Last month, Mayor Michael Bloomberg proposed the construction of a so-called Seaport City in Manhattan just south of the Brooklyn Bridge. The project, intended to help protect the city from powerful storms and rising sea levels, would be modeled after Battery Park City, the 92-acre planned community built with landfill from the construction of the World Trade Center and other projects.
Before the city builds a new version of Battery Park City, The Real Deal decided to take a closer look at the original. In this month’s Q&A, we talked to local brokers and industry experts to find out what’s happening in the Lower Manhattan neighborhood. Battery Park City is something of an anomaly in Manhattan: It’s owned and managed by the Battery Park City Authority, a public-benefit corporation created by New York State. During the real estate downturn, that caused problems for would-be homebuyers in the neighborhood, who found banks reluctant to lend in buildings on land leased from the BPCA.
In 2011, however, a group of homeowners negotiated with the authority to prevent a planned spike in monthly ground rents. That, along with the citywide inventory shortage, has helped jumpstart the residential real estate market in Battery Park City, and new residential projects like 225 Rector Place and 1 Rector Park are now close to selling out. But home prices still haven’t rebounded to their boom-time levels, brokers said.
Office buildings in Battery Park City include Brookfield Place, a complex of four towers formerly known as the World Financial Center. Brookfield Office Properties, the real estate investment trust that owns the complex, is looking to fill space there after several large tenants (including Nomura Securities and Bank of America) moved out or reduced office space. Meanwhile, Goldman Sachs’ newly built headquarters opened in 2009 at 200 West Street.
In part due to Goldman’s building, Battery Park City has gotten several new stores and restaurants lately; Danny Meyer’s North End Grill and Shake Shack both opened near the Goldman building, and luxury retailer Hermès has inked a deal for a storefront space at Brookfield Place. Also, after years of delays, the redevelopment of Pier A in Battery Park City — with an oyster bar, catering hall and tourist-information center — is slated for completion by May 2014.
For more on what’s happening in Battery Park City, we turn to our panel of experts.
Nick Jabbour
senior vice president,
Nest Seekers International
What is the available inventory of homes for sale in Battery Park City?
Like the rest of the Manhattan market, Battery Park is experiencing an unprecedented inventory shortage. Currently, inventory is at the lowest point in five years, with only about 30 properties available. This is nearly 80 percent off the average inventory of 125 to 150 properties.
What’s going on with residential sales prices and rents in Battery Park City?
Sale prices have remained fairly steady, with median sale prices ranging between $500,000 to $800,000 for the past two years, as opposed to $750,000 to well over a million between 2008 and 2010. This is likely a result of the new developments selling out, while the older Battery Park buildings have more actively traded as resales and turned over at a steadier rate. The older condos in northern Battery Park tend to trade at relative discounts.
Which price ranges and housing types are performing best right now in Battery Park City?
People are mostly seeking properties in the $2 to $2.5 million range, with three or more bedrooms. Battery Park is best known for its friendliness to growing families who are moving up from smaller properties. … The market in Battery Park is performing pretty well across the board. There’s a tremendous variety of property types and levels of service and finishes in BPC, ranging from the super luxury Visionaire, the Ritz, Millennium Tower, 225 Rector, and then relatively older buildings, typically in north Battery Park, that offer great options for first-time buyers that can’t really be had elsewhere.
What do you think of Mayor Bloomberg’s proposal to build a so-called “Seaport City” to be modeled after Battery Park City?
Battery Park City has a feel to it that very few other areas of Manhattan do, which is a result of the maintenance being overseen by the Battery Park City authority. Because of this, the parks, trees, grass and other outdoor areas are particularly well-kept and up-to-date. A lot of the charm of Battery Park is the open air space and the proximity to the river. I think it would be good to have an alternative to Battery Park for people who find a quieter neighborhood desirable while maintaining the convenience of Manhattan life.
During the real estate downturn, homebuyers had difficulty getting mortgages in Battery Park City. What impact has that had on the real estate market?
The land-lease situation in Battery Park is a concern to many buyers and banks alike. Because of this, I typically describe it as a market that can’t be compared to other Manhattan areas. As buildings have sold out, though, lenders appear to have become much more lenient, and I do think that they see Battery Park as safe collateral, the land leases notwithstanding.
How has the new Goldman Sachs headquarters impacted the area?
Without a doubt it has had a positive impact on the real estate market, both commercial and residential. The ability to walk to work for some of the thousands of Goldman Sachs employees is definitely desirable, and whenever you increase the pool of potential buyers or see greater demand, values will go up.
