildings has provided tangible evidence that the appetite for new construction is very high.
Kira Saltzman
Kira Saltzman
representative/salesperson, Town Residential
How is overall residential sales volume doing in the East Village these days?
Many seeking to buy for the first time with their hearts set on the Village, Tribeca or Soho were priced out. [They] have been blown away to discover what they can get for the same price and [still be Downtown].
What do you think of the proposed zoning changes that would create a “nightlife district” away from residential development?
I believe the new zoning laws being discussed stand to have a positive impact on residential development. Keeping large clubs — 200-plus capacity — in commercial zones would protect not only the well-being of residents, but also the dedicated small local businesses that have been struggling due to the nightlife surge in this area. No one wants to shop on a street filled with grime from the night before. Landlords and owners would benefit, too: Implementing restrictions for nightlife would protect their investments as prices continue to rise on rents and property values.