Harlem adjusts to post-boom housing market

Harlem housing prices grew faster than the rest of Manhattan during the boom, but the market hasn't been able to outrun the slowdown seen in the rest of the city.

Brokers say the treasure trove of bargain townhouses that led gentrifying renovators to head north and sparked the resurgence of the area are being overpriced by unrealistic sellers, even if there isn't the same glut of inventory seen with properties throughout the rest of Manhattan. Do-it-yourself renovators might now be heading to the Bronx instead.

"There's no longer a deal," Klara Madlin, president of Klara Madlin Real Estate told The Real Deal as part of a Q & A about the direction of the Harlem market. "A lot of the townhouses that used to fly out, the sellers have overpriced them and there is not a lot of inventory."

New condo development has surged in Harlem like the rest of Manhattan, but brokers said there appears to be enough demand by buyers at the moment to meet supply. And prices in some areas have reached the $1,000 per-square-foot benchmark usually only seen farther Downtown.

"Places on Central Park North that have views of the park can be $1,000 a square foot and even a bit higher than that," said Michael Goldenberg, executive director of sales for the Wide Side at Halstead, adding that new condos throughout Harlem are typically selling for $550 to $650 a square foot.

Developer Joseph Holland, who is developing the Lenox at 129th Street, is even more enthusiastic about the condo market in Harlem, adding it is "at the tip of the iceberg" due to "pent-up demand."

Like the rest of Manhattan, the rental market is getting quite hot.

"We find a lot of people are renting," said Sandy Wilson, managing director of the Harlem office for the Corcoran Group. "They want a feel for the neighborhood before they buy, so our rental market is very strong."

Which brokers are going to benefit from all this business -- the big Manhattan firms who have moved into the area over the last two years or the mom-and-pops that have been there historically - remains an open question.

"It's too early to say anything about market share," said Holland. While the big brokerages are being hired to market new developments, according to brokers, Holland added that "mom-and-pops have been able to hold on to customers they've had historically. It will be a battle over whether the new residents will stay with locals or a big shop."


Gary Cannata
head of the Harlem office, Prudential Douglas Elliman

Q. What part of the market is faring best in Harlem?

A. You are starting to see tremendous action in the rental market; you get so much more for your dollar. People who are interested in greater Harlem want to test it before they buy it.

Q. What is faring worst?

A. What is not faring as well are resales of townhouses and gut renovations. The prices have gone a bit crazy, not unlike Manhattan, and people have a greater expectation than the market can bear. Some of the numbers don't make sense, and there are some that are tremendously overpriced. To a certain degree [sellers] get somewhat greedy. It is difficult having a meeting of the minds between buyers and sellers that is realistic.

Q. What group of buyers is the most active right now in the overall Harlem market?

A. Mostly young families and singles, but basically people that have been priced out of the traditional established Manhattan market and are comparison shopping in Queens, Brooklyn and New Jersey. That's where our competition is. We are trying to remind them that we are part of Manhattan and there is no bridge or tunnel to get here. Every day, I'm seeing more commercial services here, and I think that helps elevate all neighborhoods.

Q. A stereotypical notion is someone moving to Harlem from farther south in Manhattan, buying and renovating a townhouse. How active is this segment right now?

A. It was extremely active 12 months ago, but it is slowing down because the prices have outreached the growth.

Q. What sort of residential per-square-foot prices are you seeing in Harlem?

A. The average is $600 to $650. If it's priced at $550, it's more brisk. People are pushing $700, but unless the amenities are there, it's really in the $600s. Considering that it costs $1,100 or $1,400 for a new development in Manhattan, here your dollars go a lot further.

Klara Madlin
president, Klara Madlin Real Estate

Q. Which part of Harlem is faring best as the overall market slows in the city?

A. Central Harlem from Morningside to Mount Morris, from 110th to 125th streets.

Q. Which part of Harlem is faring worst?

A. Some sections that border Washington Heights north of 155th Street and east of Broadway. The infrastructure hasn't gotten there yet.

