New Development Test Cases: Pricing, Strategy, and Design

Emily Zhu 7/6/2020

New development is endlessly fascinating to me, because so much of it takes the concepts and trends of the market and amplifies them. The quest for the next hot neighborhood never ends. Buyers who seek the next ‘it’ neighborhood, rough edges and all, would do well to take their cues from developers. The new developments really are test cases for the market. The high-risk, highreturn situation is so interesting, and full of higher highs and lower lows. Surely, developers watch for signs of activity in an ‘understored’ area, changing absolutely the way people think about a building concept or location.

Test Case at 567 Ocean Avenue, Prospect Park South: A Gentler Way to Gentrify

567 Ocean Ave, Brooklyn

Gentrifier, interloper, ‘neighborhood start up’ are builders attempting to reclaim developer and make it a little kinder and friendlier. Fewer companies want to be just developers anymore, and for good reason. The word has become associated with neighborhood discord, fears of rising rents and hipster homogeny. Sure, you could “follow the artists” and hope you land in the next SoHo. But a better bet may be a neighborhood with access to public transportation and real estate values that are rising but still lower than in surrounding areas. Enter what has come to be known as the “impact” developer, a socially conscious builder is thinking critically about their role in gentrification is embracing new business model – projects with civic-minded goals are merging as the conversation on inequality turns again to housing.

567 Ocean is south of Prospect Park, and two blocks from the B and Q train. Without a true model apartment, it is a little bit hard to determine how the project will hold up. Can the new mid-rise twin tower condo buildings turn an ugly duckling of a street into a swan? For a better part of two decades, the neighborhood is often criticized for being ungainly and even dangerous. Now, a rendering by Brooklyn based architect shows a tasteful stone building with oversized windows finally have real estate professional optimistic about the long-waited makeover.

All 108-units at 567 Ocean Avenue enjoy open layouts, white oak hardwood flooring, and abundant natural light. Kitchens come outfitted with natural stone countertops and backsplash, and a Bosch appliance package. Baths feature natural stone finishes, and heated floors. Selected units have private balconies. Good design and execution will end incredibly. The feeling inside is so crucial. This impression, in essence, is what has made these buildings so successful.

“New York is a city where neighborhoods evolve, and a transformation can happen so quickly. It can just take a few years, with a few new buildings, and we think this area will be completely different.” Bentley Zhao, the President of New Empire Corp, the developer behind the project

If an incredibly rare product near a sizable park and great layouts can curb appeal for a buyer, this building has much to offer.

424 West 52nd Street – Hell’s Kitchen: Preserved in Amber. Sort of.

Hell’s kitchen, stretching from about 34th street to 59th street, and west from Eighth Avenue to the Hudson, it was a tough neighborhood. Several legends compete to explain how Hell’s Kitchen got its name. When I first arrived, a longtime resident would tell an old joke that a rookie police officer in the 1880s said to his partner: “this place is hell.” His partner said: “no, no, this isn’t hell. It’s hell’s kitchen.” It has still a bit of devil in it, but it is a great place to live today. Hell’s Kitchen is an assembly of everything, industrial, residential, commercial, actors, architect, chic restaurants, and the greatest number of theaters. Fragments and layers of New York’s history unceremoniously preserved in streetscapes, in stories told on park benches, bar stools, and shadowed doorways. Someone famously said, if you are bored in Hell’s Kitchen, it is your fault.

With the gathering speed, the western edge of Hell’s Kitchen is going residential. A slightly different color, and a slightly different glow, 424 west 52nd listings had come online. The design of this small collection of 7-story boutique condo building does its best to circle the square. The 9th avenue has become a restaurant row, and projects in the high 40’s and high 50’s have delivered a lot of value. Layout-wise, this is geared to the domestic primary family buyer. Though I can’t discuss apartment marketing, the massive spaces, and bulk of units are 2 bedrooms and 2 baths, you know whom they are targeting.

With different projects scattered out, New Empire has had time to develop a good sense about what buyers are looking for. In this case, layouts in the building feature the same themes – open kitchens, splendid master suites, nice ceiling heights, finishes that speak to the contemporary tinge brings alive some of the still-visible traces of the Hell’s Kitchen history. The takeaway, though, is that this is an utterly practical purchase. Ninth Avenue, with charges in the realm of reasonable, doing it at a perfectly fair price point of $1700 per square foot. It should end up capturing buyers, with all things considered, for the price point.

The Neighborly LIC, 37-14 34th Street, Long Island City: Cranes are Everywhere.

It was a decade of tremendous change and gentrification for the boroughs beyond Manhattan, where rezoning and the pursuit of cheaper land near public transit spurred new building. The forces that transformed in Brooklyn in 2010s are well underway in Queens. Even without the addition of Amazon’s second headquarters in Long Island City, western Queens neighborhood accounts for three-fourths of all market-rate rental apartments built in Queens in the decade.

Sometimes a developer wants to let the affordability and design sell the apartment. In the case of the Neighborly, the condos are designed by Paris Forino, who has a reputation for understated elegance fulfilling commissions for homes, multi-family residences by emphasizing demanding level of beauty without compromising function. The finishes are attractive but not over the top. But will it? This is a unique situation in that by creating landscaped courtyard, and as artisanal as possible finishes for smaller, less expensive units, as if it were not done by a developer. This is partially because part of the developer team is a contractor.

New Empire, has done lots of projects, is very good at scaling the finishes and value engineering appropriately to the price point. With a lot of studios and one-bedroom units, this project should be quite attractive to buyers, especially if one-bedroom unit start at $750,000. Private outdoor spaces are in many of the units as well, giving many apartments a unique selling feature to distinguish it from its neighbors. A winner. With $685/month for carrying charges (tax and common charges) means that costs are approaching $1.1 per square foot with everything (except your mortgage) included. I have been accused of not focused on the attractiveness of the building.

Here is some PR that the building got in New York Times (https://www.nytimes.com/2020/07/03/realestate/long-island-city-greenpoint-new-development.html), the developer is offering concessions for the July 4th weekend. All of this without any prompting. Which is to say: the seller, even arguably the most successful developer working right now, has acknowledge the elephant in the room, a slower market, and is trying to get out of it. Bravo for them. Keeping prices just a hair below $1,200 per square foot and a 15-year tax-abatement may help also. With pretty designs, tax-abatement, and convenient location, there will be a lot more projects in Long Island City. I sometimes fret that the Long Island City has lost too much of its edge.