Hotter Than The Hamptons

Faena House Miami Beach; design by Foster & Partners (Photo: Courtesy of The Faena Group)  

Faena House Miami Beach; design by Foster & Partners (Photo: Courtesy of The Faena Group)

Welcome to Miami! The sun-drenched mecca of Southern Florida has always been a beloved vacation and retirement destination for New Yorkers fed up with frigid winters. Now more than ever, it has truly become New York City’s second home all year-round. 

Driven by a post-World War II construction boom and an influx of Rat Pack star power, Miami emerged as the go-to vacation destination for well-to-do New Yorkers in the 1950s and 1960s. Stunning weather, pristine beaches, fabulous entertainment and beautiful hotels made South Florida a glamorous escape from the hustle and bustle of The Big Apple. Palm trees swayed as Sammy and Frank crooned, and bikini-clad Northeasterners took poolside Mambo lessons. 

After a period of decline in the 1970s, Miami-South Beach experienced a renaissance in the 1980s. The city emerged as a fashion powerhouse with a thriving club scene and a long-overdue redevelopment of its famed Art Deco hotels. Miami Vice brought the unique pink-tinged South Florida glitz and glamour to TV sets across the country, while designer Gianni Versace and photographers Herb Ritts and Bruce Weber helped lure supermodels, musicians and other fabulous people to the area’s sandy beaches. 

The most recent catalyst to Miami’s current international appeal and influx of the wealthy and fabulous was the arrival of Art Basel in 2002. What started as an offshoot of the original Swiss art fair has grown into a week-long celebration that dominates the social calendars of the in-the-know visitors from around the world. The sophisticated draw of Art Basel has put Miami on the map for a new generation of affluent power brokers and has led to an explosion of high-end real estate development, luring Big Apple bigwigs. 

And it’s easy to see why. Just a two-and-a-half-hour flight to West Palm Beach, Fort Lauderdale or Miami International from New York City makes traveling effortless— at least compared to a three-hour, traffic-clogged drive to Montauk. Luxury hotels, premier people-watching, fine-dining, upscale shopping, vibrant nightlife and a spectacular arts and entertainment scene are all appealing to sophisticated New York visitors. 

Rendering of Eighty Seven Park, an 18-story, 70-unit luxury condo under construction with one to five-bedroom units, ranging in price from $1.6 to $15.2 million; design by Renzo Piano (Rendering: Courtesy of Terra Group)

Rendering of Eighty Seven Park, an 18-story, 70-unit luxury condo under construction with one to five-bedroom units, ranging in price from $1.6 to $15.2 million; design by Renzo Piano
(Rendering: Courtesy of Terra Group)

Rendering of interior space at Eighty Seven Park (Rendering: Courtesy of Terra Group)  

Rendering of interior space at Eighty Seven Park (Rendering: Courtesy of Terra Group)

Personal Appeal

Like millions of New Yorkers before me, I’ve made numerous trips to South Florida most winter seasons, both for business and to enjoy the warm weather, tennis, surf and beaches that have lured travelers for decades. As a veteran commercial real estate finance professional— and now a luxury residential broker—I have watched the Miami development scene cycle through ups and downs. I have been particularly struck by the new wave of well-heeled New York City buyers purchasing second homes, not only in Miami, but also all along South Florida’s east coast, including Fort Lauderdale, Boca Raton and Palm Beach/ West Palm Beach. 

This new breed of New York buyer is ultra-affluent and ultra-mobile, with the ability to conduct business from a beach or a boardroom. They are typically financiers, entrepreneurs and creative types seeking a second home in an urban location with both warm weather and beach access. To them, Miami has essentially become “New York South.” 

According to Knight Frank’s 2016 The Wealth Report, New York City is home to 5,600 people worth $30 million or more. This substantial number of “ultra-high net worth individuals”—or UHNWIs—is expected to grow by nearly a third in the next decade. Based on that information, one can expect more members of this segment to make second-home purchases in South Florida. 

