A Changing Upper East Side

The Real DealAugust 01, 2013
The Upper East Side used to be called the Silk Stocking District. Today, the ritzy nickname isn’t heard very often, but the neighborhood is still one of New York City’s most affluent.

Upper East Siders — there are about 60,000 of them — earn on average about $100,000 a year, and they are protective of their high-priced turf. Many are up in arms over a proposal to open a waste transfer station at East 91st Street and FDR Drive, where one operated for six decades before closing in 1999.

The fiercest foes are fighting the plan in court. Others are threatening to lie down in front of the bulldozers when they start to roll. Still others are looking to put their homes on the market — and a few already have.

Regardless of the legal battle and the threats, the station will almost surely be built. Judges have signed off on it; so has the federal government. Right now, construction is scheduled to start later this summer, and the finish date is sometime in 2015.
Already underway is work on the Second Avenue subway, a nearly $4.5 billion project that will ease crowding on the Lexington Avenue line and improve connections to Midtown and Downtown. The digging is almost done and the first phase — more than two miles of new tunnels from 96th to 63rd streets — should be wrapped up in 2016, according to transit officials.
The subway work and the waste station are issues du jour, but the UES is still a neighborhood that New Yorkers are jockeying to move into, of course. And the numbers prove its popularity. Different reports show slightly different specifics, but the takeaway is the same: The median price for resales — condos and co-ops — is up, demand for new development units is strong, and inventory is tight, just like it is in the rest of the city.

With all that’s happening, we decided it was time to take a close-up look at the UES through the eyes of our experts. Here’s their take on the neighborhood.

Tom Postilio
Founding Member, CORE

What impact will the waste transfer station have on the residential market?

This is a similar situation to the Urban Glass House in the West Soho area on Spring Street. The city put plans in place to put up a parking garage for sanitation trucks, and everybody panicked. You couldn’t sell apartments across the street at the Urban Glass House, and the real estate values plummeted. It was fear of the unknown. Once the city put out the renderings of what it was going to look like, people could start to deal with it. That’s my prediction as to what is going to happen here in this one area of the Upper East Side. People panic over fear of the unknown, but the dust will settle. And if the values are temporarily being hurt, they will come back.

There are several new-construction residential projects on the market or launching soon, including Harry Macklowe’s 737 Park Avenue, the Marquand at 11 East 68th Street, and Extell Development’s Carlton House at 61st Street and Madison Avenue. Which do you think will have the most impact, and why?

They are all so different. I think that the collective influence will reshape how we think of the Upper East Side as a co-op-driven market. These kinds of projects are presenting opportunities for people who may have plenty of resources and lots of money, but they may not pass muster with a co-op board. That’s the big impact.

Are there any other upcoming projects that you think are going to have an impact, and why?

I’m the director of sales for One Museum Mile, at 1280 Fifth Avenue at 109th Street, and [there’s] 1212 Fifth at 102nd Street. Both of these projects have shattered the myth that the Upper East Side stops at 96th Street. We are seeing that particularly with international buyers, because they don’t have that in the back of their mind. It’s more the local buyer who thinks that [the UES] stops at 90th or 96th Street.

What’s the inventory of available homes?

It hasn’t been this low since they started keeping records in New York City. It’s great to see that there are all these new projects happening and inventory is coming to the Upper East Side. The Philip House is fabulous, 200 East 79th, 530 Park, 150 East 72nd. Product is low, but there is a nice assortment of new development that has been happening and is continuing to happen.

How long are properties staying on the market, and how does that compare to a year ago, two years ago and during the boom?

The averages have dropped. If the average apartment was listed for 120 days, maybe that’s now down to 90 to 100 days. It’s definitely better than a year ago, it’s a lot better than two years ago, and it’s almost comparable to the boom in terms of: a nice product priced well in a good location is going to sell immediately.

What are the biggest challenges to selling property on the Upper East Side?

Because of so much construction, the area along where they are putting in the Second Avenue subway has been a little bit challenged. Savvy shoppers understand that once it is finally all cleared up and we get that desperately needed subway, those values are going to increase. We did a deal at Second Avenue and 69th Street and [the buyers] got a really nice deal. I explained to them this is a challenging spot because of what is going on. Not everybody can see past the mess, but when all is said and done, this is going to add value to your property because you practically have the subway right outside your door.

Who are the most active buyers?

In general terms, there are a lot of families that are expanding.

Which areas of the Upper East Side — Lenox Hill, Carnegie Hill, Yorkville, for example — are performing best? Which are the weakest?

