You might call it a classic real estate cost-benefit analysis: Is the joy of finding an affordable apartment in a nice Manhattan neighborhood worth three long years of noisy construction hell?
Just ask Karina Plotko, who, with her husband Gregory and their three daughters, recently bought on the Upper East Side — steps from where the Second Avenue subway is under construction (currently the work zones go from 66th to 105th Streets). “Right now it’s very chaotic,” Plotko admits. “But I think it’ll settle down — and when it does, [the location] will be that much more convenient. We saw it as an opportunity.”
The Plotkos are on East 86th Street between First and Second Avenues, within drilling distance of the subway site and where their broker, Elaine Tross of Halstead, found them two one-bedroom apartments. Having closed on the units this week, the Plotkos are now planning to combine them for a total of 1,800 square feet — at just $650 per square foot.
And the Plotkos aren’t the only ones who see their future along Manhattan’s far east.
Starting at 40th Street and going north to 96th Street, Second Avenue is attracting some seriously swank new residential buildings, unlike any previously seen so close to the East River. Adding even more value to all that new real estate will be the forthcoming subway line, which will be rolling out along upper Second Avenue at the end of 2016.
“I do believe that when the Second Avenue line is open, values are going to go up 25 to 33 percent,” says Mark J. Benun, who just bought a three-bedroom, two-bathroom condo at 515 E. 72nd St., off York Avenue. “I’m sure it won’t happen at once; it’ll trickle.” But he’s confident that’s where it’ll end up.
“I had two buyers who were drawn to the area back in 2008,” when the subway line was in its initial phases, adds Robert Dankner, president of Prime Manhattan Residential. “They had done enough research to know that the area would be messy for a few years, but the changes would create a completely different value orientation.”
Dankner put both clients on East 69th Street off Second Avenue. One of them is still in a townhouse in the area; the other, a family, flipped their apartment for a $100,000 profit and moved on to something bigger. “It takes a strong constitution to live through this, ’cause it’s messy,” Dankner concedes.
Despite the mess, big developers are clearly feeling bullish on Midtown’s new eastern front: 50 UN Plaza, the Zeckendorfs’ new 43-story, 88-unit building, is set to be completed in December 2014. Capping the Norman Foster-designed tower will be a 15,597-square-foot triplex penthouse — with its own swimming pool — asking a cool $100 million. If it sells the penthouse will be a New York City record. Did we mention it’s on First Avenue and 46th Street?
A bit north, more new condos are rising, like the 33-story Halcyon at Second Avenue and 51st Street. Due to be completed in 2015, the Halcyon will have two floors of amenity space, including a 52-foot-long lap pool, spa and sauna. The least expensive available unit starts at $1.565 million for a 1,000-square-foot one-bedroom and goes up to $6.775 million for a 3,078-square-foot four-bedroom duplex (penthouses haven’t yet been released). The subway is still a phase or two away this far south, but plans have already been drawn up.
There’s also The Charles, at First Avenue and 72nd Street, a collaboration between the late British designer David Collins and architect Ismael Leyva. The apartments are all full-floor, four-bedrooms starting at 3,107 square feet — priced from $5.8 million to $10 million. (The penthouse units should be a lot more.) Closings are expected to start next year.
While these prices are certainly not cheap, could they actually be considered a “value” for new development — particularly for properties with high-end services and amenities? Consider 737 Park Ave., another building that recently kicked off sales four blocks to the west. Here, prices average $3,631 per square foot for available units, according to Streeteasy. At The Charles, however, they’re $2,236 per square foot.
“Basically,” says Ginger Brokaw of Town, which is selling The Charles, “Second will become more like Lex.” Values will go up. Foot traffic will increase. And retail will (eventually) flourish.
But for those keen on placing their real estate bets now, they’re able to purchase at a discount. According to data from Pete Culliney at CityRealty, the average price of an Upper East Side condo drops almost 18 percent when you go east of Third Avenue. For co-ops the story is even more extreme: The average is $1,398,186 — but east of Third Avenue it’s $801,095 (a discount of more than 40 percent).
Of course, one of the big reasons prices have been historically lower is the lack of a subway, which the new line addresses. And though New Yorkers are inherently skeptical of the MTA, the first phase of construction, according to Laura MacNeil, director of the MTA Second Avenue Subway Community Information Center, is “on track and on budget.” In 2016, three stations will open along Second Avenue, at 96th, 86th and 72nd Streets, while the station at Lexington Ave. and 63rd Street will be expanded. (Future phases — extending the line up to 125th Street and down to FiDi — are as of now without a timeline.)
As for selling properties that are (or soon will be) in a construction zone, some brokers greet it with a shrug. Says Frances Katzen of Douglas Elliman, “What do you care about the construction — it’s from 9 to 4!”
When Dan Geller of Keller Williams put a one-bedroom on Second Avenue in the East 70s on the market, he made the subway part of his sales pitch. “Once 2016 comes around, when the turnstiles open up, prices will go up 12 to 14 percent, minimally,” he says. The unit sold within hours.
And while Second Avenue businesses and residents have suffered, go a block east or west and the neighborhood is changing nicely.
“First Avenue is really coming alive,” says Paul Saunders, who just bought a four-bedroom at the Azure, a 34-story, 128-unit building finished in 2010 (where prices start at $1,400 per square foot). Saunders and his wife didn’t even consider the subway in their calculations when looking at the place. They liked, instead, the lush greenery of Carl Schurz Park (a decent alternative for Yorkville residents who’ve long complained about the distance to Central Park) and the pool at nearby Asphalt Green.
“Many years ago my mother-in-law lived on 90th and York,” recalls Saunders. “The neighborhood was really nothing like what it is now.”
And the Azure, which is being sold by Ammanda Espinal of Douglas Elliman, built a brand-new school as part of their deal with the city. Yet another point for livability.
“I didn’t realize how close we were to FDR walkway,” says Benun. “I love being able to get out of the apartment and walk anywhere — it’s far enough away [from the hustle and bustle] to feel like a neighborhood.”