— Jeffrey Miller of Brown Harris Stevens I Zilbert   

— Jeffrey Miller of Brown Harris Stevens I Zilbert

Unlike most other beach destinations, Miami is rich in international diversity and sophisticated amenities. According to Knight Frank, Miami ranks as the 12th most important city in the world for the aforementioned UHNWIs. As Jeffrey Miller of Brown Harris Stevens / Zilbert puts it, “New Yorkers are used to an urban experience and like the vibrancy of Miami with its great restaurants, upscale shopping, sports venues, cultural events and art institutions,” he explains, referring to attractions that include Art Deco Weekend, the South Beach Wine & Food Festival, the Miami Open, the Perez Art Museum, the Adrienne Arsht Center for the Performing Arts and the forthcoming Patricia & Phillip Frost Museum of Science. “Miami is growing up with new distinctive neighborhoods to explore, including Downtown Brickell, Wynwood, Edgewater, Midtown and the Design District.” 

Beyond it being a fashionable, influential and internationally minded city, Miami remains very inexpensive relative to other major cities around the world. The kind of luxury listing a buyer can obtain in Miami, for say, $5 million dollars, would cost upwards of $10 to $20 million in Manhattan. Paired with Florida’s lack of state income taxes for residents, this can make the purchase of a second home into a smart long-term investment.


Rendering of an outdoor terrace at the Surf Club Four Seasons Residences (Rendering: Courtesy of Fort Capital)  

Rendering of an outdoor terrace at the Surf Club Four Seasons Residences
(Rendering: Courtesy of Fort Capital)

Miami and Beyond

The arrival of well-heeled New York City buyers, in turn, has influenced Miami’s new development stock, which now caters to those seeking large spaces and a luxury lifestyle set in a more intimate living environment. The Miami market tested its first luxury boutique-style condo property with the arrival of the Apogee South Beach. A 22-story, 67-unit luxury condo building situated in the exclusive South of Fifth neighborhood, the Apogee South Beach first arrived in 2007. Its developer, Related Group, offered large floor plans—between 3,150 and 4,225 square feet—with massive private terraces of 1,500 to 2,000 square feet, at prices averaging from $1,100 to $1,200 per square foot. The Apogee redefined luxury condo living, differing from the tower-like buildings that previously prevailed, including the Continuum, the Murano at Portofino and the Setai.

—Jay Parker, CEO of Douglas Elliman’s South Florida office  

—Jay Parker, CEO of Douglas Elliman’s South Florida office

Following the success of the Apogee South Beach, a new era of luxury was ushered into the Miami market with boutique properties including Faena House, the Edition, One Ocean, Glass Miami Beach, Eighty Seven Park, the Surf Club Four Seasons Residences and Monad Terrace following suit. Prior to 2013, few luxury properties sold above $15 million. However, at Faena House, the penthouse—an eight-bedroom, 12,516 square foot unit featuring 9,900 square feet of exterior space and a 70- foot long rooftop pool—sold in September 2015 at $60 million to Ken Griffen, the CEO of Citadel. It marked a record for condominium sales, beating a $27.5 million sale at the Continuum and a combined penthouse at the Miami Beach Edition for $34 million. Faena House, an ultra-luxury development with hotel-style amenities, is located on Collins Avenue and 32nd Street and is situated directly on the beach. Buyers have paid an average of $3,130 per square foot, or about $8 to $12 million per unit. The last sponsor unit was sold in May of this year and the building had a total sellout of $407 million. Other financial titans— including Apollo Global Management founder Leon Black, Goldman Sachs CEO & Chairman Lloyd Blankfein, and Scoggin Capital Management co-founder Craig Effron—are also among the building’s new residents. In these new premium luxury boutique-style properties with cutting-edge modern architecture, developers are simultaneously offering five-star amenities and services, and the privacy and exclusivity that wealthy New York City buyers covet. 

