Tribeca Property

In the last post we looked at the contract signed activity that has occurred so far in 2008.  Now let’s dig a bit deeper into the numbers to see exactly what type of properties are selling.  The two categories that seem to be the natural dividers in the Tribeca market are new development units versus resale units. 

Let’s define exactly what these terms will mean.  New development will be considered any new project that has been introduced or closed within the last two years.  For example, the current resales of units at 200 Chambers would still fall under new development.  Resales would reflect everything else.

Looking at the Tribeca data for 2008, we see that activities from new development signings reflected approximately 65% of all sales in January and 75% of all sales in February.  Quite a significant percentage.  Or is it?  To determine whether the number is relevant we need to look at how the current supply stacks up.  Of all the availale units for sale, approximately 55% were new development units compared to 45% for resales.  So new development is clearly taking more than its share of sales in comparison to resales.  But why?

The reason new development seems to have taken an early lead in 2008 seems to be a result of the current environment.  Firstly, many of the resale units require some form of renovation.  When the markets were extremely hot, most didn’t consider undertaking renovation projects if the overall layout was workable.  But times have changed and most buyers do not want to undertake renovation projects, especially major ones.  The few that do, what to procure the property at a substantial discount.  Which brings us to the second point: Pricing.  There is a good subset of resales that are priced not only for this year’s appreciation, but for the next several.  In a word, they are overpriced!  There are several sellers who are awaiting the elusive (or should I say clueless) foreign buyer, relocation executive or alien being who will swoop in for the day, purchase their unit for full list without any questions or concern for the market and head back into the sunset.  Lastly, since we touched on it in the last sentence, let’s talk of the foreign buyer.  Is he/she out there?  The answer is yes!  Unfortunatley, they are gravitating toward new developments since many will be either renting or using the units as pied-a-terres.  In addition, the full services offered by many new developments are quite attractive to this type of buyer.

So where does that leave resales?  Resales compete in many ways that new developments can’t.  For starters, size.  Most new developments are becoming smaller in total square footage, while still being priced high.  Many resales provide a great deal more square footage for the same price point.  In addition, many resales provide more character and uniqueness that is almost impossible to find in new development.  So why do they trail?  In a word, supply.  The quality of the resales on the market is not where it needs to be to provide for the turnover required to compete with new development.  In fact, many buyers settle for new development simply because of that fact.  Some of the most desirable properties in Tribeca are resales in pre-war buildings with high ceilings, plenty of square footage and outdoor space to boot.  Unfortunatley, not many of these units come on the market and when they do, their pricing reflects their demand.