The Golden Age
High-Rise Residential Construction Keeps Going
New York and the tri-state area are now feeling the impact of the national subprime mortgage crunch and slowdown in new home construction and residential high-rise projects, but the boom here is far from over.
Unlike the rest of the country, New York continues to attract buyers and renters alike at ever-increasing prices.
"If you're a [New York] contractor and you're not busy now, you're doing something wrong," says Louis Colletti, president of the Building Trades Employers Association in New York City.
The region's builders are adapting to limited space, reclaiming waterfronts, building bolder designs and inventing new mixed-use strategies to diversify their investments, all while facing serious staffing shortages and materials costs that continue to soar.
Better, Smarter Designs
"In the 60s and 70s, design was done under the table," says Costas Kondylis, president of New York's Costas Kondylis and Partners. The focus for any developer-designer relationship used to be efficiency and construction costs. "Today, the major subjects of conversation are design issues."
The change is in large part due to the recent advent of European "starchitects." Manhattan has seen a new era of design since the assignment of Pritzker-prize winners like Italy’s Renzo Piano to the recently completed New York Times Tower, Britain’s Sir Norman Foster on the new Hearst building and Richard Rogers, also of Great Britain, on the new Javits Center.
Kondylis calls this competition "stimulating" and says it is in large part responsible for the current "golden years of architecture in Manhattan." His firm has designed the recently completed Platinum at 247 W. 46th St., a 42-story condo tower featuring a 26-ft-long fireplace in the lobby, for SJP Properties of Parsippany, N.J., and the Link, the 44-story tower at 310 W. 52nd St. that features a glass cube lighted at night at the main entrance and a landscaped terrace with a reflecting pool. The Link was designed for New York's Elad Properties.
"Over the last 10 years, there's been such a focus on costs that architects weren't allowed to be creative," Colletti says. "Bringing in these international architects allowed the domestic architects to think a little outside the box, and that strengthens New York's role as a world-class city."
Still Going Despite the Crunch
The residential market in New York City has effectively skirted the slowdown hitting the rest of the country. As a cosmopolitan city, New York "relates not so much to the U.S. economy but to the international economy," Kondylis says. Combined with the plummeting dollar, real estate in New York continues to attract investors with the stronger Euro and other currencies.
Meanwhile, the skyrocketing price of real estate, at least in Manhattan and Brooklyn, has resulted in another phenomenon: "residences selling for $1 million or more continue to sell more quickly than lower-priced products because purchasers in that price range are largely cash buyers and not as likely to be affected by the subprime mortgage situation," says Sara Mirski, managing director of development for Brooklyn's Boymelgreen Developers.
Extell Development is scheduled to complete late this year the 43-story, $260 million Rushmore at 80 Riverside Blvd. in Manhattan, where residences as large as 3,072-sq-ft will range between $1 million and $7 million.
Also finishing this year is the 57-story Sky House at 11 E. 29th St. in Manhattan, a luxury condo tower designed by FXFOWLE of New York for the Clarett Group, also of New York, with Bovis Lend Lease managing construction. Last year, Bovis completed construction on the 886,000-sq-ft 15 Central Park West for New York's Zeckendorf Development.
The Challenges: Materials and Labor
The continued growth has meant that the cost of materials has continued to skyrocket and trained-labor shortages are being felt by every contractor.
"The availability of foundation, concrete and curtain wall subs is limited," says Dennis Freed, senior vice president of New York's Bovis Lend Lease. "A lot of times you don't even get to bid out, you pick one of these guys and work with them."
Colletti adds that "the market is so strong across every market sector that your quality contractors are close to capacity and are having difficulty recruiting project management personnel. It's really a long-term challenge."
And Jay Badame, chief operational officer at New York's Tishman Construction Corp., says, "Along with the unions, we need to educate the new employees as the older talent leaves, and we need to continue to run safe projects because of the influx of new workers into the workforce." Developers, meanwhile, are seeing tighter and tighter profit margins, and some, such as Boymelgreen, are slowing down their investment in New York. Overall, there's a "disconnect between everyone's aspirations, including the owner, the architect, the marketing people and the consuming public," says Dan Kaplan, principal at FXFOWLE.
The biggest losers, however, may be the city's poorest residents. "The high cost of construction is unfortunately also having a negative impact on both the quality and the quantity of affordable housing development in the city," says Boymelgreen’s Mirski.
Furthermore, despite the groundbreaking designs, the level of craftsmanship in New York is still behind that of the top buildings in other international hotspots.
"The type of building systems and sophistication being installed in London, Shanghai, Dubai, Tokyo is superior to what is being put in place with residential buildings in New York, and we shouldn't settle for that," Kaplan says.
For example, Europeans are used to spending more money on better craftsmanship in anticipation of longer occupancy, Kaplan adds. Still, the New York market is poised to catch up, he says.
"The appetite is there, the will is there and everyone wants the sophistication level," Kaplan says. "The question is how we get there in this market."
The key to better buildings is "more integration of design and construction," with organizations like the Building Congress and the American Institute of Architects as vehicles for this cooperation, Kaplan says. Architects are already being brought earlier onto the projects as the sites and owners’ demands become more complex.
Construction managers are also feeling the changes and coming in earlier. Bovis's Freed says higher-end finishes the consumer has come to expect demand a higher attention to detail and coordination with the designers and the trades.
In addition, the typical high-rise residential building today is becoming more sophisticated outside, where brick, for example is giving way to window and curtain walls.
