Living with the bulls on Wall Street
Booming condo market in the Financial District
Downtown Express photo by Elisabeth Robert
David Cooper, his wife Charis, and son Max in their converted condo on Nassau St.
By Ronda Kaysen
It was 8 oclock on a Monday night and Wall St. was hopping. Scores of well-clad New Yorkers dutifully signed liability waivers to enter the construction site that is the Philippe Starck-designed apartment building. Inside, a live jazz band crooned while black-tie caterers doled out glasses of wine and bite-sized latkes. The main attraction 17 stories up three model luxury apartments on display represented the last of 23 Wall St.s offerings.
With many of the condo units snatched up before the first model apartment was painted and sanded, the success of 23 Wall St, a condo conversion, is the latest example of a real estate trend that is sweeping the Financial District, transforming the third largest commercial center in the United States into the latest frontier in the heady residential real estate market.
One of the first residential conversions the terra cotta 55 Liberty St. opened as a luxury co-op in 1980 after architect and developer Joseph Pell Lombardi converted the turn-of-the-century building in 1978. The trend began in earnest in the mid-1990s when Mayor Rudolph Giuliani organized the 421-g program, a 14-year tax abatement program for residential conversions. Residential development in the area suffered a setback after 9/11, but in the last eighteen months, real estate agents, residents and business leaders have witnessed a dramatic resurgence in residential interest in the area. Some real estate agents have even renamed the neighborhood, dubbing it Tribeca East.
Everything is hot, said Sharon Katzoff, a real estate agent at the Corcoran Group and a recent Financial District resident. As the market heated up, it [the Financial District] became another viable place to live in the city. The units in Katzoffs condo conversion at 102-104 Fulton St. were yanked from the market after three days when the developer discovered that he could demand between $800,000 and $900,000 for apartments that he originally priced in the $700,000 range. One unit recently resold at a substantial increase, said Katzoff for more than $1 million.
Shaya Boymelgreen, the 23 Wall St. developer, had a similar experience with his converted landmark property, said Katzoff. Initially priced at around $500 per square foot, the units were quickly pulled from the market and re-priced at around $1,000 to $1,100 a square foot more than double the original asking price. Everything is selling, she said. Especially the family apartments.
Perhaps a harbinger of the market to come is David and Caleb Koeppels residential condo conversion of the nine-story Beaux Arts office building at 130 Fulton St. Equipped with only one bathroom and a kitchen, a buyer who wants more than a single room, must add the interior walls, rooms and additional baths himself. The starting price for a 1,890-square foot loft space is priced at about $1.5 million.
Some real estate agents in the market worry that the fragile market may potentially be thrown off-balance by over-ambitious prices. There is gradual growth, but its not going to be a hyper, high-end, large square footage district anytime soon, said Bruce Ehrmann of Stribling & Associates.
According to Ehrmann, the smaller units studios and one-bedrooms sell faster than larger, family-sized units. As for rentals, a recent Citi Habitats report found that the largest group of studio renters in Manhattan 48 percent is moving to Battery Park City or the Financial District. Average studio rental prices in the Financial District have increased by $52 a month in the last 12 months while rental prices for larger apartments have fallen, with three-bedroom apartments falling by more than $600. It is going to be young couples and young professionals who are making an investment, said Ehrmann, of the sales market.
Families may be reluctant to settle in a neighborhood lacking in retail and services. The growth that was stalled in the wake of 9/11 is slowly returning, said Ehrmann, a member of Community Board 1. As long as people put these buildings on the market for a reasonable price.
For the time being, prices for condos and co-ops remain lower than in other Manhattan neighborhoods. David Cooper and his wife Charis moved to 150 Nassau St., a residential condo conversion, eighteen months ago. My wife and I could have afforded 1,100 square feet on the Upper West Side or 1,600 square feet in the Financial District, he said. What he found when he arrived was a neighborhood that seemed less transient than the Upper West Side and more community-oriented. Its really exciting to be in a neighborhood that is on the verge of such positive change and investment, he said.
His first son, Max, was born in September, and he and his wife are awaiting updates about a new East Side elementary school. With P.S. 234 on the West Side one of the best elementary schools in the city, he hopes its East Side neighbor, where Max will most likely attend, will compare. Were very curious to know whats going to happen with the new school, he said.
In order for residential growth to thrive, it needs to occur in discreet locations within the Financial District, said Vishaan Chakrabarti, Manhattan director of City Planning. Water St. and the area surrounding the World Financial and World Trade Center, for example, will most likely remain primarily commercial areas. Whereas the northeast corner of the district, centered on Fulton and John Sts. is ripe for residential growth.