Some notable trends prevail among New York buyers making a second-home purchase in South Florida, as many buyers are embracing a downtown urban experience while searching for a luxury boutique condo lifestyle. They favor locations they can walk to—including shopping, restaurants, and cultural attractions – while still being in very close proximity to the beach. Developers are seeing many prospective New York buyers bypass a purchase in a country club-style gated community for a downtown location. In turn, some developers have begun offering a new boutique condo product in which the purchaser can replicate an expansive single-family home residence; this would include a private full-floor home with the family’s own entry, as located inside a full service building with all of the amenities of a luxury high rise like a full-time doorman and concierge, fitness facilities and indoor valet parking. This urbanization trend is having a major impact on the renaissance taking place in Downtown Boca Raton. Group P6 is developing 327 Royal Palm, a 25-unit luxury boutique condo property, currently under construction with delivery expected in the second quarter of 2017. Units average 3,800 square feet with a price tag of about $2 million. “About one-third of our buyers are coming from the New York City area, looking to purchase a second home and spend up to six months out of the year living in Boca Raton,” explained the Co-Operating Manager of Group P6, Ignacio Diaz. “Approximately 50 percent of the buyers are relocating from large homes in the area and want the convenience of a condo lifestyle in an urban-type setting in short walking distance to all.” 

The Mandarin Hotel & Residences, with 160 luxury condominium units, is also coming to Downtown Boca Raton, with delivery expected in 2018. Former New York City residents, Judith and David, purchased a 5,000-square-foot residence at 327 Royal Palm with three expansive outdoor terraces. Per Judith, “We wanted the space of a large home in the setting of a full-service luxury boutique-style condo property within a more urban type setting in close proximity to the beach, but where we could walk to shopping, fine-dining, Trader Joe’s, Mizner Park, Royal Palm Place and the local Boca Raton Museum. We wanted the convenience of a downtown lifestyle.”

New York buyers are also discovering the transformation, and great value in Fort Lauderdale, once known solely as a rowdy spring break destination. Newgard is developing The Gale, a mixed-use hotel/ luxury condominium project, consisting of 96 hotel rooms and an adjacent 12-story building with 128 luxury condominium residences. According to Newgard CEO Harvey Hernandez: “Approximately 70 percent of our buyers are domestic and about 30 percent are from the New York City area. These are largely second-homebuyers who are all looking for a turnkey luxury full-service building with all amenities.” Buyers are affluent and in their late 50s and 60s, and they view Fort Lauderdale as a value opportunity. They want to get in before prices rise. Other new luxury condo projects in the immediate vicinity include Auberge Beach Residences & Spa, where units start at $1.5 million. A 5,800 square foot residence with 3,700 square feet of private outdoor space recently sold for $8.9 million. A Four Seasons Hotel & Private Residences is also in development with a completion date expected in 2018. A two-bedroom, 2,000 square foot residence is priced at $3.5 million or $1,750 per square foot. 

Further up the South Florida coast, Palm Beach and West Palm Beach are also seeing new boutique luxury condo properties coming to market. New York and San Francisco-based developer DDG is behind 3550 South Ocean, a six-story, 30-unit condo project with units ranging from 2,800 to 3,400 square feet. The building will include a fitness center, a swimming pool (facing the Atlantic Ocean) and private beach access with units priced between $2.3 million and $5.0 million. The Bristol of West Palm Beach, a 25-story luxury condo building with 69 units, will have units priced between $5 million and $22 million. Both developments are currently under construction. 3550 South Ocean will be the first luxury building built on Palm Beach’s barrier island in over a decade.

Faena House is a 19-story, 47-unit luxury condo with one to five-bedroom units, ranging in size from 1,307 to 4,730 square feet; each residence features a signature wraparound terrace. Buyers have paid an average price of $3,130 per square foot or about $8 to $12 million per unit. (Rendering: Courtesy of Faena Group)  

Faena House is a 19-story, 47-unit luxury condo with one to five-bedroom units, ranging in size from 1,307 to 4,730 square feet; each residence features a signature wraparound terrace. Buyers have paid an average price of $3,130 per square foot or about $8 to $12 million per unit. (Rendering: Courtesy of Faena Group)

Miami Heat

With ultra-luxury Manhattan real estate set to reach as high as $9,000 per square foot for new Central Park South towers, it’s no wonder that South Florida prices seem like a downright bargain for the wealthy New Yorkers. The emergence of luxury boutique buildings and vibrant, walkable downtown areas, not to mention the glossy international reputation bestowed by Art Basel, have solidified that area’s appeal. 