Q. What is the most underrated neighborhood in Harlem as far as there being an upside in prices?

A. East Harlem, north of 125th Street and east of Fifth Avenue, what used to be called Spanish Harlem.

Q. What is the most overrated neighborhood in Harlem?

A. Around 125th Street, the central Harlem corridor; it came up the first and fastest.

Q. Which is the strongest property type in Harlem right now -- condos, co-ops or townhouses?

A. It's hard to say. A lot of the townhouses that used to fly out, the sellers have overpriced them and there is not a lot of inventory. The buyers are leery because they need work. There's no longer a deal. Co-ops sell if priced right -- a lot have come on to the market recently and at really high prices. [Condo] developers have not lowered their prices.

Q. Is there too much new condo inventory coming to market in Harlem?

A. There's too much condo inventory throughout New York. I saw this happen before in the late '80s to '90s. Some became rental buildings. At the moment, it seems that the demand is still there. It's still cheaper to get a condo in Harlem.

Q. What is the most exciting new condo project (that you are not involved with)?

A. The Dwyer condos: they are warehouse lofts at 123rd and St. Nicholas that are more like a Downtown loft building. Most others are brownstones that are floor-throughs or brand-new buildings that look alike.

Q. What group of buyers is the most active right now in the overall Harlem market?

A. Young couples in their 30s and 40s and professionals that think Harlem is an exciting place to live because it is still on the island and they are priced out of Downtown. Mainly, it's Manhattan, although we are getting people from Europe who live in Manhattan, too. They think it's kind of cool and aren't as afraid of Harlem. They don't have the same impression as other Manhattanites.

Q. What group of sellers is the most active right now in the overall Harlem market?

A. The condo developers for both small and big projects. Townhouse owners were cashing out over the last two years -- this year there are a few, but most cashed out already. Some are attempting now, but they are trying to get prices that are way over the top, so I don't know how serious they are.

Q. How have the big brokerages done in relation to the mom-and-pop brokerages in Harlem?

A. [The big brokerages] have a lot of the new condo developments. But the smaller agencies have the customers that we share and the sellers of the townhouses -- people who have been in the neighborhood for a long time, so they have a little bit of distrust for the big companies.

Q. A stereotypical notion is someone moving to Harlem from farther south in Manhattan, buying and renovating a townhouse. How active is this segment right now?

A. Not as active as it has been because the prices are too high now. If you are paying over $1.4 million for a shell, you are not getting those people anymore. I think those people are going to go to the Bronx. It's hard to find a shell for $800,000, and you will have to put in at least $500,000 by the time you are done and it would take a few years. But the average apartment in Manhattan is over $1 million, so maybe it's worth it.

Q. Is there a need for some sellers to lower their prices now that the boom is over?

A. They are pricing 15 percent over what will sell. People don't even want to look to make a lowball offer. Though, still today, if you underprice, you'll get a bidding war. The customer makes the market. The customer has seen a lot; they know what things are worth.

Bill Rohlfing
founder, Uptown Townhouse

Q. Which is the strongest property type in Harlem right now -- condos, co-ops, or townhouses?

A. You're asking a developer of townhouses, so I believe the property that will hold its value and increase is the single- or two-family townhouse. All buyers are moving Uptown for one thing -- space -- and I believe that space is the premium in Manhattan.

Q. Which part of Harlem is faring best as the overall market slows in the city?

A. All of Harlem is doing well that I can see, especially everything below 125th, the Mount Morris Park, Sugar Hill and Strivers Row areas -- but these areas have always been stronger in sales. The other areas seeing aggressive growth are areas surrounding the newer condos, at Lenox and 130th, Lenox and 110th, the Langston at 145th, and Bradhurst and the Dwyer at 123rd and St. Nicholas. Of course Hamilton Heights is doing well also due to Columbia's expansion, and the redesign of Riverside Park at 127th to 133rd and the areas north of Riverbank Park between 147th and 154th streets.

