Every morning, 365 days of the year, I post a daily contemplation to my fellow colleagues at COMPASS and today I wanted to share one:
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Every morning, 365 days of the year, I post a daily contemplation to my fellow colleagues at COMPASS and today I wanted to share one:
SUBURBIFICATION AND THE CITY
I hate to admit this, but when I lived in Dallas many years ago, one of my more enjoyable off-duty outings was heading out to the suburban mall, especially North Park Mall. Not only could I escape the brutal heat and humidity of Summer, but there was also something oddly magical about all the magnificent stores such as Neiman Marcus and Barney’s with many more in between, not to mention a food court with tacos and the likes, stacked conveniently under one roof with fountains and Henry Moore sculptures on display, that I found strangely appealing and extremely convenient. Granted you had to drive through insane traffic to get there, but once you were there you arrived in a psuedo ‘walkable city bubble’ comprised of retail ‘avenues’ just the way you would experience life in a small town. Many of these suburban malls are failing now as their Disney-esque version of City life is being re-imagined back in the City.
Large malls are credited with destroying the Main Streets of many cities and towns…..and they certainly have encouraged a more generic multiplied brand mentality to shopping. These days you can spot the same major brands at any high end mall anywhere in the world. Hermes, Coach, Ferragamo, Gucci, Prada, etc. They are all there, everywhere. At the lower end the same is true: Zale’s, The Gap, Banana Republic, H+M, etc. Sameness is a product of modern mall life. And this ‘MALL OF AMERICA’ (and the GLOBE) has arrived in the City.
In Milan, Italy the magnificent Milan Galleria across from the Duomo, has been brought back to life as a City-suburban-style mall fueled by the investment of Prada and Versace. The splendor of city architecture has been blended with the suburban-mall-style conveniences of multiple stores under one roof in a controlled environment. Suburban Malls that were originally designed to emulate City life, are now returning to the City in a suburban-city hybrid.
The mall at the Time Warner Center was risky business when it was developed, yet it has been extremely successful. The concept of vertical shopping in the big City had failed in the past. The entire center is a statement of how many modern consumers wish to live in a large city: this complex that comprises a hotel, condominiums, a theater, a mall, a food store, restaurants, etc, allows city-dwellers to experience the conveniences and attributes of suburban life AND city life all under one roof. Want to go for a swim or massage? There is a magnificent gym and pool. A walk? There is a park at your doorstep. And most of the experience exist under one roof in a secure, climate controlled environment with tons of natural light where the consumer is immune to snow, ice, rain, heat, humidity, UV rays, etc……with ‘people like us’.
While I simply adore the charms of a city street lined with unique boutiques, restaurants and stores, there is lots to be said about a controlled environment without the inconveniences of the elements. There is also something to be said for an environment that makes life easier by curating and editing all that we need in one place. The SUPER PIER just west of the Meatpacking District will house restaurants, a beach club, galleries, boutiques, a movie theater, Google offices, etc all under one roof. If TIME IS THE LAST LUXURY, this is addressing this need superbly. Getting the CITY MALL right will be a unique challenge: who after all wants some of those dreadful suburban mall experiences we know all to well?
Recently I met with the top broker of a super-fancy suburban area outside of New York: she is simply amazed at the expanding trend towards living in the city. Raising kids in the City. Retiring to the City. What was once unheard of outside of suburban life is being created in a unique and highly desirable version in the City. Large expensive buildings (and their surroundings) are building in all the conveniences once only associated with suburban life, combined with all the allures of the City. Neiman Marcus has been an anchor to suburban malls around the USA: Now it will be an anchor to an entirely new part of Manhattan, HUDSON YARDS, surrounded by 100 additional boutiques and restaurants in a City Mall. Neiman Marcus which has been traditionally associated with anchoring suburban mall life could now become more associated with city life, anchoring revived or new urban neighborhoods.
This CITY MALL TREND is very important to us in the real estate business. It has created important new demographics. City Malls mirror the needs and wants of the modern day consumer. They are just one part of the suburbification of the City.
PLEASE: someone PLEASE tell me where you can buy a MANSION for $1,75million….or $ 3million….or even $5 million in Manhattan? Our brilliant local government has officially re-defined the meaning of the word MANSION: Yes, a mansion in New York City can be bought for $1.75 million according to those who run our City. Really? In an effort to raise revenues to pay for affordable housing (a good thing!), Mayor De Blasio is proposing a new MANSION tax on all those ‘mansions’ that would be 1% paid by the buyer for properties valued at more than $1.75 million and 1.5% for the portion of properties valued at more than $5 million. If we all agree that this tax is going to be effective lets please re-name it. The word MANSION associated with this price-point is insulting.