While overall appeal and real estate values are cyclical for many cities, South Florida has long been established as a preferred destination because of its gorgeous scenery, warm weather and coveted beaches. Now with its sophisticated urban lifestyle, international draw and upscale amenities, New Yorkers can flock to Miami without feeling they’ve left anything behind. 

Aerial view of Faena House whose penthouse (an eight-bedroom, 12,516-square-foot unit featuring 9,900 square feet of exterior space and a 70-foot long rooftop pool) recently traded at $60 million.(Photo: Courtesy of The Faena Group)  

Aerial view of Faena House whose penthouse (an eight-bedroom, 12,516-square-foot unit featuring 9,900 square feet of exterior space and a 70-foot long rooftop pool) recently traded at $60 million.(Photo: Courtesy of The Faena Group)

North Beach-Surfside-Bal Harbour-Bay Harbor

Due to the lack of land and oceanfront sites remaining in prime South Beach, there has been a wave of new development taking place in the North Beach, Surfside, Bal Harbour and Bay Harbor enclaves. 

Bay Harbor was rezoned two years ago and is experiencing a major renaissance, capitalizing on its location within walking distance to the beach, restaurants and shopping in neighboring Bal Harbour; the latter is home to Bal Harbour Shoppes, one of the premier luxury high-end retail shopping centers in the country. 

(TOP) The Surf Club Four Seasons Residences include 150 luxury condo residences with one-to-six bedroom units, plus 13 penthouses, ranging in price from $3.8 million to $40 million; design by Richard Meier (Rendering: Courtesy of Fort Capital)    (BOTTOM)  Bijou Bay Harbor is a nine-story, 41-unit, full-service boutique luxury condo, situated on the Intracoastal Waterway (adjacent to Bal Harbour).(Rendering: Courtesy of U.S. Affiliate of Acierto Inmobiliario-Juan Carlos Gonzalez)

(TOP) The Surf Club Four Seasons Residences include 150 luxury condo residences with one-to-six bedroom units, plus 13 penthouses, ranging in price from $3.8 million to $40 million; design by Richard Meier (Rendering: Courtesy of Fort Capital)

(BOTTOM) Bijou Bay Harbor is a nine-story, 41-unit, full-service boutique luxury condo, situated on the Intracoastal Waterway (adjacent to
Bal Harbour).(Rendering: Courtesy of U.S. Affiliate of Acierto Inmobiliario-Juan Carlos Gonzalez)

The Real Deal: Ranking Brooklyn's Priciest Condo Developments

My Takeaway: Buyers who want new development and more bang for their buck should consider prime Brooklyn neighborhoods, where you can now find properties with all the high-end amenities of Manhattan, but much better per-square-foot prices. Read my article on the Ryans for more on a couple who choose to buy in Brooklyn instead of Manhattan.

A number of high-profile new luxury condo developments have debuted in Brooklyn this year, many with a Manhattan-style design and high-quality aesthetic, including 51 Jay Street in DUMBO as well as the Boerum in Boerum Hill/Downtown Brooklyn. As The Real Deal reports, based on the sales activity of these new developments, luxury, full-amenity condo properties averaging $1,300 to $1,500 per square foot are in great demand here. Given the entry price point for new development in Manhattan ($2,000+ per square foot), the Brooklyn buyer pool is now deep with an increasing number of Manhattanites, West Coast transplants and foreign buyers seeking the borough out as their first choice. Prime Brooklyn—which includes Williamsburg, DUMBO, Brooklyn Heights, Boerum Hill and Cobble Hill—is seeing the majority of this luxury new product to date. These neighborhoods now represent a real alternative to Manhattan.

Read the full story in The Real Deal.

New York Times: 2015 is the “Year of the Condo” in New York City

My Takeaway: The NYC brokerage community continues to see strong demand from domestic high-net-worth individuals, as well as from foreign buyers, for Manhattan luxury condos. Given the competition among new projects, buyers in both the middle luxury price range and at the top end of the market can expect to see a higher level of design and quality in this next wave of new condo product. 