Anywhere that you have pockets of new developments, it’s like bees opening up a hive. That’s where the people will go because it’s fresh new product. If anything is maybe moving any slower, it may be the Sutton Place area, just because it is a little bit removed and off the beaten path.

Daniel Farris
Associate Broker, Brown Harris Stevens

How is overall residential sales volume?

The volume has changed dramatically since a year ago and two years ago. The number of apartments available has dropped dramatically and there are so many buyers actively looking. There were something like 1,257 apartments available on the East Side in June, versus 1,344 in May and 1,780 in June 2012. You send your buyer some listings and if they wait a week, most of those listings have gone into contract.

What’s going on with sales and rental prices?

Buyers are so savvy and they know when an apartment is priced correctly. I’m seeing apartments going at asking or, if there are multiple bidders, over asking. A year or two ago, you could negotiate. It’s all a cycle, but those days are over and out for now.

Which price ranges and housing types are struggling?

One-bedroom apartments have slowed in the past month, particularly in co-ops that only permit 50 percent financing.

What impact will the waste transfer station have on the market?

It will definitely impact that area. Two of my buyers passed on great apartments within range of the transfer station simply due to the uncertainty surrounding it in the future and for possible resale.

What’s the inventory of available homes?

Quite frankly, pathetic. There is so little available in so many price points. You can show maybe one or two good listings and that’s it. A few years ago, I spent three days showing apartments to one of my buyers and she bought the last apartment I showed her on a three-day run. Can you imagine doing that today?

How long are properties staying on the market?

A few days or up to a few weeks if the property is priced correctly. Misprice it and the apartment lingers. Buyers still will not put in an offer on an overpriced property.

What are the most surprising trends you’re seeing?

Besides lack of inventory, it has to be the willingness of buyers to look at new condominiums. But the prices of those apartments sometimes boggle the mind. I’m also seeing families who bought Downtown a few years ago coming back Uptown to be closer to some of the schools and activities for their children.

What are the biggest challenges to selling property on the Upper East Side?

You have to know your inventory cold. Get a new listing to your buyer before they pick it up on StreetEasy and know the nuances of the building and what it takes to get them past the [building’s] board. You had better clearly understand the purchaser’s financial situation and know how to explain it to the board.

Eloise Johnson
Executive Vice President, Halstead

How is overall residential sales volume?

Compared to a year ago, it is quite healthy and it is much better than two years ago. Comparing today’s market to the boom, it is difficult to draw parallels, as it was two totally different markets — there was much more inventory during the boom.

What’s going on with residential sales and rental prices?

Prices are on the ascent, with sales in certain categories being very robust. Rental prices are more than holding their own. We are fast approaching pricing during the boom. And in certain categories such as three- or four-bedrooms with views — those prices are exceeding the boom years.

Which price ranges and housing types are performing best?

I am seeing large condos on high floors with fabulous views and perfect, move-in condition move quickly. Townhouses are also experiencing a nice comeback.

Which are struggling?

Large apartments on very low floors are not selling quickly. One-bedrooms on lower floors are also lagging.

What impact will the waste transfer station have on the market?

As expected, some prospective purchasers are reluctant to [buy] in the area. If the station does open, it will have some impact on prices. However, sometimes the fear of the unknown is worse than the reality. The Second Avenue subway has also been a source of concern for prospective purchasers. Now that the subway is near completion and the real estate market is stronger, many consider the new subway a plus.

What are the most surprising trends you’re seeing?

For the past 10 or 15 years, properties in the East 50s, Beekman Place and Sutton Place have sold at lower prices than comparable properties on the Upper East Side. We are seeing an increased interest in this area. We believe our customers are interested in taking advantage of the lower prices. A customer of ours is a family that is purchasing in Sutton Place. They believe there will be long-term value in the area due to the resurgence in Midtown East. This family believes — and we agree — that eventually the extension of the Second Avenue Subway will contribute to an easier commute to Downtown and higher prices of residential properties.

What are the biggest challenges to selling property on the Upper East Side?

Often, our first job is to help buyers understand how strong the Manhattan market is today. Many still think there is a real estate recession. Another challenge is that co-op and condo boards are increasing their standards for purchasing, making it more difficult for some prospective purchasers to buy the property of their dreams. [The tougher standards are the consequence of many owners falling behind on their monthly common charges during the recession.] Finally, rising prices and lower inventory have combined to make the Upper East Side a very fast-paced selling environment. Agents and buyers need to be prepared to act quickly.