Q. What is the most underrated neighborhood in Harlem as far as there being an upside in prices?

A. If I were to pick neighborhoods, I think Hamilton Heights -- which I still consider Harlem -- is still underrated; that's everything east of Broadway and west of Amsterdam from 140th to 154th streets. Hamilton Heights west of Broadway has already taken off. The area north of 125th between the bridge [Park Avenue] and Lenox has been underrated, but is picking up steam. There are a few areas above 155th that are underrated, but they are smaller pockets.

Q. A stereotypical notion is someone moving to Harlem from farther south in Manhattan, buying and renovating a townhouse. How active is this segment right now?

A. That notion of the "early adopters" in Harlem I think is waning. The majority of bargains are snatched up by the developers in the area at the moment, so I don't see as many individuals renovating as I did a few years ago. Also, I think the pricing is getting to the point where buyers are wondering, why not get something completed, instead of taking the risk of the project on top of these higher numbers?

I find that this buyer is working full time, understands nothing about construction and would rather have it done for him and move in, where a few years ago the early buyer was someone that was capable of having a flexible career, had already dabbled in construction or development, and had the time to focus on the project of a property.

Q. What is the most exciting new condo project?

A. I like 111 Central Park North, the Dwyer, the Langston and the Lenox. The latest pocket of new development seems to be going on east of Jackie Robinson Park due to the Langston's development, and once again, there is new development on every inch of Harlem -- it's all active. I'm really happy to see they are putting up something nice and with glass at 111 Central Park North, as opposed to some of the other "prefab" stuff Uptown.

Q. What sort of per-square-foot prices are you seeing in Harlem? What is the range you are seeing?

A. Condo prices range from $600 to $800 per square foot. I've heard they are going for over $1,000 per foot on 110th Street now.

Shimon Shkury
partner, Massey Knakal

Q. Is there too much new condo inventory coming to market in Harlem?

A. No, Harlem is different because the zoning density does not allow for large building. Every development that takes place will be on a smaller scale; that's why more can be built. There's not a lot of vacant lots that allow more than 20,000 square feet.

Q. What is the most exciting new condo project (that you are not involved with)?

A. The Athena at 111 Central Park North overlooking Central Park with apartments starting at $1.5 million. It will get numbers equivalent to prices we see on the Upper West Side. The neighboring building, 125 Central Park North, sold at up to $1.6 to $1.7 million because it's still on the park, which attracts people.

Q. What sort of per-square-foot prices are you seeing in Harlem?

A. With respect to condos, it depends on the location and amenities, generally $600 to $700 a square foot. In an elevator building or a unique location such as 111 Central Park North, I believe it has gone above $1,000 a square foot. Townhouses run $350 to $500 a square foot if it requires no renovation. If it is a shell, it's about $250 to $300 a square foot.

Sandy Wilson
managing director of the Harlem office, the Corcoran Group

Q. Where is the most active area for new development?

A. Frederick Douglass Boulevard. We call that the development zone, from 100th to 125th streets.

Q. What part of the market is faring best in Harlem?

A. We find a lot of people are renting. They want a feel for the neighborhood before they buy, so our rental market is very strong. They can get a floor-through one-bedroom or sometimes two-bedrooms for reasonable prices. Rents are anywhere from $900 to $3,500.

Q. What sort of per-foot prices are you seeing in Harlem?

A. Prices range between $500 and $1,000 a square foot depending upon what's new and its proximity and amenities and if it is tax-abated. But the average is around $600 to $700 a square foot.

Q. With a lot of big Manhattan brokerages moving to Harlem in the last two years, has it gotten more competitive from a brokering point of view?

A. At first, one would think that, but we find ourselves to be a lot more collegial. With Warburg and Corcoran, we had a get-to-know-you event and we are planning to have more of those and be more inclusive. That was a first in a series of get-togethers at Tribal Spears, a new little caf» on Frederick Douglass Boulevard.

Michael Goldenberg
executive director of sales for West Side, Halstead Property

Q. What is the most exciting new condo project (that you are not involved with)?
The Dwyer at 123rd and St. Nicholas sold very well because it was priced at a level that people perceived as a very, very good value.