For those who thought the residential building boom of the last few years moved at a dizzying pace, things are about to get even quicker. As The New York Times reported earlier this year, approximately 6,500 units—across more than 100 buildings—are expected to open for sales in Manhattan in 2015. That’s up from just 2,500 units in 59 buildings last year. Ground-up construction will comprise about 60% of all new development projects. Approximately half of the new units (an estimated 3,300) will be in the so-called “middle luxury” segment—which has been neglected so far, but has proven to be the market’s “sweet spot,” representing the majority of the market demand. Two-bedrooms in this price range were selling for about $2.5 million in the third quarter of 2014, based on contracts signed. Prices at these new developments will range between $1,700 and $2,300 per square foot. Conversely, ultra-luxury units, priced at $5,000 per square foot and above, represent less than 10% of the new development inventory coming to market in 2015. 

Read the full story in The New York Times.

NYC's Lower Manhattan: The New Downtown

Buying a property in New York City can be a daunting experience, not the least of which because it’s a large city with many wonderful neighborhoods to choose from. If you’re unfamiliar with all of these neighborhoods (or even if you know NYC well) it can be challenging to assess the pros and cons, especially if you live out of town. This is why I want to share what I consider to be one of the most dynamic neighborhoods in New York City, and unquestionably one of the best for an investment right now: Lower Manhattan. 

Lower Manhattan is actually made up of several neighborhoods, straddling the southern portion of trendy Tribeca and encompassing the world-famous Financial District (“FiDi.”) Its borders are the iconic Brooklyn Bridge to the north, the tip of Manhattan to the south, South Street Seaport to the east, and Battery Park City to the west. Following the devastation that occurred in this area on September 11, 2001, the city’s powers-that-be made rebuilding and rebranding Lower Manhattan one of their highest priorities. The ensuing renaissance has resulted in a luxury residential development boom, making this area of Manhattan both the newest “it” neighborhood to live in and a great value proposition over the long term. 

I chose to move to Lower Manhattan myself back in July 2003, after residing in a post-war co-op building on the venerable Upper East Side for 15 years. I discovered Lower Manhattan’s North Battery Park City neighborhood, bordering Tribeca and just north of FiDi, by chance, while previewing the Solaire, a new, amenity-rich modern luxury high-rise overlooking the Hudson River—and also NYC’s first residential tower built to environmentally friendly standards. I was mesmerized by the water views and sun-drenched apartments. With a short walk to the Chambers Street subway station I could be at my office in Midtown after just three express stops to Times Square on the 2/3 train. I was in search of a change at the time and my gut was telling me: This is your new home and neighborhood!

I. The New Downtown: A Neighborhood Renaissance



I noticed big changes starting to occur shortly thereafter, including the completion of Hudson River Park, which transformed the formerly barren waterfront here into one of the city’s best open-air spaces. But the real jumpstart to the renaissance began when Goldman Sachs broke ground on the construction of its new headquarters at 200 West Street in 2005 and moved in five years later. Goldman then purchased the adjacent Embassy Suites hotel building and began re-tenanting the ground-floor retail space to include upscale eateries, shops and restaurants. They also replaced the existing hotel with a more upscale boutique Conrad Hotel brand. 

A year prior to Goldman’s move, Whole Foods opened one of its largest New York City markets at Greenwich Street (between Warren and Murray), along with a Bed, Bath & Beyond and a Barnes & Nobles. Other additions included Soul Cycle’s signature NYC-Tribeca studio (at Warren and West), a Palm restaurant and later, the Asphalt Green pool/athletic complex (at Murray Street and North End Avenue). 

New luxury high-rise condo buildings, including 200 Chambers Street and 101 Warren Street, changed the residential landscape. New York by Gehry, the striking, curving tower also known as 8 Spruce Street, was a real test for the FiDi neighborhood: a 76-story, 904-unit luxury rental, located just south of the entrance to the Brooklyn Bridge and east of Park Row. It leased very well (current asking rents are at approximately $97/square foot per annum; averaging about $4,500/month for a one-bedroom and $7,500/month for a two-bedroom).

Then the real wow factor came when media behemoth Condé Nast reached an agreement in August 2010 to occupy 1.1 million square feet in the 104-story One World Trade Center. The company executed a $2 billion, 25-year lease in May 2011, with plans in place to relocate 2,300 employees to its new headquarters from Times Square.