If this new mansion tax goes into effect will it dampen sales activity to the point where the net gain is zero, or worse?
Oh, and if the idea of this new tax is to raise revenues, it may be a good idea for Mayor de Blasio to start raising revenues for the City in his own back yard: he pays a QUARTER of the real estate taxes compared to similarly valued MANSIONS elsewhere in New York for his Park Slope townhouse MANSION. Yes the picture posted above is Mayor de Blasio’s MANSION……and its worth about $ 1,75million. His real estate tax bill is about $ 3,000 per year….
Read more about this in the Wall Street Journal’s article this morning.
Posted by Leonard Steinberg, President of Compass, on April 28th, 2015
Are companies re-evaluating office space rentals to become office space owners?
An affiliate of Ruder Finn the global public relations firm based in New York, has bought a five-story Sutton Place building previously occupied by antique and movie prop shop Newel for $30.7 million, that will become Ruder Finn’s new headquarters. The 34,000-square-foot property purchase at 425-429 East 53rd Street, between First Avenue and Sutton Place South, equates to a cost of roughly $900/sf. Assuming they will have to spend an additional $200/sf to finish out the space, their total cost will be around $38 million.
Assuming a company like this would have to rent space for around $ 75/sf, their annual rent for 34,000sf would have been around $2.5 million annually. Knowing that commercial space has a ‘loss factor’ of around 15%, their 34,000 sf may be the equivalent of 38,000sf or more, so their rent for that amount of usable square footage may be closer to $ 2,85million per year. Assuming rents escalate by 2% per year, in 10 years their rent could be north of $3,5 million per year. If Ruder Finn takes a 100% 30-year mortgage on this building at 6%, their annual mortgage payments will be around $2.76 million. Then there are the costs of real estate taxes and maintenance on top of that.
The building would be paid off completely in 30 years, yet over 30 years they would have paid around $100 million in rent…..and not own a building that surely will be worth lots more.
Why wouldn’t every company not want to own their office space?
Yesterday a literal forrest invaded West Chelsea: numerous massive, fully grown trees were being installed at 500 West 21st Street, the almost completed building by Sherwood Equities……Sherwood Forrest perhaps?
The massive scale of the trees, some over 40ft in height, had on-lookers mesmerized. I could think of nothing more wonderful than instant forests sprouting up all around the city! The engineering and infrastructure necessary to install this was very impressive indeed. The best landscapers in town (Reese Roberts and Partners, who also designed our magnificent penthouse terrace at 7 Harrison Street in Tribeca, also with large mature trees) designed this installation of a bank of mature trees as a buffer between the building and the Highline Park which it abuts, providing privacy to those apartments that will be confronted by heavy foot traffic on this prized elevated park.
As someone who works with developers daily, I always stress that it is the actual plantings that matter most when landscaping. Nothing is more wonderful than a controlled view, and a view of a park always commands a premium. West Chelsea welcomes its new forest!
Posted by Leonard Steinberg of Compass on April 20th, 2015
Shockingly, the politically fueled non-story about how people who qualify for affordable component rental housing within a large market-rate condominium would have to use a separate entrance, has resulted in over 88,000 applicants for just 55 units at 470 West 62nd Street. Further proof that regular, intelligent human beings care a lot less about an entrance to a building than the affordability of the home, contrary to the tiring misplaced banter of political hacks whose political agendas trump all reason. Did these 88,000 people DEMAND access to all the identical facilities of those paying significantly more to buy in these buildings? Of course not. Why? Because they are practical and realistic. They would be only too thrilled to have the opportunity to live in a wonderful new building in a solid location for low rent. Only unrealistic, self-entitled deluded politicians would believe they should have EVERYTHING that everyone else has just because.
Does Mayor DeBlasio offer to pay the same real estate taxes than others in New York who for similar valued property pay double, triple or more? Of course not! For those applying for this affordable housing, the chances of ‘winning’ are 0.14%…..in short very slim. I do wish those who ‘won’ the right to live in these apartments signed a contract that encouraged them to elevate their earnings and move out over a set time period to allow the thousands who did not win this lottery to get a break, but that may be wishful thinking on my part in a city that chooses a few select lottery winners and seems quite comfortable with everyone else footing the bill or suffering. The U.S. Constitution says we should all be treated fairly and equally: some politicians simply choose to ignore this.
