LuxuryBlurb

Posts Tagged ‘new developments’

ATTAINABLE LUXURY IS NOT NECESSARILY AFFORDABLE

Thursday, February 19th, 2015

Posted by Leonard Steinberg, President of COMPASS, on February 19th, 2015

Each morning I start the day by writing a letter to my company on a topic of interest. I thought I would share this morning’s, all about the emerging “Affordable Luxury” market that I feel should be termed ATTAINABLE LUXURY. After all, what is so affordable about any real estate in a large city?

In my books buying a home is a luxury for most people at every price-point, especially in a big city. Too many agents poo-poo the buyer who ONLY can spend $1 million on a home, when to that buyer a million dollars seems like a ridiculous fortune. Remember when you bought your first pair of real expensive shoes? That feeling of ‘wow, I am really going all out here’ pales in comparison to the magnitude of a home purchasing transaction. For the VAST majority of home-buyers buying is highly stressful, involves tremendous second-guessing and ranks up there with death and divorce o the stress-meter.

With many large city developers focusing almost exclusively on larger expensive apartments over the past few years, it comes as a relief that some are now as focused on what they call ‘AFFORDABLE luxury’. For most this is simply inaccurate: the vast majority of these buyers will not consider these apartments affordable…….most will still see them as a luxury that is attainable, but the word affordable may be a stretch. Affordable also diminishes the meaning of the word LUXURY and in my opinion should be avoided.

Condominium median pricing in New Developments trades at an approximate 35% premium: This pricing premium is magnified in the ultra-luxury area of the market. The pricing spread between new development and resales may not be sustainable over the longterm. While everyone focuses on price per square foot, at the end of the day it is the absolute price that matters most to the majority of buyers. If they can only afford $2 million to buy a home because that is what their assets, income and bankers will allow, attempting to buy a $2.5million property is pointless. The $2million property will probably deliver less than the more expensive one, so they may not be getting anything terribly affordable at all at the end of the day. More attainable properties that deliver the required room count will probably be less luxurious, in lesser locations and have shrunken dimensions.

Another important factor in this ‘attainable luxury’ market are real estate taxes and monthly carrying costs that keep rising each year. Most cities are subject to rising costs, much of them attributed to labor and unions, not to mention inefficient governments. Unfortunately governments do not make any allowance for cost-of-living in the tax structures: someone earning $500k annually in Memphis would need to earn approximately $826k in Washington DC to live a similar quality of life….about 65% more!

So while the world tries to push the word AFFORDABLE, remember for most this word is inaccurate and simply insulting.

THE NEW WORLD OF FINSH-OUT IN MANHATTAN NEW CONSTRUCTION

Friday, June 21st, 2013

imagesPosted by Leonard Steinberg on June 21st, 2013

Walker Tower set the stage for an entirely new level of finishes in Manhattan New  Construction by delivering esthetics AND mechanical sophistication similar to that of a very high end custom renovation. Gone were those hideous Home Depot-style HVAC grills and diffusers. Baseboards and moldings were not considered the responsibility of the buyer after closing, not to mention fully automated AV systems and shades. The quality of windows, insulation and sound attenuation, common areas, etc had all changed, and the world took note, delivering record pricing on what is arguably a so-so block. Some may say the buyers over-paid for these apartments: but the buyers who do buy apartments with this level of finish out often consider it a good buy when weighed up against buying the traditional mediocre finish-out new building, gutting it and starting from scratch. Those renovations usually cost around $ 1,200/sf and take up a lot of energy and time.

Now along comes 11 East 68th Street, and in my opinion and entirely new bar has been set for interior finish out. WOW! Shelton Mindel have again delivered, but seeing this quality outside of a custom-designed billionaire’s home is rather exceptional, and entirely new for the new development market in Manhattan. The sophistication of design is of a unique class: from the molding details to the panelling, the systems, the onyx bathroom, the window detailing. Its all just so exquisitely detailed and executed, I am not sure buyers of $ 15million homes will ever be able to look at anything less ever again. Bravo to HFZ capital for taking the bold step forward and not delivering the usual cosmetically disguised schlock we had all become used to. While many will balk at the pricing, those in the know will see the value.

