Gregory J. Heym
Executive Vice President, Chief Economist
By JASON SHEFTELL
Modern luxury is space, size and uniqueness in this $25 million One York penthouse, which has seen more bidding action than apartments under $2 million in the same building.
Tell Jay-Z that luxury is dead and he'll show you the wood paneling in his Gulf-stream V. Tell the buyers of a luxury condo backing onto the rail tracks in Long Island City that luxury is dead and they'll swear by their double-paned silent windows it's alive and kicking.
While luxury is a million different things to a million different people, for the past 25 years, brand marketers have pummeled the word into a sad state where its meaning is as confusing to consumers as quantum physics.
Volvo claims it's a luxury vehicle. So does Cadillac. Lexus tried to redefine the word in the 1980s but diluted it even more.
Ralph Lauren was luxury, then he licensed his label to mass manufacturers. Now, according to fashion insiders, he's buying back his name in certain product categories to better control his brand image.
The concept of luxury has become confusing, but it's far from dead.
When it comes to New York-area housing, luxury is applied by architects, home hunters and real estate agents to describe anything from a wall-to-wall carpeted two-bedroom condo in Asbury Park, N.J., to four-bedroom apartments overlooking Central Park with Corinthian marble entryways, bathroom bidets, 14-foot ceilings and Venetian blown-glass kitchen tile.
"Luxury is a misused term because the market tries to apply it to everything," says Dr. Jim Taylor, vice chairman of the Harrison Group and co-author of "The Annual Survey of Affluence and Wealth in America," produced by American Express Publishing and Harrison Group. The 2008 version of the most definitive survey undertaken today on the habits of America's wealthiest individuals is being released at American Express' Luxury Summit conference on Tuesday. The data even cover those with $20 million or more in individual assets. "It serves marketers' interest to say their own product is luxurious," said Taylor.
So what is luxury? According to Taylor, whose clients include Gucci, Four Seasons Hotel Group, Microsoft, Louis Vuitton and Coca-Cola, luxury has to do with the sublime.
"The first thing you need to understand is that luxury is a characteristic of products and services, not people," says Taylor. "In every category - from automobiles to French dueling pistols to chicken soup - there is a point where features, artistry and quality separate the sublime from the excellent. The person buying the product has built enough knowledge in the category to understand where the sublime exists."
Luxury products today, those that reach sublime levels, combine quality, craftsmanship and product design. Taylor illustrates his point with the example of shotguns. "A shotgun with the same type of ability to hit a bird can cost you $75,000 at Harrods, for an antique with 200-year-old brass, or $75 at Wal-Mart for a new model," he says. "They both work exactly the same. Never before has the spread for luxury been so astounding."
You could make the same point about New York City's new-construction condominiums. In Flushing, SkyView Parc from Muss Development offers the finest finishes available in that area. There's a 41/2-half-acre private outdoor park on the fifth floor of the development with a pool, tennis courts and a children's playground available for residents only. Apartments sell for $600 per square foot.
Less than 20 miles away, 15 Central Park West, New York's most expensive new condo project, has apartments selling at $6,000-plus per square foot. Overlooking Central Park, the limestone building has the finest finishes available in the top end of Manhattan condos, including a circular driveway making it convenient for chauffeurs to wait for clients.
Buyers in both housing markets - Flushing and Manhattan - are likely to be well-educated in their areas. Both have purchased the finest products in their neighborhoods. Purchases in both can and should be considered luxurious.
Cara David of American Express points out that consumers looking for luxury products are spending more time educating themselves in their product category.
"The research and education makes the search for luxury a form of joy," says David, vice president of corporate sales and marketing for American Express. "In the beginning, apartment buyers probably couldn't even tell a great cabinet."
That explains why New York real estate agents and developers report that buyers are looking at 30 to 40 places before making an offer on a new home.
It's important to understand that Manhattan, despite popular belief, is not the center of the universe for everyone in New York City. While real estate has always been about "location, location, location," top locations exist in local submarkets. For the Asian businessman living
in Queens, Flushing is his Mecca. For the retired Russian fiancier who likes to fish, Brighton Beach might be his Tribeca.
Living in New York Is Luxury
While the rest of the country deals with a mortgage crises and the possibility of recession, New York hotels are at 99% occupancy, our stores are filled with Europeans buying goods at half the price they would in their own countries, and our bars and restaurants are packed nightly with dollars changing hands and personal connections solidified. Our service and idea economy still thrives.
