NYC Real Estate Market Defies Old Borders

NYC Real Estate Market Defies Old Borders
Supply Struggles to Meet Demand

Three years ago, Jacky Teplitzky swears, no one would even consider buying a residence above East 86th Street in New York’s Upper East Side. But all of a sudden, that border has relocated 10 blocks north, to East 96th Street.

According to Teplitzky, similar market expansions have erased housing boundaries all over the city in the past decade, despite a temporary market halt due to investment timidity after Sept. 11.

Teplitzky, who was recently named executive vice president at Douglas Elliman, shared these and other residential market trends with a full house at the Yale Club in Manhattan for the Foundation for Accounting Education’s Real Estate Conference on Jan. 12.

Her conclusion, simple and optimistic, was that 2004 should see even more market expansion and profit than 2003 did.
“If everything remains the same, I predict [a profit increase] of at least 10 percent,” she said. Her research confirms that the real estate market will remain a driving force in New York City’s economy.

The residential real estate market’s resiliency has strong roots. According to Teplitzky’s research, the past 29 years’ average sales prices have risen at a remarkable rate. An apartment worth $80,000 in 1974 was valued at $900,000 in 2003, nearly 12 times more.

“2003 was the year the Manhattan real estate market crossed the $900,000 average sales price threshold to $916, 959,” Teplitzky said.

This number, however, needs to be taken with a grain of salt. Its curve is thrown off by the staggering $45 million sale for a single apartment—a new record—located in Time Warner’s new construction at Columbus Circle.

Darcy Stacom, an executive vice president and partner at Investment Properties Institutional Group, reported similar positive trends in the commercial market. Citing optimism as one of the main forces driving the market, Stacom was pleased to finally see some bidding wars over commercial space this year, something that has rarely happened since the dot-com days, she said.

Like Teplitzky, Stacom is confident in the economy’s mounting strength. Although she expects some sort of stall in 2004, Stacom also feels the money being invested in commercial real estate—mostly personal, long-term, or highly taxable money—is there to stay.

As investors return to real estate, sellers and buyers may have different tales to tell. Because the island of Manhattan is bound by steadfast borders, lack of inventory will present a problem for buyers in 2004. Teplitzky’s anecdotal evidence of more than 50 individuals bidding above market value on a property not worth venturing out in the cold to see is testament to how low inventory meets with very high demand.

The supply-and-demand struggle for real estate in New York comes as no surprise. But Teplitzky also cited demographic shifts in the city’s population that may have remained undetected in other markets. For one, more families are staying in the city after the birth of their second child, a time when they typically have decided to leave Manhattan for more room in the suburbs, she said. As a result, combining apartments—buying two spaces and then knocking down the walls or ceilings in between to double the space—is no longer considered rare.

Eric Noren, a CPA in the entertainment industry, attended the conference to get the latest news for several of his clients who are real estate investors. For him, and many other CPAs with like-minded clients, Teplitzky’s and Stacom’s optimism was good news to bring home to the troops. Other conference speakers also highlighted economic trends, beyond real estate, that may prove helpful tips to pass onto clients.

Andrew Alper, president of the New York City Economic Development Corporation, delivered a luncheon address packed with insight into Manhattan’s economic future. Among other things, he hopes the post-production film industry will expand in the future. In addition to seeing New York City as the backdrop of so many movies and television shows, Alper hopes to introduce more production and editing work into the city’s economy. He also mentioned the life science industry as a key area of focus for future economic growth in New York City.