From the Magazine: Luxury Condos on the Lower East Side Break a New Price Barrier
Here’s our cover story from the July print magazine.
No one’s likely to confuse the stretch of Delancey Street near the Williamsburg Bridge with Park Avenue. The defining characteristics of the area today are a series of nondescript commercial buildings, a highway-like thoroughfare and a random selection of bargain retail outlets. But by next year, pedestrians craning their necks will see something new: a shimmering residential tower cantilevering over the Solid Gold discount jewelry store on the northeast corner of Delancey and Norfolk streets.
A lot of local residents thought the developers, Adam America Real Estate, the Naveh Shuster Group and the Horizon Group, had lost their minds when they announced the high-end project known as “100 Norfolk” a couple of years ago on the former site of a refrigeration facility used by the dearly departed Ratner’s Dairy Restaurant. They might be surprised to know that, just a few months after launching sales for the 38 condos in the ultra-modern building, 85 percent are under contract. Last month, a three-bedroom unit on the ninth floor fetched $4.3 million, or $2,665 per square foot.
It’s not the first time an apartment on the Lower East Side has broken the $2,000-per-square- foot barrier. But in recent months it’s happened with more frequency as several new luxury buildings came onto the market. As Andrew Barrocas of MNS brokerage told the trade magazine The Real Deal last month, “I think for a long time the demand wasn’t there for this type of product… [But now] we’re seeing numbers on par with other parts of the Downtown market.” In part, the sky-high prices are simply a reflection of Manhattan’s overheated residential market. But it’s also apparent that the $2,000 threshold represents a significant turning point for an historically low- and middle-income neighborhood.
Luxury housing is, of course, not a new concept on the LES. It’s been eight years, after all, since the 17-story Blue Building opened on Norfolk Street, stirring controversy for both its unconventional architecture and multi-million-dollar apartment prices. But today, for the first time, multiple luxury projects are in the pipeline that are likely to reshape the Lower East Side’s residential market for years to come. Here’s a summary of some of what is in the works.
>100 Norfolk St. The marketing website set up by Douglas Elliman Real Estate calls this building a “new architectural masterpiece” from designer Eran Chen, featuring a “striking glass facade cantilevered over tree-lined streets like an elegantly lit chandelier.” Located in a section of the neighborhood rezoned in 2008, the development site was created by cobbling together air rights from several nearby lots. Multiple units have broken the $2,000-per-square -foot barrier, including a $7 million penthouse reportedly purchased by real estate investor and bar owner Emma Hsieh. Mr. Chen, of ODA architecture, apparently likes his creation so much he’s keeping a corner unit for himself as a downtown getaway from his main Upper West Side home.
>50 Clinton St. Replacing buildings that housed acclaimed restaurant wd-50 as well as 60-year-old Rothstein’s Hardware (which moved to Ridge Street), this seven-story project seems to be having no trouble attracting buyers interested in snapping up undersized apartments starting at just under $1 million. Fredrik Eklund, a star on Bravo’s Million Dollar Listing, predicted there would be strong demand for smaller units his team is aiming at “entry level buyers and young professionals.” Even through the single-story commercial structures on the site haven’t been demolished yet, many of the 37 units are under contract at around $2,000 per square foot. Some are going for a little less, while others are actually pushing $3,000 per square foot. A 655-square-foot one-bedroom on the sixth floor is in contract for $1,375,000. Eklund boasted on his Instagram feed that a penthouse unit was recently claimed for $2,900 per square foot
>215 Chrystie St. Forget luxury. How about super-luxury? These 11 full-floor and half-floor apartments on top of the new Public Hotel across from Sara D. Roosevelt Park are going for, on average, nearly $4,000 per square foot. Hotel developer Ian Schrager calls his latest project “tough luxe,” blending the best qualities of uptown chic and downtown grit. There are six units now listed on the New York real estate site StreetEasy, ranging in price from $7.1 million to an eye-popping $18.75 million for the penthouse. Last fall, the New York Observer noted that this 4,236-square-foot apartment was being eyed by a Park Avenue couple “interested in using the place for the complementary purposes of art storage and entertaining—as a kind of interesting weekend getaway south of 14th Street.”