I am working on a project in West Chelsea designed by Steven Harris and another at 7 Harrison in Tribeca: both are small buildings, yet the quality of design and finish out will set another new standard for the Downtown market where until recently a Sub Zero fridge and some marble was enough to delude buyers into thinking what you were selling was quality.

Of course this high level of finish out cannot be applied to all projects as it would eliminate the more affordable properties altogether. Not every buyer has $ 10million to spend. But it does send a message to all developers now entering PHASE 3 of the new construction cycle where competition is growing and lots more product is coming to market: you may have to sacrifice a bit of profit to deliver the quality buyers have now become accustomed to: relying on the super-heated market of the past 6 months to continue forever would be unwise.

THE NEW DEVELOPMENT RETURNS TO NEW YORK: A GIANT AWAKENS

Thursday, January 13th, 2011

Posted by Leonard Steinberg on January 13, 2011

After a 2 year hiatus, ‘New Development’, the darling of Manhattan high end real estate is coming back with a vengeance! We hear new buildings such as the Extell’s Park Hyatt building, Harry Macklowe’s Park Avenue tower, 250 West Street, the Rudin’s St.VIncent building are all moving forward aggressively. Almost completed buildings One Madison Park shows strong signs of life and 245 Tenth Avenue is back on track for a Spring launch.

Everywhere we hear chatter of brand new projects, old projects coming to life, and buildings in limbo being resurrected. Based on the dreadful supply of quality apartments, this is happening out of necessity. The big questions are:

1)    How will the banks view financing these projects? What will interest rates be by the time they close?

2)  How soon can they actually be delivered to prospective buyers:  do buyers have the will or the guts to commit now to a property that may only be delivered 18 months to 30 months from now?

3)  With the expiration of the 421-A tax abatement program, will those buildings that don’t have a tax abatement have monthly carrying costs so high they scare off buyers or are unfairly dis-advantaged next to those buildings that do have the abatement because they were secured before the program ended?

4)   Will buyers be equipped to buy again from floorplans? (see previous post).

5)   What kind of pricing can developers realistically expect? Lets face it, the record prices of 15 Central Park West were only achieved when buyers could physically tour the building, completed, up and running. The value of the finished product should not be under-estimated.

6)   Some developers of new developments in New York were culprits of delivering buildings that fell far short of the promises made in their sales offices: have buyers of New York property forgotten this already? Or have developers been forgiven and has trust returned? With the power of the blogs, I believe those developers that screwed up in the past will have to provide much greater assurances and incentives to provide sufficient confidence in their ability to deliver a quality building. Those that did deliver quality, will be handsomely rewarded.

7)  Pricing:  Labor and materials and land all cost less now than at the peak:  will these savings be passed on to the consumer for the first group of buyers to incentivize momentum? I see no way around this. Those who take the biggest risk should be rewarded for doing so.

8)  Will the weak dollar save the day as foreign buyers view New York’s prices as ‘good buys’? Lets face it, in China the recession was a very brief moment…..these buyers are still quite used to buying off floorplans.

We believe the beginning will be tough, but will improve as buyers recognize the opportunity for buying a quality existing property is slim with the current limited supply.

BUYING FROM FLOORPLANS: ARE THEY READY?

Wednesday, January 12th, 2011

Posted by Leonard Steinberg on January 12, 2011

After 2008 showing prospective buyers of luxury property just the floorplans of a condominium with a model kitchen and bathroom virtually ceased. As construction and new projects ground to a halt in New York, the ‘new normal’ was all about showing a completed, furnished (staged) apartment to allow buyers to experience the full impact of the property they were considering.

I seriously doubt any sales would have happened in new buildings without these finished units to showcase, especially in the worst part of the recession.

Now, as the inventory of these new buildings dwindles, new projects will be faced with a new dilemna:  Are buyers ready to look at just a floorplan again to make a substantial purchase? Will buyers, spoiled by lushly furnished apartments have the imagination or will to guess what the finished product will look like? As a re-sale broker I know how buyers often place most of their focus on furniture…..it took years to get them accustomed to looking at the space represented in a floorplan. How long will it take to re-educate them?

We shall only see in the next few months as new projects come to life…..stay tuned.