"The New York economy is very lucky to be the recipient of the $33.2 billion in Wall Street bonuses that are distributed and mostly spent right here," according to Gregory Heym, chief economist for Terra Holdings, who owns Brown Harris Stevens and Halstead Property. "The number of home sales in the $10 million or above range in Manhattan has increased 318% from the first quarter of 2007 to the first quarter of 2008. We had four sales over $30 million in the first quarter of this year and only five in total for all of last year. The luxury housing market is strong."
Whether they live in Elmhurst, Flushing, Pelham Bay, Tribeca or Bedford-Stuyvesant, New Yorkers have constant access to luxury. In Corona, Queens, it might be an elevator or a doorman. In Brooklyn Heights, it might be a townhouse with a garage.
Luxury Is Quality
Last year, during the height of the real estate boom, developers were building as quickly as they could and as much as they could. Too much inventory in the new condominium market diluted the quality available to buyers. Lawsuits over exact ceiling heights and building conditions were common occurrences. The recent collapse of a crane on Manhattan's upper East Side deeply troubled apartment buyers and local residents concerned about faulty buildings and poor construction endangering their lives.
With the real estate boom decidedly slowing, low-quality developers have been weeded out as units in poorly built projects remain empty.
Marketer Michael Shvo, currently selling the W New York Downtown, a coastal property on the Riviera Maya (in Mexico) and an Amanresort in Utah, says today's buyers are more concerned than ever about who's developing the building.
"Appliances, amenities and great finishes are expected at this level of the market," says Shvo. "Today's buyers check construction quality and they check the developer's record. When you're buying something worth so many millions of dollars, the last thing you want is a lawsuit over poor building. A better fridge or wine cellar is not so luxurious anymore. Top-level construction is."
Space, in New York, Is Luxury
To Donald Trump, New York's best-known global real estate brand, it's as simple as space, and sometimes an invisible amenity.
"I'm building bigger closets now, and we're even enlarging windows so our buyers can have better views," says Trump, who started the movement toward luxury condo living in the early 1980s with Trump Tower on Fifth Ave. "In the 1980s, luxury wasn't necessarily top of the line. Today, it has to have great craftsmanship."
Still, however, Trump sees some trends come and go, and others stick around.
"You can see it shift from bronze fixtures then to nickel fixtures now," he says. "It's all cyclical. I've seen buyers duped into buying two-valve heating systems and been horrified by not being able to control the heat in different rooms. These buyers learn the hard way. We build all our buildings with five-valve systems now because there is no better way to live."
Luxury Is Unique
Luxury is being special. In artist Julian Schnabel's pink palace condo building on 11th St. in the far West Village, one apartment has a large claw-foot bathtub in the middle of a room with a wall-to-ceiling glass window at one end and a 6-foot-deep, 6-foot-tall fireplace at the other end. Said one architectural insider, "Imagine a snowy night? You can have a roaring fire in one end of the room and watch the snow fall in the other - all from a great big bathtub."
Hotelier and developer Andre Balazs also sees luxury in the details. When guests check into his Mercer Hotel on Prince Street in SoHo for three days or more, the stationery in their room has their name typed below the hotel's embossed logo. The standard bathtub in his William Beaver House condo on Wall St. is big enough for three people. Just last week, eight units in the building were sold over a 10-day period.
Developer Ian Schrager believes luxury has to be a rarity. His 40 Bond, designed by Swiss architects Herzog and de Meuron, became an immediate visual sensation with blown-glass green columns and a plaster gate mimicking local graffiti. Even the sprinklers in the building were hand-made especially for the project.
"Luxury is individual," says Schrager. "We try to build environments that are totally new, that people have not experienced or seen before. The experience must be rare. The really unique provides a luxurious experience. That's what I always strive for. It has nothing to with money or spending or ostentation. It's based on taste."
Standing in 40 Bond's dark elevators covered in Austrian smoked oak, you can smell the clean wood. The darkness, the detail in the small space with the golden floor-button-panel against the brown walls gives a sense of timelessness. As the elevators rise, you feel as if you're going to places few have seen. It's instant excitement; the thrill is luxurious.
As a result of 40 Bond, nearby apartment owners are said to have seen a 300% increase in square-foot prices. In other words, Schrager's neighbors have made money because of his architectural creation.
Sharing Local Luxury
In today's New York housing market, clearly one of the most expensive in the world, new condominiums can sell for $6,000-plus per square foot, while one-bedroom apartments two blocks away might rent for $2,200. While the renter of the two-bedroom might not have marble baths, both New York residents shop at Time Warner Center and enjoy the same neighborhood services.
Surprisingly, the high-end luxury market seems as sound as the average home-size arena.