In total, more than $30 billion in public and private investment has poured into Lower Manhattan over the last decade, for the reconstruction of the 16-acre World Trade Center site, the Fulton Center transportation hub, and other new hotels and residential buildings. Ten years ago, Lower Manhattan was known as a place where people came to work, but left in the evening. Today there is new energy on the streets day and night, 24-7.

II. The New Downtown: Retail Renaissance

This new energy is due in large part to Brookfield’s decision to re-brand the former World Financial Center complex as Brookfield Place, a strategy that was necessary in order to attract a new office tenant mix, given the contraction in the financial sector following the 2008-2010 recession.

Brookfield Place has become the de facto “town center” for Lower Manhattan, serving the immediate neighborhoods of Tribeca, FiDi and Battery Park City with some of the finest shopping and eating establishments in the entire city. 

The 10-story, glass-vaulted Winter Garden Atrium here already features such high-end fashion brands as Salvatore Ferragamo, Burberry and Omega, while Hermes, Bottega Veneta, Ermenegildo Zegna, Gucci, and Aspinal of London will join them later this year. When Saks Fifth Avenue opens its four-floor, 75,000-square-foot store to anchor the retail complex in February 2016, it will become Lower Manhattan’s first major luxury department store. Furthermore, the north pavilion, located off of Vesey Street, includes such contemporary brands as Michael Kors, J. Crew, Bonobos, Diane von Furstenberg, Theory, Paul Smith, Vince, Lululemon, Posman Books, Vilebrequin, Calypso St. Barth, and Scoop NYC. 

Le District, a 30,000-square-foot, French-inspired marketplace (a French “Eataly”), opened in April and features a 7,000-square-foot outdoor dining space on a plaza overlooking the Hudson River. Hudson Eats, a 600-seat food hall, is located on the second floor with 14 fast-casual eateries. Also new here is an Equinox Fitness Center.

Lately, Lower Manhattan has become the new destination for high-end signature restaurants such as Beaubourg, a brasserie-style restaurant at Le District, along with the elegant Le Bar bistro. Highly popular Italian eatery Parm is also newly opened at Brookfield Place, where Jose Garces’ Spanish tapas restaurant Amada, along with celebrated French chef Joël Robuchon’s L’Atelier de Joël Robuchon will debut later this year. The legendary, highly influential Japanese restaurant Nobu recently announced its departure from Tribeca for a 14,000-square-foot space in 195 Broadway’s grand lobby (to open in early 2017). Danny Meyer already has three restaurants in the North Battery Park City neighborhood (Shake Shack, Blue Smoke and North End Grill); Keith McNally and Tom Colicchio will soon open restaurants at the Beekman. Other trendy new dining spots include Racines, Little Park (at the Smyth Hotel), Warren 77, Dead Rabbit and Pier A. The owners of the Spotted Pig are considering a four-story venue at the top of Rose Associates’ new 644-unit apartment conversion at 70 Pine Street. 

Westfield World Trade Center, which will open this year, is poised to become an iconic destination for both residents and tourists with 150 stores and restaurants in the Oculus of the World Trade Center transportation hub. This 365,000-square-foot complex will include Hugo Boss, Michael Kors, Banana Republic and Desigual. In addition, the newly redeveloped South Street Seaport, including the multi-level 365,000-square-foot Pier 17 retail, dining and entertainment complex and the eight-screen iPic movie theater in the Fulton Market Building, will serve as yet another a retail magnet for Lower Manhattan, anchoring the northeastern border of the neighborhood. 

Joining Brookfield, Westfield and the Seaport, more new retail shops are set to open on Lower Broadway (including Zara, Urban Outfitters and The Gap) in total creating approximately two million square feet of new and repositioned retail space by 2017—a major milestone for Lower Manhattan.