>204 Forsyth St. On the site of the former Nativity Mission School, developer Charles Saulson is building 11 high-end two- and three-bedroom apartments, including a 1,500-square-foot unit for $3.3 million and an $8.5 million penthouse.
Compared with other downtown neighborhoods, such as Soho and Tribeca, the Lower East Side still boasts a relatively small number of new condominium units entering the market. In the first quarter of 2015, MNS brokerage’s “New Development Report” found the median price on the LES was about $1,300 per square foot. But brokers who have been working in the neighborhood for the last few years believe there’s been a fundamental shift.
In November 2012, Ariel Tirosh of Douglas Elliman sold a three-bedroom penthouse at 115 Norfolk St., a new condo building, for $3.8 million, just under $2,000 per square foot. At the time, it was the most expensive condo sale on the Lower East Side since the 2008 financial meltdown. Now he’s overseeing sales at 100 Norfolk St., and recently won the coveted contract for condominium sales in the high-profile Essex Crossing development project.
In a recent interview, Tirosh said he thinks a “psychological barrier has been broken.” There was a time in the not-too-distant past, he explained, in which the location was a drawback for some buyers. “Now it’s a place that has a big upside,” he said. “It’s not as sterile [as some other neighborhoods], Tirosh added, “and it’s edgy and has promise for the future.” The Essex Crossing project, which will bring new apartments as well as a 14-screen movie theater, an expanded Essex Street Market and other local amenities to the area, is a big part of changing perceptions. He also mentioned the influx of high-profile restaurants and hotels in the past couple of years. “It’s all giving buyers reason to embrace the Lower East Side,” he said.
It’s worth pointing out that these trends directly impact only a very small part of the Lower East Side housing market. Like New York City in general, most residents are renters. Based on the most recent statistics available, the homeownership rate in Community District 3, encompassing the LES, East Village and Chinatown, is scarcely higher than 12 percent. But times are definitely changing. New luxury developments are already under construction, or will be in a matter of weeks.
In the first phase of Essex Crossing, for example, 55 condominium apartments will be created on a site at Ludlow and Broome streets (11 of those apartments are to be set aside for middle-income families). In the Two Bridges Neighborhood, Extell Development is building a massive luxury condominium project alongside the Manhattan Bridge that will flood the Lower East Side market with 646 new high-end apartments. Neither developer has gone public with marketing materials for the projects, but it’s a safe assumption that the condo units will be priced above $1 million.
In the past few years, the definition of “luxury” in Manhattan real estate has changed dramatically. In January, the penthouse at Extell’s One57 tower in Midtown sold for $100 million, a Manhattan record. Developers are forging ahead with numerous $20 million condos in the area around Central Park. In this environment, real estate pros have come up with a term—“affordable luxury”—to describe apartments in the $1–3 million range. As ridiculous as this may seem, this is the “new normal” for apartment buyers.
“The meaning of the word ‘affordable’ has become skewed,” Jonathan Miller of appraisal firm Miller Samuel told the Daily News earlier this year. “It’s gone from meaning subsidized housing to affordable to the middle class. Now it’s morphed into this, which is not really affordable for most people at all.”
On the LES, the vast majority of apartments still available for sale are located in the Grand Street cooperatives, the former middle-class housing developments that only entered the free market in the past 15 years or so. Even in these mid-century towers, two-bedroom apartments are now selling for more than $800,000. Only about a dozen units in the co-ops were listed for sale at the middle of last month.
Throughout the city, there’s a serious shortage of apartments priced $1 million and less. Developers are now beginning to address the situation, building more projects in the “affordable luxury” category. This is why the Lower East Side is beginning to see high-end projects popping up, largely aimed at affluent first-time buyers.
How hot is the LES luxury market? At 100 Norfolk, half of the apartments were under contract last October, just one week after sales got under way, leading to industry chatter that the first units might actually have been priced too low. As of late last month, the cheapest apartment, a 647-square-foot one-bedroom, was listed for $1,150,000.