Who are the most active buyers?

We deal mostly with young professionals, young families and empty-nesters. During the recession, there were fewer young professionals because it was difficult for them to find jobs, or if they did have jobs, it was difficult for them to find better-paying jobs so they could buy larger apartments. We saw some young families use the opportunity to trade up. The empty-nesters who no longer wanted a large house in the suburbs used the opportunity to purchase in Manhattan. Lastly, during the recession, we were pleased that purchasers from other countries were buying. The foreign buyers are still here. However, people who live and work in New York are coming back in big numbers.

Which areas of the Upper East Side are performing best? Which are struggling?

Lenox Hill has always been very much in demand, and therefore expensive. We believe that this area will continue to outperform other areas of the city. Since there is an abundance of excellent private and public schools, families are increasingly interested in purchasing properties in Carnegie Hill. There have been many new residential buildings, plus new stores and restaurants. Since prices in Yorkville, east of Second Avenue, have been lower than Lenox Hill or Carnegie Hill, some buyers are interested in taking advantage of this opportunity.

Kathy Slattery
Associate Real Estate Broker, Corcoran

Which upcoming projects are going to have a big impact on the UES market?

432 Park is going to be an iconic building, both on the New York skyline and in the apartments. It has 10-foot square windows, has soaring ceilings, is beautifully designed and is in a great location.

How long are properties staying on the market?

In the under–$3 million category, apartments are on the market up to two or three months. Above $6 million, depending on the location and price/value perception, it can be a year.

What are the most surprising trends you’re seeing in the Upper East Side residential market?

All of the new development in the East 70s, Manhattan’s “Gold Coast.”

Who are the most active buyers right now and how does that differ from the past?

I see more retiring baby boomers moving into the city and sizing down in the city, which may account for the low supply of smaller apartments and the higher supply of larger apartments. Fortunately, I am also seeing more big families with children looking for space on the UES, because that is where their children are in school.

Which areas of the Upper East Side are performing best?

West of Third Avenue is the strongest market in all of these neighborhoods.

Peter Culliney
Director of Research and Analytics, CityRealty

How is residential sales volume?

About on par and maybe slightly ahead of last year, which had the highest volume since the crash — 2008 was the prior peak, with $5.5 billion in co-op and condo transactions, and 2012 is the peak since with $5.2 billion. Since the second half of the year is traditionally stronger than the first half, provided the current dearth of inventory does not keep too many people out of the market, our feeling is that we will at least equal last year’s overall volume, but it will be a hard push to beat the 2008 record.

Where are sales and rental prices?

Overall average sales prices [for co-ops and condos] are off slightly this year from last year’s feeding frenzy, dropping to $1.4 million from $1.7 million. There is clearly a lot of demand and not nearly enough supply. This is keeping pricing somewhat firm but also causing hesitancy for both buyers and sellers.

Which price ranges and housing types are performing best? Which are struggling?

There seems to be a rising demand for larger units and more bedrooms. The average square-foot pricing for condo units with six or more bedrooms — driven by demand — is more than 50 percent above the 2008 peak. Studios, on the other hand, are almost 8 percent below peak, while two-bedroom apartments are almost 2.5 percent below peak. Smaller co-ops — studios to two-bedrooms — are off by 10 percent to 15 percent.

What’s the inventory of available homes?

We are seeing less than 50 percent of the listings we have recorded for 2009.

How long are properties on the market?

Of the thousands of properties that have come to the market in the UES over the past year, there are only 56 that have been on the market more than one year, and only 160 that have been on the market for more than six months.

Roy Silber
Associate Broker, Citi Habitats

What’s going on with residential sales and rental prices?

Prices for rentals are up 5 percent to 7 percent from this time last year. I am even seeing clients outbidding each other for rental apartments, and that’s something I haven’t experienced in recent years.

Which price ranges and housing types are performing best?

The most intense demand is for two-bedroom homes with two full baths. Apartments with two full bathrooms can carry up to a 15 percent premium over those with just one and a half.

Of 737 Park Avenue, the Marquand and Carlton House, which do you think will have the most impact?

I predict that all three are going to trade at price points that will put them among the most expensive buildings in the neighborhood. It’s extremely rare to find completely gut-renovated buildings of this magnitude in well-established areas. Typically, home seekers would have to go east to find new construction.

What are the biggest challenges of selling property on the Upper East Side?

The challenge is not to overprice the home. In this market, everything and anything will sell if it’s not overpriced.