Stephen G. Kliegerman
President of Development Marketing
By VIVIAN S. TOY
STUDIO apartments used to be the wallflowers at New York City’s real estate party, but not anymore.
In new developments, the $1 million studio has become almost commonplace. One studio at the Plaza recently sold for $2,002,550, and several others there have sold for just under $2 million.
To justify these high prices, studios in many of these new condos have grown in size, and in some cases are nearly twice as big as the more traditional 450-square-foot box. These bigger, more expensive spaces tend to appeal to buyers of pieds-à-terre and investors, not to the typical first-time home buyer.
In yet another sign of how strong the studio market has gotten, the price per square foot for studios in some Manhattan neighborhoods is now higher than that for one-bedrooms. Studios in the financial district, for example, are selling for $1,012 a square foot, compared with $948 a square foot for one-bedrooms, according to data from Radar Logic, a real estate data analysis company.
“The studio market has been so strong that it sort of counters the underlying axiom of real estate in New York that there’s a premium placed on larger spaces and that one plus one equals two and a half,” said Jonathan Miller, an executive vice president and the director of research for Radar Logic.
Now, zero — zero bedrooms, that is — can be worth more than one. And brokers agree that studios at all prices, from the more affordable ones in older buildings that are tailored for young professionals making their first purchases to the supersized ones in new condos, are in demand right now and are often selling faster than larger apartments.
Brokers say that the market for studios is as strong as it is because the supply simply has not kept up with demand. The number of studios in existing co-ops and condos has diminished over time, as more people have bought neighboring apartments to expand their own spaces. New construction, meanwhile, has not introduced many new studios into the market in recent years, because developers have been so focused on building larger, “family size” apartments. So when studios come on the market, they tend not to linger.
But this was not always the case. Studios are known to be one of the most volatile parts of the New York real estate market and developers generally believe that they would be one of the most vulnerable sectors if the market went into a slump. “In a really hot market, they will be overvalued on a per-square-foot basis,” said Adam Rose, president of Rose Associates, which develops and manages apartment buildings across the city. “But in a soft market, they’re worthless, because everyone who can afford it will shift to a one-bedroom.”
In the early 1990s, when the market was still drifting in a recession, “we couldn’t give away studios for $75,000 and less,” he said, “but today, those same apartments are selling for $600,000.”
But Mr. Rose and others who have watched the studio’s reputation evolve over time agreed that the days when buyers feared studios were a bad risk are becoming an increasingly distant memory.
At Fifth on the Park, a 160-apartment condo being built on the edge of Mount Morris Park in Harlem, 9 of the building’s 10 studios sold in the first 5 months. “The studios sold much quicker than the larger apartments, probably because they’re more reasonably priced,” said Carol Griffin, president of the Griffin Real Estate Group, which is handling the marketing. “But that wouldn’t always have been the case. This market wasn’t interested in studios before.”
Francesca Cha, who recently signed a contract for a 600-square-foot studio in the building, priced at $450,000, said she hadn’t been sure what she would be able to afford when she decided earlier this year that it was time to move out of the Harlem apartment that she now shares with her mother and two younger siblings.
Ms. Cha, 34, a manager at a J. Crew store in Midtown, said she saw plenty of studios in co-op buildings in the area that were priced at $350,000 or less, but she ruled them out because they all needed renovation, something she didn’t want to take on.
After seven months of searching, she concluded she wanted to live in a new building, but until she came across Fifth on the Park, she found very few that had studios.
“Even though I won’t be able to move in for another year, I’m happy I waited,” she said. “The building has a lot to offer — just having a full-time doorman is huge.” Like most new construction in the area, the building has a gym, roof deck and garage.
But while new studios in Harlem may still be affordable for young buyers, most of what’s being built elsewhere in Manhattan may not be. Many of the studios under construction have asking prices of $750,000 or more. A 698-square-foot studio in the William Beaver House, a 47-story tower under construction, recently sold for $1.37 million.
Despite the prices, there seems to be no shortage of buyers.
Dae-Hoon Kim, a 29-year-old lawyer and film student at New York University, just bought a 680-square-foot studio at the Plaza for $1.4 million, and his mother bought a 900-square-foot studio there for $1.96 million. They both bought their apartments as investments and plan to rent them out, but only after living in them for at least a few months themselves. “I would love to be a filmmaker,” he said. “Having a place at the Plaza, maybe I could live there for a couple months and pretend to be one of the great artists that lived there.”
