Insignia's gerringer: first-time buyers flooding residential market

Real Estate Weekly, Nov 6, 2002 by Andrew Gerringer

One of the most interesting aspects of the residential marketplace in New York City has been a gradual influx of first-time buyers, typically people who have been renting apartments and now find they can afford to buy coops and condos, buoyed by low interest rates. In the third quarter just ended, sales of studios and one-bedroom coops, the typical entry-level space, comprised more than half of all coop sales in the city.

The question is, what are developers and architects doing to meet the demand for space by this population?

The Development Marketing Group at Insignia Douglas Elliman has watched this market change for almost two years. That's why we have been strongly recommending to the developers, investors and architects we work with to design product to match this demographic - units of 1,000 to 2,000 square feet that can be priced in the $1.5 million range. At the same time, we ask the architect to give consideration to how these smaller units could be combined should the market, or particular buyers, dictate this.

By designing layouts that make it relatively easy to combine units, the developer can have it both ways -- catering to the most affluent buyers with full-floor or duplex apartments and to people of more moderate means who will buy 1,000 to 2,000-SF space.

For a considerable time, it seemed to be the norm to target high-end buyers in new construction and conversions by carving out large 4,000- to 5,000-SF residences with eight-digit price tags.

There will always be a market for large, ultra-expensive coops and condos. In today's marketplace, however, the real opportunity is with the younger generation of buyers on their way up the economic ladder, single people and families who are more value-oriented.

A perfect example of meeting this pent-up demand is our experience marketing The SoLita Building, a loft condo Downtown at 161 Grand St. This is a 16-unit building that we put on the market last November. It sold out in three months.

Why? Two-bedroom apartments there were priced in the $1 million range. Most units were half-floor, 1,800-SF lofts, and the layout was flexible enough that apartments could be combined if a buyer wanted the extra space.

We believe a primary concern of architects and builders is to design with an eye towards providing product that will be attractive to the prevalent customer base at any particular time. As we say, try to visualize what the user wants in product.

This is the underlying principle in the work that Insignia Douglas Elliman's Development Marketing group does with owners, investors and developers. We're very hands-on in the advice and research we provide to encourage further residential development in a city that is chronically short of inventory.

One of the values we bring to the table is careful study of the market in the very early stages of planning to convert a building to residential use or the increasingly rare new residential construction in this city. We look at everything, economic trends, the kind of buyer who's coming into the marketplace, neglected neighborhoods ripe for residential development, zoning and entitlement issues.

When a neighborhood like the Lower East Side and East Village opens up to a new generation of home owners, we can track it. We like to say that to make money in real estate follow the artists who are always seeking cheaper space. The next stages to signal possible opportunity later on for residential development is spotting new bars and restaurants opening to serve a growing and changing populace.

These people typically are renters who evolve into buyers. As the neighborhood grows too affluent for younger people, other neighborhoods emerge as the place to be. We're seeing this cycle now in Williamsburg, Greenpoint and Red Hook in Brooklyn.

A close study of changing demographics and economic trends is all important in bringing onstream reasonably priced residences that meet both the goals of the developer as well as the purchaser.