Q. What sort of per-square-foot prices are you seeing in Harlem?

A. The basic condo product ranges from $550 to $650. In terms of luxury, it's $600 to $800. Places on Central Park North that have views of the park can be $1,000 and even a bit higher than that.

Q. How have the big brokerages done in relation to the mom-and-pop brokerages in Harlem?

A. There's nobody that can give an honest answer to that question. Anyone that answers it is being self-promotional.

Q. A stereotypical notion is someone moving to Harlem from farther south in Manhattan, buying and renovating a townhouse. How active is this segment right now?

A. Not much because of the supply situation. Demand is there, but prices for townhouses have reached a very high level, often with the property needing a lot of work and buyers have to decide if it makes economic sense. But right now the real problem is that there is no inventory.

Christopher Halliburton
executive vice president, Warburg Realty Harlem

Q. Which part of Harlem is faring worst as the overall market slows in the city?

A. Probably the west side of Harlem from 135th to 155th streets has a little bit more resistance amongst buyers. Some of it has to do with amenities and transportation. There is only the local No. 1 train there, as opposed to central Harlem with access to all those trains.

Q. What is the most overrated neighborhood in Harlem as far as there being an upside in prices?

A. I don't think at this time there's an area of Harlem that's overrated or overpriced. If you look at the brownstone market, one might look at Hamilton Heights or Strivers Row as areas that are pricey. They deliver a great product in most cases. Washington Heights delivers a great product; you have to deliver services to complement it. That's something people question at this time and thus deem it pricey.

Q. Which is the strongest property type in Harlem right now -- condos, co-ops or townhouses?

A. If you have a townhouse between 110th and 125th street west of Fifth Avenue, it's going to be snapped up quickly because it is highly desirable. You can take the condo market and say the same thing. The city is a set of concentric circles and as close as possible to between 110th and 125th street is very desirable.

Q. What group of sellers is the most active right now in the overall Harlem market?

A. Developers, in terms of the total numbers and then, second, owners of unrenovated townhouses.

Joseph Holland
president, Uptown Partners

Q. Which part of Harlem is faring best as the overall market slows in the city?

A. I think the area that I'm working in [developing the Lenox at 129th Street and Lenox Avenue], Central Harlem, is doing the best. I believe that's the case because there are more services, with new services like restaurants and retail stores coming in. Central Harlem is developing a cachet there that this is the place Uptown where development is happening.

Q. What is the most overrated neighborhood in Harlem as far as there being an upside in prices?

A. There are no real bargains left in Harlem. At this point, the price of land is not what it is in Manhattan, but it is rising. As a developer looking for sites, I have to pay top dollar for land. The challenge is paying as much for land as elsewhere in Manhattan and not being able to get comparable sellout prices at the end of it.

Q. Is there too much new condo inventory coming to market in Harlem? Will this drive down prices?

A. No, I think there has been a pent-up demand for new condo development and we are at the tip of the iceberg for market-rate condominiums in Harlem. I haven't seen rental buildings developed yet because the interest rates are still low enough. There may be a shift if interest rates go up; then rental housing will make a comeback.

Q. How has the Harlem market fared in relation to the rest of Manhattan?

A. Comparable market-rate housing is 30 to 40 percent below what you would find Downtown, so as interest rates go up there would be buyers who, as their opportunities become more limited, I'd expect they will look at a place like Harlem.

Q. How have the big brokerages done in relation to the mom-and-pop brokerages in Harlem? What sort of market share do they have?

A. It's too early to say anything about market share. Mom-and-pops have been able to hold on to customers they've had historically. It will be a battle over whether the new residents will stay with locals or a big shop.

Q. A stereotypical notion is someone moving to Harlem from farther south in Manhattan, buying and renovating a townhouse. How active is this segment right now?

A. It's clearly moving toward the end of the cycle. The brownstone and townhouse revolution started in the '80s, when the city made a tremendous investment in renovating its housing stock. The market has matured because there isn't the inventory.