III. The New Downtown: Commercial Renaissance

Following the recession of 2008-2010 and the collapse of the financial firms Lehman Brothers and Merrill Lynch, prospects for filling exiting Downtown office space looked grim. However, with the evolution of our innovation economy, the tide has changed. Lower Manhattan has seen a net gain of more than seven million square feet of office space since 2011 (tenants acquiring 9 million square feet have moved in from other NYC office locations and only 2 million square feet of tenants have relocated out of Downtown). The TAMI (technology, advertising, media and information technology) sector has accounted for 47% of all relocations. More than 800 TAMI tenants are now located below Chambers Street, adding to the vitality of Lower Manhattan. Many TAMI tenants are migrating to Lower Manhattan from Midtown South, in search of lower-cost office space where they have access to a robust transit network, top-notch broadband access, abundant WiFi and flexible workspace. TAMI tenants are reshaping the future of this dynamic neighborhood, once dominated by Wall Street brokerage firms.

Co-working company WeWork opened its third Lower Manhattan location at 85 Broad Street early this year, signing the second quarter’s largest deal in Lower Manhattan and the third largest deal citywide. With a lease of 234,879 square feet at 85 Broad Street, WeWork now occupies more than 744,000 square feet of commercial office space and joins the ranks of Lower Manhattan’s largest tenants. 

Prior to the recession, average absorption was approximately 3 to 4 million square feet of office space per year. In 2014, approximately 6.3 million square feet was leased, comprising 12 deals over 100,000 square feet (50% were relocations). Approximately 3 million square feet alone was leased at Brookfield Place, including 700,000 square feet to Time Inc., 400,000 square feet to Hudson Bay (which owns Saks Fifth Avenue), and 346,000 square feet to the Bank of New York. Media Math, a global digital marketing company, executed a lease for 106,000 square feet at 4 World Trade Center and will relocate nearly 600 employees from three separate Midtown locations. Macmillan Science & Education leased 176,000 square feet at 1 New York Plaza, relocating from Midtown South and two other non-New York City locations. High Five Games executed a lease for 87,663 square feet in One World Trade Center, also relocating from Midtown South. Other notable new non-financial tenants include Revlon’s lease of 90,200 square feet at 1 New York Plaza and Hugo Boss’s 73,690-square-foot lease at 55 Water Street, also moving from Midtown South.

The Lower Manhattan office vacancy rate of 10.4% is down 0.8% year-over-year, reflecting positive absorption. Class A rents reached $61.90/square foot in the first quarter, the highest quarter-end asking rent in the market’s history, increasing 49% since the trough of the post-recession, outpacing Midtown’s growth of 24% and on par with Midtown South’s increase. The Class B vacancy rate is 6.5%, down 2.0% year-over-year, reflecting in part the strong leasing from the TAMI sector. Class B rents in Lower Manhattan are on the rise as well, growing to $41.90/square foot, its highest level since the first quarter 2009 and up 9% year-over-year.

IV. The New Downtown: Transportation and Tourism Renaissance

Source:  NYTimes

Source: NYTimes

As for transportation to and from Lower Manhattan, the newly opened Fulton Street Center (the “Grand Central Station” of Downtown) provides streamlined access to nine subway lines. The World Trade Center transportation hub will encompass 11 subway lines and the PATH trains to New Jersey, while the East River Ferry terminals provide scenic routes up and down the Hudson River, including to Brooklyn.

All of this development has contributed to Lower Manhattan becoming a major tourist destination. In 2014, the district welcomed 12.4 million visitors—a huge 30% increase from 2013. Currently, there are approximately 15 hotels under construction with another five in the planning stages. In 2015 alone a full seven new hotels will open, growing Lower Manhattan’s current room inventory by 30%. The 189-room Four Seasons Hotel at 30 Park Place will be a particularly welcome addition to the area, the only 5-star luxury brand in FiDi.

V. The New Downtown: Residential Renaissance

Perhaps most notably, the improved infrastructure and transportation hub, wide variety of new shopping and dining options, and many office tenant relocations from Midtown and Midtown South have made Lower Manhattan a dynamic, 24-hour neighborhood, ripe for a growth spurt in residential housing.

