The Luxury Trend
“It smells like 2006,” said Peter Hauspurg, Chairman of Eastern Consolidated. 2006 was a time when the property sales market was full of inventory and prices were on the rise. According to the statistics, it looks like NYC is very much riding the second wave of that trend and coming back full-swing after the 2008 market crash, and there are many ways to interpret that trend.
On the residential side of the real estate market the trend is increasingly becoming more and more luxurious. Luxury listings are selling quick and inventory is increasing steadily. This being said, the effects of that increase and progress of sales has also affected the other side of the properties market as well. That side being the commercial real estate market.
Within the first quarter of 2014, Manhattan’s commercial real estate has recorded the highest quarterly volume in the last decade. Vacancies have fell to 10.5 percent and average price per square foot is $63.96 which is 7.3 percent higher on the year-over-year.
Many commercial properties like the United Charities Building located at 287 Park Avenue are selling as “conversion properties”. There are many buildings that fit into this category such as 450 Park Avenue which was recently bought, 45 Broad Street, the Post Luminaria at 385 First Avenue, and Post Toscana at 389 E. 89th Street. These properties can all be converted into hotels, condominiums, apartments, or office redevelopment.
Office buildings are also in high demand. “We’re actively looking downtown for offices and or retail and in Brooklyn. There is not a question of this being an active market,” said Michael Alpert, president of the Ashkenazy Acquisition Corporation.
Jared Kushner, owner of the Puck building, is currently capitalizing on this trend by building a new office ‘campus’ branded DUMBO Heights to keep up with the ongoing demand. With such high volumes and soon to be inventory in this market we can see the definite emergence of the ultra-luxury trend trickling down from the residential market and right into the commercial market as well.
A good way to keep an eye out for Manhattan’s high-end trend on the street-level is to take a walk down Third Avenue. Throughout your walk you’ll notice many storefronts that are sitting with ‘for rent’ signs in their windows. Many retail spaces in Manhattan are going out of business, and are being replaced by more banks or are simply waiting for an occupant.
Prices due to the development boom that we’re currently experiencing here in Manhattan have driven up asking rent prices and increased inventory. There’s an exorbitant amount of new space, hundreds upon thousands of square feet of newly created exquisite and expensive retail space. The market isn’t quickly picking up all excess properties with the recent vacancies. This means there are a lot of properties that are wishing to be bought and developers are quickly picking them up and changing them into properties that can meet the current demand.
Asking prices for rent are also a reason for the recent vacancies of street-level storefront properties. Cheap leases made in the 90’s and following 9/11 are now expiring, and landlords are asking for the higher rents to meet current market values. The change that renters are feeling is the difference of $50-$150 per square foot to the current market value of $200-$500 per square foot.
Businesses like St. Mark’s Bookshop were paying $23,500 per month in rent for their Third Avenue location between Eighth and Ninth Streets. Moving to another neighborhood saved the company from closing it’s doors, and moved the niche shop to another neighborhood that will begin to grow around it. Whereas the Third Avenue location will most likely undergo a makeover to bring it up to optimal market conditions or just a conversion to satisfy the demand.
The words ‘Manhattan is changing’, seems to be an understatement in the market today. Luxury is the current trend and properties all over Manhattan vacant or occupied are exhibiting it one way — or another.