In addition to having the kind of living space that rivals that of most one-bedrooms and some two-bedrooms in the city, both apartments have large foyers, full-size kitchens, washers and dryers, and walk-in closets. “It’s more expensive than a one-bedroom in most other places,” Mr. Kim said. “But it’s the Plaza Hotel, and the price per square foot was a pretty decent deal, especially considering the name and the location.”
The two apartments cost about $2,000 a square foot, he said, while apartments they saw at the Time Warner Center, at the other end of Central Park South, would have cost much more.
Most studios, of course, cost a fraction of what the Kims paid for theirs. The average price for studios in condos is $644,360, and the average price for studios in co-ops is $354,057, according to a market report released by Prudential Douglas Elliman earlier this month. Since studios are generally still the most affordable apartments around, they remain the entry-level purchase for first-time buyers trying to get a toehold in the New York market.
Mo Shah just bought a studio in the West Village for about $500,000, and he sees it as a steppingstone to something bigger. “It’s a studio, so I don’t want to live there that long, but for a few years at least,” said Mr. Shah, a 29-year-old foreign-exchange analyst who moonlights as a music editor for Ego, a magazine for the South Asian diaspora.
After scanning hundreds of listings downtown, where he had his heart set on living, he said, “I was starting to think that I was going to compromise and maybe it wouldn’t be in my ideal neighborhood, but then I think I just got lucky and found this — it’s not a huge space, but it’s for me.”
But by studio standards, Mr. Shah’s apartment is actually on the large side. It totals about 550 square feet.
Joe O’Brien lives in a typical prewar studio on West 57th Street that has only about 300 square feet. When Mr. O’Brien moved in last year after living in a one-bedroom rental, he had to pare down his belongings. He now owns one set of sheets, one suitcase and two pots, and he used to have many more of each.
“The lifestyle in a studio is definitely different,” he said. “It forces me to be well organized, and it makes me second-guess every purchase, so I’m not nearly as extravagant as I used to be.”
For Carla Melman, though, the need for a larger space ultimately trumped her initial wish to buy a studio somewhere downtown. She saw and rejected more than 100 apartments south of 23rd Street because they were either too expensive or too small or in terrible shape. “They were places where I knew I couldn’t survive if I had to be home sick for two days,” she said.
When her broker showed her a 600-square-foot alcove studio with a 400-square-foot patio on East 77th Street, she put aside her downtown dream without a second thought. “Downtown is cool, but I was an idiot for not considering other areas,” said Ms. Melman, a 31-year-old Wall Street equities trader.
She moved into the apartment, which cost her about $400,000, late last year and has put in a fair amount of work, including new counters and tile in the kitchen.
Her broker, Susan Orbach Scott, an agent at Bellmarc Realty, said the same space would probably sell for $500,000 now.
While the supply of studios has been on the decline, that trend may soon shift. Developers of new buildings have traditionally shunned studios because they cost nearly as much to build as one-bedrooms but sell for significantly less. They all but stopped building studios in the last few years in favor of two- and three-bedrooms, meeting a demand for larger spaces.
But many developers are now deciding to build more studios in future projects.
“We’re definitely trending toward building more studios, because there’s such demand for them and the price per square foot has gone up,” said Shaun Osher, chief executive of CORE Group Marketing, which is involved in more than a dozen new developments across the city.
At the Jasper, a 20-story office building in Murray Hill that is being converted to condos, 3 of the 80 apartments will be studios, with prices starting at $890,000. “It will still be a rare commodity,” Mr. Osher said, “but a year or two ago, you would have found buildings with no studios at all.”
Developers of more moderately priced projects are starting to build more studios, too. “They see that there’s a need for smaller spaces, and they also want to hedge their bets a little bit and diversify their product,” said Stephen Kliegerman, executive director for development marketing at Halstead Property.
Instead of building another three-bedroom, they might build a two-bedroom with a studio right next to it. A buyer who wants extra space can buy the two apartments and combine them, but studio buyers can also find their way into the condo market.
At 505 West 47th Street, which will not be completed until early 2009, nearly a quarter of the building’s 111 apartments will be studios. They will range from 400 to 450 square feet at prices starting at $399,000.
“People think we’re kind of crazy to go at such a low price,” said Mati Weiderpass, a principal in the project. “But we wanted the average young professional to be able to afford to live in this building, and it’ll also work for pied-à-terre buyers who want to be able to go to the theater and walk home.”
Sunday, October 21, 2007