A recent visit to the highly anticipated new mall at BROOKFIELD PLACE left me cold: Granted the designers inherited some rather bland architecture to begin with, but what they have done with it is truly disappointing. Nothing about this mall is much different or enticing than a bland mall anywhere else in the world. Time Warner Center benefits by striking architecture, but even that cold mass of steel and granite feels warm and cozy to Brookfield Place where they have achieved new heights in sterility. Surely being set alongside the water’s edge could have influenced some form of human charm? This place feels so cold to me, so un-inviting. Miles of boring granite or marble. Those massive palm trees while novelty for sure could be interesting…. but feel like a Floridian suburb to me. Huge open spaces that could be ANYWHERE MALL AMERICA…..
The LE DISTRICT food court looks more like a newly minted Starbucks than anything remotely as interesting and vibrant as Eataly. It repeated the dating design language of white subway tiles, steel, wood and concrete in a manner not unlike fifty other retail environments around the city….and hundreds (if not thousands) around the globe. It is about as French-charming as an Eiffel Tower T-shirt, although the smell of the food is beyond incredible. But where is the French charm we all love so dearly? There are thousands of French design elements that could have been inspiring and this is all they could muster? Disney-Parisian is not the style I am referring to, but surely there is something that could be both authentically New York AND French?
If you are looking to buy a Michael Kors handbag or a pair of Ferragamo shoes, this mall will deliver. The food quality is strong. The environment needs help. It needs CHARM. Right now its as cold as a Battery Park City winter.
New Yorkers like to think of themselves as innovative, individualistic and original: unfortunately many of them often follow trends like a herd of sheep. An article in this weekends Wall Street Journal showcases how a world once possessed by owning an Hermes Kelly bag, now confronted with the reality that THOUSANDS own this same bag that costs $10,000+, is turning towards something more individualized and less obviously excessive: Carrie-Bradshaw-think appears to be fading.
I see a similar trend emerging in New York real estate. Granted there will always be a market for the most fashionable building of the moment, but buyers of previous ‘of-the-moment’ buildings are learning the cost of fashion in real estate. Unless the attributes and features of a building are truly substantive, the cosmetics can fade fast. There are buildings that were once ‘it’ buildings rather recently that already look rather tired. I shudder how those poor buyers were conned into believing what they were buying was so great when in actuality they were buying something rather ordinary.
Today I am seeing a new trend where wealthy, educated buyers are looking for more than just a trend or moment. The mass production of an ‘it-product’ automatically diminishes its value in my humble opinion. Formulaic design has its limits. A home should allow for individuality and self expression. Too many properties are either dull and repetitive or dictatorial in design. This is changing. We will soon be launching a building at 152 Elizabeth Street in Nolita designed by master architect Tadao Ando with interiors by Gabellini Sheppard that speaks to this subject beautifully. In a sea of sameness, creating a product that is very difficult, if not impossible, to reproduce, let alone mass-produce, is a challenge, but if properly delivered becomes an instant collectors item.
‘It-buildings’ are great up to a certain price-point, but when the majority of people are spending a huge percentage of their net worth on a home, asking them to believe in fashionable of-the-moment possibly-soon-to-be-out-of-style real estate is somewhat dangerous from an investment perspective. Lets see what this next round of New York buildings can produce to see if it mimics a trend thats already happening in a much more affordable market….fashion.
Traditionally, couples who lived in New York City migrated to the suburbs, or at least to the Upper East Side, to raise a family. This has changed drastically over the past decade. With the gentrification of Downtown neighborhoods, schools, parks, services, amenities and property have adjusted to the demands of raising a family.
Avenue’s School, the private international school located in West Chelsea, has heightened the real estate industry’s need to build larger apartments that can accommodate a growing family. Three and four-bedroom apartments that were virtually non-existsent 5 years ago, are common place in most new buildings. Townhouse pricing in the area has soared. Schools alone are not enough of a draw: having great parks, play areas, sporting facilities, restaurants that accommodate strollers and noisier, messier kids, sidewalks that allow for easy walking, etc all play into the picture. The appeal of the suburbs has always been about quality of life…..as this quality of life continues to improve in New york, the more families are staying and moving to the City. The costs are still enormous, and unfortunately our governments make virtually no acknowledgement of cost-of-living in their tax structures. Someone earning $300,000 in Manhattan is considered equal to someone making the identical income in Memphis. Its quite insane. People who live in a $2 million apartment in New York are termed rich, yet for what their dollar buys on big-city standards, this is truly middle class, as crazy as that may sound to those who live outside of a large city.