How long are properties staying on the market in Battery Park City and how does that compare to a year ago, two years ago and during the boom?
Running parallel to the Manhattan market at large, perhaps a bit longer, the absorption rate is now at around one-third of what it was in 2009. We’re seeing apartments staying on the market, on average, for five to seven months, where in 2009, properties languished as long as 15 months.
Who are the most active buyers in Battery Park City right now and how does that differ from the past?
Battery Park’s inherent kid- and pet- friendliness makes it particularly attractive for growing families. But you can also purchase a great studio in the mid-$300s, making it a great place to start off.
Sofia Song
vice president of research, StreetEasy
How is residential sale volume in Battery Park City and how does that compare to a year ago, two years ago and during the boom?
Based on the volume of closings this year from January to May, Battery Park City is up 62 percent from the year prior, but it’s still down 42 percent from the boom.
Where are residential prices in Battery Park City today? Are they up or down compared to a year ago, two years ago and during the boom?
The median sales price in Battery Park City [so far] this year is $779,000, down 57.9 percent from the peak median price of $1.48 million. Keep in mind that Battery Park City had a lot of new development sales during the boom. In contrast, Manhattan’s median price is at $790,000, an 11.7 percent decrease from the peak. The median rental price in Battery Park City is currently at $3,800, which is up 7.5 percent from two years ago and down 15.6 percent from the peak.
Which price ranges and apartment types are performing best right now in Battery Park City?
One-bedrooms are selling the best in Battery Park City as they’ve made up 40 percent of all closings in 2013 to date. Three-bedroom apartments also seem to be highly popular here, as they made up 25 percent of all closings.
Which price ranges and apartment types are struggling the most now in Battery Park City?
I’m not so sure that any type in particular is struggling because inventory has been so tight across the board. However, I will say that we’ve only seen one closing this year for an apartment with more than three bedrooms, and no closings above $3 million. But I think that is more a [result] of the limited inventory.
Did Hurricane Sandy impact the real estate market in the area?
Judging by the numbers, no. There were 94 closings in Battery Park City in the fourth quarter of 2012, immediately following Hurricane Sandy. The year before, there were only 34. This was an increase of 177 percent.
What do you think of Mayor Bloomberg’s proposal to build a so-called “Seaport City?”
The city needs more housing, especially for those who are not in the market for luxury product. If that’s what Seaport City can be, then great. However, the Brooklyn Queens Expressway would be a huge barrier to access the neighborhood — much more so than West Street is to Battery Park City. So it may take longer for Seaport City to mature into a ‘hot’ neighborhood.
During the real estate downturn, homebuyers had difficulty getting mortgages in Battery Park City. How has that impacted the real estate market?
Battery Park City condos were having a tougher time getting financing — especially during the downturn — because of the high ground rents the buildings had to pay the BPCA . But in 2011, the ground rents were renegotiated so that the monthly charges for residents wouldn’t be so exorbitant. This has opened up financing and has made the area more attractive to buyers.
What’s the impact of new retail in the area, such as Danny Meyer’s North End Grill and Shake Shack?
They make the area more desirable and build its character, [so that] people will stop thinking of it as an alternative for people who got priced out of Tribeca.
What are the biggest challenges to selling or leasing property in Battery Park City today and how do those challenges differ from what you’ve seen in the last few years?
The monthly carrying charges and taxes are very high compared to the rest of the city. It means that buyers can afford less here than other comparable neighborhoods. Additionally, winter can be pretty harsh here and West Street can feel particularly isolating. Still, those challenges have been mitigated by the renegotiated ground rents, the increase in residential amenities and destination restaurants, and the increase in [the number of] residents, which adds to the liveliness of this area.
Ariel Cohen
executive vice president, Douglas Elliman
What’s going on with residential sales prices and rents in Battery Park City?
The best buildings and views are commanding $1,400 to $1,600 per square foot, while the average is around $1,000 to $1,100 per square foot. Prices will always be lower than comparable areas in other parts of Manhattan due to high monthly charges, since all of BPC is on leased land.
Which price ranges and housing types are performing best right now in Battery Park City?
Water views, and larger apartments for families.
Which price ranges and housing types are struggling the most now?
Buildings with less-favorable land-lease terms.
How has the presence of Goldman Sachs’ new office building impacted the real estate market in the area?
Very positive, especially the new retail, restaurants, renovated cinemas and hotel. Every new restaurant or retail option can only attract more residents. Tenants like Danny Meyer and Hermès are stamps of approval for other tenants to join in as well.