Lower Manhattan is now home to more than 60,000 residents, three times the pre-September 11 population, who live in 31,000 residential units spread across 323 buildings. It is projected that 80,000 residents will be living south of Chambers Street by 2017. But the area’s rent and purchase prices are still competitive when compared to more established neighborhoods. It’s also one of the few neighborhoods that is still seeing rising prices, making it a solid investment opportunity. 

FiDi’s average price per square foot for condos increased 8% to $1,323/square foot in the second quarter of 2015 from $1,217/square foot in the second quarter of 2014, while the total Manhattan average price per square foot for condos increased 7% to $1,589 from $1,484 during the same period. The median sales price for FiDi’s apartments increased to $1,150,000 in the second quarter of 2015, up from $919,998 a year earlier. In 2014, FiDi’s median sales price nearly doubled (45%) to $999,000 from $505,000 around a decade earlier, while Manhattan’s median sales price hit $1,350,000 in 2014 vs. $961,000 in 2005 (a 29% increase). Hence, over a 10-year period, FiDi outpaced the increase in the median sales price for all of Manhattan. FiDi’s median rent has soared from $2,200 in 2005 to $3,200 in 2014, an increase of nearly 46%. Average rentals for doorman buildings in FiDi currently range from approximately $3,500 to $3,900/month for one-bedrooms and $5,500 to $6,000 for two-bedrooms.

“Buyers and renters have been drawn to FiDi seeking out greater affordability and the newness of an up-and-coming area,” says Jonathan Miller, President of Miller Samuel.

The changes taking place have attracted a diverse group of new buyers who would have never considered going south of Chambers Street a decade ago. For families priced out of trendier Downtown neighborhoods like Tribeca, SoHo and the West Village just to the north, the area offers more space at a favorable price. It is also anticipated that more foreign buyers will show interest in Lower Manhattan as the new inventory of luxury towers, neighborhood amenities, and more high-end shops and restaurants continue to open.

This all explains why in the first quarter of 2015, construction continued on more than 2,300 new residential units in 12 properties (about 865 rental units and 1,138 condos), in addition to more than 2,400 units spread across 16 properties currently in the planning stages, of which approximately 800 will be condos. Prominent new developments opening over the course of the next year include:

  • 70 Pine Street, a 66-story, 644-unit luxury rental conversion in the former AIG headquarters and attached to a 132-room extended stay hotel. Opening late 2015. 
  •  30 Park Place-Four Season Residences, a 67-story, 157-unit luxury condo new construction with 189 hotel rooms, designed by architect Robert M. Stern. Opening 2016, prices from $3.4 million to $29.5 million. 
  • 50 West Street, a 64-story, 191-unit luxury condo new construction by architect Helmut Jahn. Opening 2016, prices from $1.9 million to $22.6 million.
  • 5 Beekman Street (The Beekman Residences), a 51-story, 68-unit luxury new condo construction attached to a 287-room Thompson Hotel. Opening 2016, prices from $2.95 million to $4.35 million.
  • 100 Barclay Street (Ralph Walker Tower), a 31-story, 166-unit luxury condo conversion. Opening 2016, prices from $3.2 million to $11.5 million.

Further down the road, high-profile luxury condo projects on the horizon include:

  • 111 Murray Street, a 62-story, 154-unit new construction scheduled to open in 2018, prices from $2.0 million to $17.5 million.
  • 125 Greenwich Street, a 71-story, 128-unit new construction scheduled to open in 2018.
  • 151 Maiden Lane (One Seaport Tower), a 60-story, 74-unit new construction, scheduled to open 2017.

The rapid sales activity of the new condo developments noted above, with prices ranging on average from $2,200 to $3,300 per square foot, is a testament to the validation of the neighborhood. This is a very different environment from a decade ago when high-profile condo projects like 15 Broad Street and 20 Pine arrived on the market, unsure of whether they would sell (they did).

The overwhelming conclusion is that anyone in the market for a New York City residence or investment property should seriously consider Lower Manhattan as a preferred neighborhood. I walk the streets here every day and have witnessed its growth and renaissance first-hand. I also attend real estate industry conferences, access industry market stats, and have ongoing conversations with various real estate players on a regular basis. Everyone is talking about what a great long-term investment this area is. 

There is no doubt about it—Lower Manhattan is the future of NYC.