Kelly Kennedy Mack, President of Corcoran Sunshine Marketing Group
Stephen G. Kliegerman, President of Halstead Property Development Marketing
Edward D’Ambrosio, Vice President of Douglas Elliman, New Development
Melissa Pianko, Executive Vice President of Development for Gotham Organization, Dev
1. New developments are a very popular topic right now! Why do you feel that New developments have become so “hot” again?
Kelly Kennedy Mack: This may be the strongest real estate market in New York history, and it is being driven by a new development revival. Of the $6.3 billion sold in Manhattan in first quarter, more than a third came from new development. Manhattan has been starved for new condominium inventory over the past five years which has created intense pent-up demand for new product. Low inventory is propelling sales in every submarket and at every price point, resulting in truly astounding sales.
Stephen G. Kliegerman: The new development market has seen a tremendous resurgence in the past twelve months as New York has lead the country out of the housing recession due to numerous factors. First and foremost, as the economy has healed, job growth in the city has created an overwhelming demand for housing – pushing rents up while the economic stimulus has kept interest rates low. Thus, for the first time in many years, it has once again become more affordable to own than to rent in the city. In addition to that, the number of new housing units built since the summer of 2008 has dropped to a 30 year low as financing for new developments dried up due to the recession. Secondly, there has been an increase in interest from foreign buyers looking for a safe haven for equity preservation and future appreciation in the market. Foreign buyers are willing to accept relatively low returns in order to safeguard their savings in anticipation of rising housing costs as demand for new housing still outweighs supply. Lastly, there is always a high demand for new housing with the latest and greatest amenities, finishes and, of course, location. Many of today’s new developments are located in highly sought-after neighborhoods such as Tribeca, the West Village, Upper West Side. Now Midtown, with the emergence of One57, 432 Park and Baccarat has been established as a residential destination for the wealthy.
Edward D’Ambrosio: It’s pretty simple… there is a natural cycle of home ownership… which includes ownership of a “new” home. That cycle was interrupted with the onset of the recession. In general, people are now feeling a bit more secure about the financial status of the economy and their own financial status. People are finally adjusting and accepting what some call the “new normal.” There is a pent-up demand and inventory is low, so right now there is a flurry of activity from both the builder/developers and the buyers.
Melissa Pianko: During the downturn (2008 to 2010) there were not many new developments started. So for the past few years, there has been a limited amount of new residential product brought to market. Gotham Organization is bringing our first post-recession building to market this month – Gotham West – located at 510-550 W. 45th Street between 10th and 11th Avenues in Hell’s Kitchen. We are thrilled to be bringing this large development to market at a time where there is a significant demand for new buildings.
2. What amenities are today’s buyers looking for in a new building? Name 4 that are the top of the list please.
Stephen G. Kliegerman: Buyers seek amenities that enrich their lives and add value to their residence. The most sought-after amenities today are well appointed fitness centers that offer services such as personal training and wellness programs, swimming pools, resident lounges and children’s play rooms.
Kelly Kennedy Mack: Buyers don’t respond to gimmicks. Useful and time-tested amenities including parking, storage, fitness and multipurpose rooms, especially those designed with children in mind, resonate with today’s buyers. More recently, we’ve seen a proliferation of global buyers with multiple homes around the world, so properties offering full-service amenities supported by a hotel operator are actually an everyday need in their jet-setting lifestyle. In recent months, Baccarat Hotel & Residences New York has captured the world’s attention with the most exquisite amenity package available – anywhere.
Edward D’Ambrosio: Today, amenities may be interpreted as “features.” What features rank high on the list for buyers? 1-Kitchen design and layout. How they integrate into the homeowners lifestyle. 2- Outdoor living space – Patios, gardens, cooking areas, areas to entertain. 3- Open floor plans – great rooms that lend themselves to entertainment and ease of flow. 4- Master bedrooms or master suites that are on the main floor with generous closet space.
Melissa Pianko: We tend to focus on rental developments so I will speak to what renters are looking for in new buildings. We believe the New York renter has gotten smart. They want amenities they will actually use rather than fads (like Wii machines). At Gotham West, we have a large courtyard which is an oasis from the craziness of New York. It is beautiful to look at and a great place to relax. We also have a really great gym – with spinning and yoga, a large lounge, some more intimate gathering spaces, a business center and a roof deck. We offer an array of concierge services. The idea is that our renters are busy and we want to make their complicated lives as relaxed and convenient as possible.
3. What are some of the biggest challenges developers face in the market today?
Edward D’Ambrosio: Scarcity of residential parcels of land. Not having enough inventory, or the right product, available for today’s buyers. Trends in the market have changed rapidly. Lifestyle and location demands have shifted dramatically. On Long Island, particularly, dealing with communities and local municipalities that oppose new construction has been a major challenge. There is a fear that new building will result in higher school taxes, more traffic, etc. Many studies show the exact opposite. Over time new communities often increase tax revenues, will bring new jobs, new retail. Overall it enhances the living experience in the community.
Melissa Pianko: Development is fun because it is challenging!
Kelly Kennedy Mack: Every developer I know is looking for a plot of land to build on. Scarcity of land is a growing challenge to developers.
Stephen G. Kliegerman: Developers face numerous challenges particularly in New York City. First off, obtaining construction financing is still more difficult than it was prior to 2008 as lenders are still being very conservative, causing developers to either pony up more cash on their own or to find equity partners to join them in order to get a development off the ground. Secondly, in the past four months land prices have sky-rocketed as developers compete for sites as the market continues to flourish on both the rental and condo side. In addition, as the development market heats up, construction costs are starting to rise again as the competition for quality contractors increases.