We think [residential development] is going to strengthen the commercial core in creating a nicer area for office workers, he said. Many businesses look favorably upon placing their offices in neighborhoods where their employees can also live. By 2008, the city expects 15,000 new and converted residential units, said Chakrabarti.
Longtime residents have noticed a change to their sleepy neighborhood in recent months. There seem to be more rental conversions, more young people, more take-out food being purchased, more people on line, said lower Broadway resident Liz Berger. Most of the new residents are young professionals, she noted. Of the 12,012 new residential units occupied or under construction since 2000, 6,479 of them are in the Financial District/Seaport neighborhoods, according to a Community Board 1 report.
Berger moved to the neighborhood 22 years ago, enjoying the close proximity to the water and the pioneer aspect of being one of the few residents in the citys financial center. Theres a real sense of determination, she said of her neighbors. Bergers main concern with her Downtown neighborhood is retail. When the first Korean grocer opened in 1986, Berger was thrilled. It was better than Bloomingdales, she said. Aside from Zeytuna and Jubilee, two Downtown grocers, Berger relies on Fresh Direct, an on-line delivery grocer, and the Green Market at the World Trade Center. Even the recent growth, which Berger says has reached a critical mass, has not brought the much needed retail. We have a few small local businesses that cater to local residents and families, she said. But we need more, we need a real sense of place.
Berger is not alone in her concerns about retail growth. The general consensus among business leaders and residents alike is the neighborhoods notable lack of amenities. With no full-sized grocery store in the neighborhood, and a shortage of restaurants and other retail shops that cater to a 24-hour community, the Financial District, unlike much of Manhattan, offers a dearth of weekend and evening-hour services to its residents.
We have a lot of families who are down here and if we want to support retaining them, we need to make sure that there are the critically needed amenities they want, said Julie Menin, founder and president of Wall Street Rising, a non-profit small business and residential advocacy group founded after 9/11. We need more supermarkets, we need more restaurants, we need more stores, she said.
Menin, also a Financial District resident, considers the neighborhood a very nice place to raise a family, but hopes to see, among other things, a Whole Foods-type grocery store move into the neighborhood. Retailers shy away from the Financial District, she said, because they worry, there is not a critical mass on nights and on weekends.
City Plannings Chakrabarti agrees that retail development is critical to viable residential growth, but both types of development must be managed correctly in order to thrive. You have to have a plan that encourages residential growth in the right areas, he said. Without the population, you are never going to get the retail.
Retail breeds retail, if planned correctly, said Chakrabarti. Were really pushing for strong ground level retail that will have a spillover effect, he said, citing plans for stores near the East River beneath the F.D.R. and at the new World Trade Center. Its important to think about activities clustered together.
Retail vacancies are on the decline, according to retail real estate agent Faith Hope Consolo, Vice Chairman of Garrick-Aug Worldwide. Since the start of the year, the vacancy rate has dropped from 14 percent to 9.3 percent, she said. Last year, the vacancy rate was 17 percent. Aside from the slow weekend and evening traffic, the Financial District has its benefits for retailers: space averages at $75 per square foot, compared to an average of $125 per square foot in Midtown Ashe said.
Chakrabarti is optimistic about the retail growth. All the big retailers want to move down here, he said. Its already started. Its going to continue to grow.
Some local business leaders worry that residential growth is moving too fast and could dilute the reputation of the neighborhood as the countrys financial epicenter. What do people think of when they think of Lower Manhattan? said Shirley Jaffe, vice president for economic development for the Downtown Alliance, the neighborhoods Business Improvement District. They think of Wall St. and they think its the financial center. The more you take away commercial buildings and you mix residential into the financial core, the more difficult it is to sustain that.
Residential growth does not necessarily preclude commercial growth, said Chakrabarti. The whole point of the residential development is actually to strengthen commercial development, he said, citing Midtown as a balanced mixed-use neighborhood. Because Midtown has a large residential population, retail thrives on the nights and weekends, which is a boon for commercial businesses that enjoy the variety of services during business hours. We think that residential development is going to strengthen the commercial core in creating a nicer area for workers, he said. Fine dining restaurants, for example, that cater to business lunches will have a higher success rate if they can also serve an evening and weekend clientele.
The Alliance does not entirely oppose residential development in the neighborhood, said Jaffe, but the BID is wary of the trend. We are concerned about what the impact will be on businesses and the infrastructure that has been built over the last hundred years that is geared towards a major financial center, she said.
Looking back over the long history of the neighborhood it is the first neighborhood in the city Menin sees the residential boom as a return to the historic mixed-use neighborhood it originally was, opposed to a move away from it. You had shopkeepers with small stores and above them more residential units, she said of the original neighborhood. The Financial District has such beautiful historic buildings, its such a wonderful area. It thrives on being mixed use.