As we know all too well here at New Construction Manhattan, our island’s real estate market is going strong. Improving yet again on last year’s numbers, Manhattan sales when measured by price per square foot (PPSF) have increased by 8% over the past year, with only a 4% increase when compared to the second quarter of 2011. However, that statistic doesn’t nearly cover the fluctuations at the neighborhood level, a trait that truly gives us insight into the inner workings of the Manhattan luxury real estate market, especially in regards to new developments.
At the local level, the findings in terms of PPSF are relatively consistent with common sense: neighborhoods such as Greenwich Village (including the West Village) and SoHo still vie for the title of most expensive neighborhood. A limited supply of housing coupled with location and the inability of developers to build new residences all conspire to create some whopping PPSF figures: Greenwich Village broke $2,000 per square foot, a feat seen almost nowhere outside of Manhattan. Again, this speaks volumes about the difficulties in developing historic areas, but also the desire on the part of the buyer to seek out these types of homes.
In terms of developing neighborhoods, the archetype that is Chelsea is reigning supreme. Nearly tied with more established areas such as the Upper East and West Sides, Chelsea has broken $1,400 per square foot, and this is a part of Manhattan with continued growth in terms of new development, particularly around the High Line. Yet this segment of the market varies wildly, as can be seen by comparing Chelsea to other parts of the island, particularly Midtown West (which includes Clinton) and Harlem.
So why is Chelsea more expensive than either Midtown West or Harlem, particularly when, by some estimates, more luxury development has taken place in the latter than the former? Historically, Chelsea was the first among these to become trendy, a northern extension of the success of the Meatpacking District’s revitalization. The High Line, a world-class art scene, and easy access to the rest of New York City also play a part, although the High Line’s relatively recent opening is offset by its indisputable influence as a magnet for growth. In essence, Chelsea has had more time to soar to prices seen in more established areas. Further, the growth in Midtown West and Harlem occurred right around the time of the economic downturn, rapidly increasing vacancy rates and creating oversupply in general. This is beginning to change, but Harlem still ranks the lowest of all neighborhoods in terms of median PPSF at only around $600. At $1,000 per square foot, Midtown West is similar to Murray Hill and the Lower East Side.
It is important to remember that these figures emphasize new development, thus slightly skewing the numbers overall. In areas such as Greenwich Village, new development is scarce and far more desired than in areas such as Midtown West, which is filled with newly-finished condos. However, the trends are reflective of those throughout Manhattan, new development or not, providing us with interesting insight into to continued change of what is one of the world’s most fascinating real estate markets.