4. Let’s talk money. How difficult is it for someone to finance a new construction purchase? What should a buyer ask their mortgage banker or mortgage broker in advance? Do any developers provide financing for buyers?
Kelly Kennedy Mack: Financing for purchasers varies by building and is less prevalent at the highest end of the market where Corcoran Sunshine mainly operates. That being said, buildings over 50% sold are relatively easy to finance. Many developments have preapproved lenders, so it’s wise to speak with the sales team for lender recommendations specific to the building they represent.
Stephen G. Kliegerman: Well, not only have I been a development marketing expert for quite some time, but my wife is actually a private mortgage banker at Wells Fargo, so I know a lot about this. Obtaining financing is not as difficult as the press has made it out to be, although lender requirements have become more stringent post Lehman. Purchasers need to be well prepared to obtain a mortgage today. First off, know your credit score and make sure it is over 700 in order to get the best rates and have the most options. If your credit is not good obtaining financing will be difficult. Second, prepare for the process by having your last two years of tax returns, most recent pay stubs and all of your financial documents ready to present to your lender. In addition, for the most part be prepared to put 20% down and if you are self-employed have plenty of backup information prepared with your accountant to present your actual income to the lender. The days of no income verification loans are gone, so be ready to have your entire financial profile scrutinized.
Edward D’Ambrosio: Let me put it this way: financing any purchase nowadays can be complicated and surely frustrating. Buyers for new construction qualify as they would with any conventional loan to purchase a home. However, what becomes difficult is navigating and understanding the banks underwriting process and paperwork most lenders require. Every buyer should ask their mortgage banker or broker specific questions regarding that process and know where the underwriting actually takes place. Most Loan Officers know which banks and or lenders have the most common sense policies. Most developers do not readily offer financing. What they have done over the past few years is become much more flexible in terms of extending the length of contracts – offering the buyer more time to secure financing and/or sell an existing property.
5. Excluding developments that you might be working on at the moment, what new development do you admire, and why?
Melissa Pianko: Rather than a residential development, one of my favorite upcoming new developments is CornellNYC Tech. This is an incredible opportunity to help the City of New York on so many levels and truly feel that this brings us to the 21st Century. In case you’re not familiar with it, New York City’s plan to establish a world-class applied sciences university received a major boost recently with the announcement of a $133 million donation from prominent tech billionaire and philanthropist Irwin M. Jacobs, the founding chairman of mobile technology giant Qualcomm. Jacobs and his wife Joan are making the donation to Cornell University and the Technion-Israel Institute of Technology, which have joined forces with New York City to launch Cornell Tech, a $2 billion research university to be located on Roosevelt Island, between the boroughs of Manhattan and Queens.
Kelly Kennedy Mack: I’m very interested to see how the residential conversion of the Woolworth Building turns out. It’s always been one of my favorite buildings in the city.
Stephen G. Kliegerman: 18 Gramercy is a favorite of mine. The location is one of the best in the city and the fact that they were able to enlarge the windows had a huge impact on the park views and amount of light the residences receive. One of my other favorites is Walker Tower. The developers of Walker Tower took a huge risk putting what I consider the best fit and finish package in any development into the kitchens, baths, floors and hardware and it really paid off. Not only are the views amazing but the finishes compliment the amazing views. Every developer is now using Walker at the gold standard for what a quality, top of the line product is.
6. When constructing a new building, what modern technologies are developers incorporating into their projects in order to “Go Green?”Can you name a few changes all developers should make in order to build smarter and more efficient buildings?
Stephen G. Kliegerman: Developers are using everything from recycled materials, beautifully manufactured ceramic tiles rather than natural stone, high efficiently HVAC systems, high E rated glass to state of the art mechanicals in order to conserve energy, respect the environment and maximize efficiency.
Edward D’Ambrosio: ’Going green’ really is important to me personally, but also for the overall environment, so it’s very exciting to see that Geo-thermal and Solar energy is incorporated more and more into the initial design plans for new homes.
Kelly Kennedy Mack: One of the newest properties in our portfolio, Watchcase in Sag Harbor, has extensive planted green roof technology. This looks beautiful and provides ecological benefits and cost savings to the homeowner, the property, and the entire village of Sag Harbor.
In other LEED-certified properties like Riverhouse and The Laurel, buyers have noted their appreciation of green features like filtered fresh air, tobacco smoke protection, and use of low-VOC paints and sealants. HVAC systems that require less energy and produce fewer CO2 emissions are popular as well.
These systems are environmentally friendly and add real value to the lives of purchasers. What’s interesting is that developers who have built their careers around green properties, like Michael Namer at Alfa Development, say that it ultimately doesn’t cost more for a developer to build green.
Gradually, more and more towns have raised the energy saving requirements for the home; not just Energy Star appliances, but for all the mechanical systems in every new home. It is costly, but best for the consumer today and the environment in the future. What can, and should be done, without having it required by the local building codes, is to insulate each home to meet higher standards on a regular basis. Additionally, there are many materials available such as recycled products or materials that are environmentally friendly.
Melissa Pianko: Thinking long-term here about green building is important: what can be done upfront to reduce long-term energy costs and make the building more sustainable. I think we will start to see developers using more innovative approaches – particularly as the government incentives start to catch up with the technology.