Question: What is the most overused word in the Manhattan real estate lexicon? If you haven’t visited a sales office recently, gone online or seen a property advertisement at any virtually price point, the answer is still glaringly obvious. Why “luxury” is bandied about by agents and marketeers with such ferocity and, in most cases, without justification goes beyond mere distraction to become an industry nuisance. Counter to the hype and “bigger is better” philosophy, analysts and experts have noticed a significant movement in buyer behavior towards a more discreet, quiet pursuit of elegance and value. As status-driven as the world is, the growing popularity of high-end smaller condominium developments with big price tags is happening–and not just here in New York, but in other markets as well.
Since everything about Manhattan real estate is cyclical, the return to a more intimate, boutique style of residence harkens back to when apartment buildings were first constructed as hotel-like quarters. While this way of living stayed consistent to this day in cities like Paris and London, larger buildings cultivated an association with power, luxury and convenience that changed the way New Yorkers lived–or wanted to live. While amenities like a pet spa, wine cellar and outdoor rooftop showers typically lure the first-time homebuyer, the increasingly rare luxury of privacy afforded by smaller buildings attracts the affluent, the famous and anyone who doesn’t want to suffer the bureaucracy and impersonality of cookie-cutter living.
From the perspective of a developer, smaller buildings are appealing on several fronts. There is much less space dedicated to common areas of the blueprint such as hallways and more room in the actual residences with some elevators opening directly to the apartment for example. Rather than maximizing the number of units per floor, the schematic for smaller developments is more livable and expansive. Also consider the cost associated with employee salaries of major buildings and their operational expenses which ultimately translate into higher association fees. Buildings with fewer units may have fewer owners to share these costs, but the overhead is commensurately less. Projects that are smaller also give developers an opportunity to be more creative with design, finishes and aesthetics as compared to the chore of creating 500 apartments that are exactly alike. Given the limitations of air rights, zoning, available land and other realities of building in the city, the prospect of developing a behemoth high rise is daunting even for the most seasoned and successful developer. Because the budget to promote new buildings can be up to 10% of the total projected revenue of the development, advertising costs alone for large developments are passed on to buyers already grappling with hefty price tags.
Whether it’s Beach House 8 in Miami or 18 Gramercy Park in New York, a large percentage of the buyers for high-end boutique-style apartments will be using the apartments as pied-a-terres or second homes. Especially in cities where every possible service and convenience is available with just a call or a text, the daily necessity of a dry cleaning valet or a Zen garden quickly loses its luster as well as its resale value. After 2008, when homes lost 35% of their value in the ten largest metropolitan markets, buyers today are redefining luxury with an eye to qualities that are less prone to downturn, such as square footage, location, views, light and architectural integrity. Size and luxury always matter, but not necessarily the size of the building or what is loosely defined as luxury.