Developers See Continued Demand in Luxury Market

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NEW YORK CITY-Luxury developers and brokers at the Inman News REConnect conference said the key to building apartments that will sell at any price point is to know your buyer. "It's all in how you handle the details. You have to understand the market and submarkets," said Stephen M. Ross, founder and CEO of the Related Cos. LP.The Luxury Apartments: Selling & Developing in New York seminar featured; Ross, William Zeckendorf, of Zeckendorf Development and co-chair of Terra Holdings; Sharon E. Baum, vice-president of the Corcoran Group; and Dolly Lenz, vice-chairman new development marketing, investment sales at Prudential Douglas Elliman. The panel was moderated by Steven Spinola, president of the Real Estate Board of New York.

Evidentially Related knew what buyers wanted at the Time Warner Center with some units selling for $3,500 per sf. Ross said they spared nothing in the way of amenities and finishes in the units. "We wanted the best, even though we knew the buyers would bring in their own designers and obliterate everything we had done. We had to create a vision for them."

Hundreds of units were spoken for prior to 9/11, Ross explained. "We really had to start all over again in terms of marketing. We were in a high-rise building." The units sold for the same rate months later, when buyers again were interested in living in a luxury high-rise building with high-end retail at its base. Today only one unit remains unsold.

And so goes the luxury market, Ross said, even with the speculated bubble talk. "The market overall is very strong, you have just seen the normal seasonal slowdown. Yes, there is a lot more supply, but with the availability of money, you will see more development occurring."

Of 515 Park Ave., with apartments selling for as much as $2,000 per sf, Zeckendorf said, "it really was a product-driven building. We tried to create large-room apartments, with tall ceilings and strong finishes." Zeckendorf's latest development, built on the former Mayflower Hotel site, 15 Central Park West is 50% sold, with apartments sales are averaging $3,000 per sf.

New York buyers are looking at new developments more and more, said Baum. "Prewar buyers are now going to new developments, because they just don't want to go through the hassle of coop boards." With interest rates low and Wall Street bonuses at an all time high, the demand for new condo development is still high, added Lenz. "People are moving out of Fifth Avenue coops and into buildings with a Whole Foods at the bottom. Once they get a taste, they won't go back."

Lenz said the only downside to the condo development craze is inexperienced builders, who don't know the market. "You just can't build to build, you have to have experience and you have to know the market." Ross added that the demand for luxury apartment living in New York will remain high and although most of his buyers are domestic, sales are also coming from Europeans.

Zeckendorf agreed. "I am very optimistic on the market. We saw a shift in August. It shifted into a more balanced market. I see the second quarter of '06 as very telling of where the market will go."

The REBNY Q3 report indicates the average sales price for a Manhattan condo rose by 29% to nearly $1.3 million; the average price per sf rose to 24% to $1,071. The highest neighborhood median sales price was Downtown, which climbed to $935,000, an increase of 37%, while Northern Manhattan saw the highest percentage increase--50%--to a median price of $349,000, according to the report.