How long are properties staying on the market in Battery Park City and how does that compare to a year ago, two years ago and during the boom?
Thirty to 45 days today, compared to 180 days at the worst [of the downturn].
What are the biggest challenges to selling or leasing property in Battery Park City today?
For selling, it’s high monthly charges, and for leasing it’s the perceived isolation of the location.
Gary Trock
senior vice president, CBRE
Which upcoming commercial projects do you think are going to have a big impact on Battery Park City and why?
The rebuilding of the World Trade Center and its retail space, the World Trade Center Transportation Hub designed by Santiago Calatrava and the reconfiguration of the retail at Brookfield Place will be huge game-changers for Downtown.
How are new restaurant and retail options impacting the real estate market in the area?
Never before have there been such tremendous retail choices for Downtown residents, office workers and tourists. The rebuilding of the WTC and the construction of the [Sept.11] memorial and museum will bring millions of tourists to this submarket daily. The retail market has reacted accordingly, with more upscale retail than had existed previously.
What is the range of retail rents in the area, and how has that changed over the past few years?
Retail has escalated tremendously to almost triple what it had been since 9/11. Asking rents on Broadway have exceeded $500 per square foot.
John Ryan III
principal, Avison Young
How has the presence of Goldman Sachs’ newly built headquarters impacted the real estate market in Battery Park City?
It validated Downtown as still being the center of financial service companies. Clearly, Goldman could have looked at a lot of other places to go. They made a commitment to stay Downtown … it is an important statement for the overall market. They have also thought about the new retail amenities and the food choices as if they were looking at it not from the highest dollar, but what they may find not to be there today.
As you mentioned, Battery Park City has recently seen an influx of new restaurants, they include Danny Meyer’s North End Grill and Shake Shack, and the luxury retailer Hermès just inked a deal at Brookfield Place. How are new restaurant and retail options impacting the real estate market in the area?
By offering both of those from a price-point standpoint, and having [Goldman] employees walk only a few steps and not have to go seven or eight blocks is real genius. Regarding the Hermès announcement at Brookfield Place, having represented Bank of America, it was part of the overall decision to recommit to both 2 World Financial Center and 4 World Financial Center. … We clearly wanted to understand what their plans were for the retail and how their redesign of the amenity package [would support] the businesses that were there.
What are the most surprising trends you’re seeing in the Battery Park City real estate market right now?
The trend [is] for media and technology to commit to go Downtown. On the one hand, it’s surprising because it doesn’t have the funky feel that those firms culturally migrate to, but the alternative is being in an overpriced market: Midtown South. Obviously Condé Nast making the commitment that they made [signing a deal to lease about 1.2 million square feet at 1 World Trade Center] has increased the credibility for that industry that in going Downtown, you are not an outlier. When we represent a client they say culturally we want to be in Midtown South, we want to be in a funky cool space, but [then] they see a value opportunity in what’s Downtown.
What are the biggest challenges to selling or leasing property in Battery Park City?
The one issue from an office tenant’s standpoint is that it is a bit of a walk from the existing transportation. But once the new transportation hub is built and delivered it’s a very short walk, a lot of it can be done underground, and I think that negative really goes away.
Marc Shapses
executive managing director, Studley
Which upcoming residential or commercial projects will have the most impact on the real estate market in and around Battery Park City?
The World Trade Center is huge. It’s recreating Downtown. It’s going to be an incredible complex when it is done.
What is the current range of asking rents for office space in Battery Park City?
I have done a lot of work Downtown. It was always the best value in the city building for building, dollar for dollar. It was lacking retail, but the value that you’ve always been able to get there is first-class office buildings at substantially less rent than anywhere else in the city, with large concession packages with great views. Nowhere else in the city can you get [these] water views, because it is so narrow Downtown. Some people didn’t want to go down there because it was lacking a 24-hour community, but that has been changing since the mid-’90s. Now we are getting to the point where many corporations, law firms and media companies, who were all pretty focused on Midtown for most of their existence, are seeing the value and what you get from going Downtown. Are there still concession packages that are being offered? Oh, sure. Between big cash allowances for work letters and large free rent packages, they are getting upwards of $100 a square foot in concession packages to go down there. For Downtown as a whole rents are in the mid-$30s to $50s per square foot on a majority of the space. At the World Financial Center and the World Trade Center, it’s the mid-$40s up to the mid-$70s depending on which building and which space.
How did Hurricane Sandy impact the area?
Most of the buildings are redoing all of their electrical power and moving it above grade. They are investing in the buildings, to protect them against this happening again.