"Curtain wall has a much longer lead time than masonry," Freed adds. “On some of these projects we are picking the contractors based on the price we want to get, and then we negotiate after the design is done. If we waited for the drawings, we'd never have the wall in time."
The Future is Mixed
With the slowing down in the market, cautious developers have started hedging their bets. Most recently, with tourism in New York reaching a peak and driving hotel room prices higher, the hotel-condo has become popular.
"For the amenities the hotel provides to the condo owners a piece of the sky you can take the most premium floors and sell them for $1,800 to $3,000 per sq ft," says Pat Di Filippo, executive vice president, New York Region, for Turner Construction.
Tishman Construction of New York is the construction manager on a 57-story, $300 million hotel/condo tower scheduled for completion in 2009 at 123 Washington St. near the World Trade Center site. Scheduled for completion early this year is Renaissance Square, which is being developed by Cappelli Enterprises and will feature two 44-story condo towers flanking a Ritz-Carlton hotel.
Meanwhile, almost every project going up in New York City now has elements of retail or community space on the lower floors.
"What's happening is that there are no good sites left, and institutions have sites and need money, so mixed used is what we're seeing," FXFOWLE’s Kaplan says.
He adds that any community that lies along the major commuter networks from Stamford to New Rochelle to New Brunswick is more likely to attract people looking for "urban" environments where work, play, shopping and entertainment are all rolled together into pedestrian-friendly spaces, with a big shift toward sustainability and energy efficiency.
The Future is Green
With the boom in luxury residential construction, marketing terms like "marble countertops" and "stainless steel appliances" have become standard. This, in turn, has led savvy developers in a new direction: going green.
"It is increasingly important to differentiate each new project in order to break through the market clutter and reach buyers,” Boymelgreen's Mirski says. She adds that her firm is focusing on green development.
"Regardless of apartment or condo, regardless of cost, all owners are still sensitive to sustainable design in construction," says Turner's Di Fillippo. He adds that current construction practices already allow buildings to attain LEED ratings at "little or no cost."
Pat Di Fillippo, executive vice president of Turner Construction of New York, says that while the condo market will continue to grow, Manhattan may be due for a correction. "Will the people in Manhattan wake up?,” he adds. “You can pay $2 million for a studio in Manhattan or get 3,000 sq ft somewhere else.
"Harlem is an untapped possibility, Queens has already shown that it's capable of residential construction and Brooklyn will continue. I'll be surprised if Staten Island doesn't catch up."
In Harlem, Bovis Lend Lease already started construction last spring on the $126 million Avalon Morningside Park for AvalonBay Communities. Twenty percent of the 296 units are reserved for affordable housing.
In Brooklyn, RAL companies of New York finished developing this fall the $150 million One Brooklyn Bridge Park, which boast 449 units as large as five bedrooms.
Boymelgreen is slated to complete this year two 12-story towers in Park Slope: the 68-unit Crest at Second Street and Fourth Avenue and the 113-unit NOVO Park Slope.
Forest City Ratner Cos.'s $4 billion Atlantic Yards project alone will bring 6,430 units spread across 15 high-rises in downtown Brooklyn, according to the latest plans.
In addition, Williamsburg's waterfront continues to change every day, with 28 new towers 20 to 40 stories high and a total of 10,800 new units expected to be completed by 2015.
Toll Brothers of Horsham, Pa., and L&M Equity of Larchmont, N.Y., have completed One Northside Piers, which features 180 units in a 29-story tower designed by FXFOWLE. Douglaston Development of Douglaston, N.Y., broke ground last year on the Edge, a 1-million-sq-ft complex with 1,400 residential units.
In the Longwood section of the Bronx, New York's Jackson Development Group and Arker Cos. of Woodmere, N.Y., finished developing a $26 million, 12-story rental tower with rents starting at $638, with 10% of the units slated for the formerly homeless.
High-rise residential is going up farther north as well. In New Rochelle, Turner has completed the 558-rental-unit Avalon on the Sound II. Turner is also working on Hudson Park North, a two-tower condo project in Yonkers that includes 12- and 14-story towers, for Stamford, Conn.-based Collins Enterprises. The project, schedule for completion December, will include a two-acre public waterfront.
Farther up in Connecticut, Cappelli Enterprise of Valhalla, N.Y., started construction in May on the $160 million Trump Parc Stamford, a 34-story condo designed by Costas Kondylis for a joint venture of the Trump Organization, Stamford's F.D. Rich Co. and Cappelli. Completion on the tower, which includes one- to three-bedroom apartments and duplexes, is slated for 2009.
Across the river from Manhattan, New Jersey's waterfront continues to attract those buyers seeking more space for a marginal trade-off in commuting times. Construction was slated to start late last year on the $415 million Trump Plaza Jersey City, which will feature two towers 55 stories high and include 862 units.
The same can be expected for other waterfront towns, from Hoboken, Weehawken and up to Fort Lee. Tishman is finishing construction on the first phase of North Beach at Asbury Park, a three-tower waterfront condo high-rise. Applied Development of Hoboken, N.J., is building the 850-unit Liberty Harbor in Hoboken.
Some firms have used the growing success to diversify their work outside the tri-state area. Costas Kondylis, for example, now has, for the first time, 12 projects abroad.
"It's a beginning of a global architecture movement, and New York firms have a lot to offer abroad," Kondylis says.
The growth of high-rise residential construction in traditionally single-family-home areas of the outer boroughs may be indicative of a general paradigm shift all over the country. Even one of the country's top single-family builders, Pennsylvania-based Toll Brothers has gone into high-rise, mixed-use residential all around New York and New Jersey.