At One York, by architect Enrique Norton, a 10,000-square-foot, $25 million penthouse sees more bidding action than a 1,000-square-foot, $2.2 million two-bedroom.
"We have seen three times the interest in our apartments priced over $10 million than of those priced under $2 million," says Stan Perelman, developer of One York.
But price aside, brokers and local real estate leaders continue to see the luxury market in different ways. For broker Adam Modlin, who represents celebrities Usher and Alex Rodriguez, the ultimate luxury is having a butler. For Rodrigo Nino, who runs one of real estate's biggest international sales conglomerates, luxury is peace of mind.
For someone on the street, it might be any apartment above the 25th floor with a view of the rest of the city. For a dog owner, it could be living in Port Imperial, a New Jersey development on the Hudson River where dispensers that clean up pet mess are located almost every 100 feet on a promenade facing the New York skyline.
For this writer, living in a walkup in a Greenwich Village tenement, luxury equals peace and quiet. Any kind of internal or external construction noise destroys my ability to do my job - which is to write.
For Louise Sunshine, who coined the term "five-star living" when she marketed the multi-million-dollar residences at the Time Warner Center four years ago, "super-luxury" controls today's market. Currently working with the Alexico Group, Sunshine oversees sales and marketing for perhaps the most luxurious hotel and residential project in New York - The Mark Hotel.
Headed by French interior designer Jacques Grange, international furniture manufacturers and interior designers have constructed unique furniture for the lobby and common spaces of The Mark. Grange, who has designed interiors for Yves Saint Laurent and Princess Caroline of Monaco, has furnished several residential units for sale with custom-designed pieces specific to the project. For Sunshine, it's this confluence of categories that bring her term "super-luxury" to life in New York real estate.
"In the 1990s, luxury was about bricks and mortar and space," says Sunshine. "The spaces have become much bigger now. To build a super-luxury product, you have to combine art, fashion, architecture and design. People are buying lifestyle. In New York, that is luxury."
What Sunshine means is that luxury in real estate has overflowed into other product categories where luxury is more apparent. Fashion, with thousand-dollar price tags on T-shirts or shoes, has consumed our attention for decades. For hundreds of years, fine art, such as a Picasso painting or a Michelangelo sculpture, provided the most expensive and appreciative assets (besides an always risky stock and bond portfolio). Now it's real estate.
In terms of design, New York has gone through a transformation of what's considered luxurious. Interior designer and furniture manufacturer Noel Jeffrey, who has been designing exclusive New York residences from Park Ave. to Tribeca for 39 years, has noticed a movement toward younger clients demanding a different kind of style.
"My clients today are in their 20s and 30s," says Jeffrey, who has designed a room at the Kips Bay Designer Show House 10 times. "Being young, they don't know as much about design. Their requirements are different. In the past, they were older and more easily categorized into traditional English or French. Now their tastes are more adventurous than before, more eclectic, more personal. For them, a Crestron touchpanel system, where they can control the climate, the shades, the lighting in their entire apartment, that is pure luxury."
The Future of Luxury
It's when luxury is overdone that it becomes commonplace. Post-World War II America gave birth to Levittown and luxury housing on a broader level. Mass-market manufacturing of goods from chairs to automobiles to blue jeans created an American culture consumed by luxury. Not surprisingly, it altered the definition of the word.
Today, experts such as Taylor of the Harrison Group and David of American Express see luxury in products that have the highest levels of craftsmanship, design and quality. It's when consumers discover those characteristics that they spend inordinately more money. This return to quality and hand-crafted products dates back to Roman times, when homes were filled with marble floors, hand-carved tables and opulent verandas meshing indoor with outdoor space.
In New York real estate, we're seeing exactly that today. Sliding doors open up the living rooms in several upscale buildings to the outside elements. Rare stone from Spanish quarries and Chilean caves have become kitchen countertops. What sounds ridiculous has become luxurious as we search for the rare and obscure.
In the future, luxury will not be ostentatious. It will be common and not obnoxious to own a $15,000 chaise longue or have French limestone from a 16th-century chateau on your West Chelsea floors. If you understand the category, if you can afford the luxury, you will feel proud of it.
The same goes for a balcony in Elmhurst that overlooks a 17th-century church. Luxury in the future could be as minute as a rare Pez dispenser on your wood-carved fireplace mantle. It can be collectible furnishings or a rent-controlled apartment costing $300 per month. It can be living three blocks from a new city park on the East River near South Street Seaport. And it will be as alive as it ever was.
"Everybody will always buy as much luxury as they can," says marketer Taylor.
Thursday, April 10, 2008