While the media focusses its attention on mega-deal, ultra-priced properties, the reality is there are some properties for sale in-between that are actually attainable. Not AFFORDABLE necessarily, but attainable. If $ 2,500/sf is the new benchmark for a new building apartment, a 3,000sf apartment should cost upwards of $7.5 million. With some compromise, there are alternatives: We are listing a 4,100sf+ apartment in Greenwich Village at 345 West 13th Street, a top quality, doorman, condominium building for under $1,400/sf. Granted, a chunk of the space is below grade, but its completely usable with natural daylight and an additional full bathroom and separate entrance…..very usable space and perfect for that need to stretch out: a games room, hang-out area, etc. For the more monied buyer, we have four bedroom, full floor apartments at 560 West 24th Street that are the equivalent of a 4-story townhouse, but on one floor….with services….for under $8 million. You cannot find a fully renovated townhouse that size anymore for under $10 million. There are also very good buys in the co-op arena: I know of a 4,000sf loft coming to market in the heart of Chelsea that hovers around $1,250/sf: no-one in the press is talking about these great buys, but they should. All around town there are some great buys in the re-sale arena, that with some compromise and a little TLC, can provide great housing at a fraction of the price of the much touted more glamorous new buildings.
These prices are still well beyond most buyers, yet when you compare the cost of a large house in the suburbs along with the cost of time for commuting….for some that cost is priceless (time is the last real luxury)….combined with the escalation potential only a big city with higher inflation guarantees, the big city alternative becomes more enticing.
As real estate professionals, the New York Department of State prevents us from discussing schools or using terms such as ‘family sized’ as they are deemed potentially offensive or discriminatory against those who do not have a family. I think this is bureaucratic insanity. If a buyer were to ask me if other families live in the building, we are not allowed to refer to ‘familial status’ at all. Surely as a buyer it would be nice to know who your neighbors may be? It is left to the buyer then to do their own research and fact-finding. Is this another excess of ultra-liberal-thinking that serves no-one? I don’t have a family and would have absolutely no problem with discussing families, their needs, schools, whether there are potential play-mates in the building, etc. I simply don’t see the insult or any form of discrimination in doing so……maybe I am deluded?
The absolute suburbanization of the city is somewhat exaggerated: Too many gripe about how the city has lost its gritty edge. To those I say evolve. Would the original American Indians prefer this whole island returned to farmland? Manhattan will never ever remotely resemble a traditional suburb and will always contain the elements of an urban environment with great museums, public transportation, in-your-face diversity, taller building, greater density, etc. However, we all benefit by improving the quality of life for all in all large cities, and New York has done an exceptional job in re-shaping the quality and future of neighborhoods, especially Downtown, for those seeking the attributes of a suburban life mixed with the delights only a large city can deliver.
Posted by Leonard Steinberg, president of COMPASS, on March 7th, 2015
As unemployment figures continue to drop, the likelihood of rising interest rates strengthens……and this may cause a spike in pricing as buyers rush to buy to capitalize on the current low (but rising) interest rates. Rising prices may force some to turn to renting, which would further create the imbalance between supply and demand in the rental markets and push renting pricing up. The next 4 months will be very telling indeed.
New records are about to be set in New York City: At the much-anticipated 83-unit 220 Central Park South designed by Robert A.M. Stern, storage rooms will be priced starting at $111,000 for 44 square feet ……or $ 2,522/sf. This number was very recently associated with record priced properties elsewhere in Manhattan, but now just a few weeks later will be the cost of storage space without windows. An 84sf storage space will be asking $211,000.
Even more shockingly, wine cellars will start at $133,000 for 38 square feet….or $3,500/sf. and go up to $287,000 for a larger 82 square feet space. Parking spaces will cost $750,000.00, a thorough bargain when compared to the parking spaces in Soho located at 42 Crosby Street that made headlines by asking $1 million per space. The apartments at 220 Central Park South will be asking a little over $ 7,000/sf and up and will be competing against remaining units at 432 Park Avenue, One 57 and the other new buildings such as the Steinway Tower, the Nordstrom Tower, 520 Park Avenue and 53 West 53rd Street, the MOMA Tower.