February 5th 2015
New York Daily News
Shoebox apartments are getting the boot.
The studio — a New York mainstay going back to almost World War I — will soon become extinct as developers focus more on building large units, which generate higher returns.
Listings for new studios compose just 4% of the units in Manhattan — down from 15% in 2013, according to the marketing firm Corcoran Sunshine.
As of January, just 30 such apartments were on the market, compared with 161 in January 2012.
“It’s amazing. You have all these people with decent budgets who want to buy studios and there’s absolutely no inventory for them,” said broker Dianne Howard of the Corcoran Group, who can’t find a new studio for a single female client with a budget of $825,000. “There are literally only about two projects to choose from.”
As a result of the new dearth in inventory of small apartments, prices are huge.
The median price for a new studio in Manhattan rose by a jaw-dropping 60% in the last year to $930,000, the biggest jump in price of any unit type, according to the Corcoran Group. By comparison, the median price for a one-bedroom home in a new development rose by a comparatively paltry 30% and the cost for a two-bedroom home dropped by 11%.
Market-wide, studio prices went up by 5%, including resales, while one-bedroom prices rose by just 2%.
Demand is far outpacing supply. When Robert Edwards, a 70-year-old retiree from New Jersey, listed a studio apartment at 160 E. 27th St. for sale last month, he had an accepted offer within 12 days.
“You couldn’t do much better than that,” he said, noting that he made a nearly 15% return on the unit after paying $375,000 for it at the height of the market in 2006.
Buyers flocked to the open house.
“You would have thought there was a Kardashian in there,” said Edwards’ broker, Jason Haber of Warburg Realty.
Developers’ reluctance to build studios marks a big shift in the makeup of New York City homes, which have historically been geared toward studio and one-bedroom buyers. The word “studio” was said to have been coined by developers of the 1920s, who wanted to make tiny apartments sound more romantic.
As a result, cramped studio living became a rite of passage for financially strapped New Yorkers, even fictional ones such as “Sex and the City” protagonist Carrie Bradshaw, who clashed with one-time fiancé Aidan when the two were forced to live together in her tiny apartment.
A minuscule Greenwich Village studio also served as the backdrop for “Barefoot in the Park,” the 1967 film that cast Jane Fonda and Robert Redford as warring newlyweds with a leaky roof and weirdo neighbors.
“Until the last decade’s housing boom, all the new product that hit the market was heavily weighted toward one-bedrooms and having a three-bedroom unit was an anomaly,” said appraiser and market analyst Jonathan Miller.
So, what’s the deal?
“We know there’s demand, but we don’t typically recommend that developers build studios,” said Andrew Gerringer, a new development sales expert with the Marketing Directors. “You’re just not getting the same dollars for them.”
Here’s the breakdown: Studio prices are rising rapidly, but developers can get a higher price per square foot for larger family apartments — which don’t cost that much more to build than their smaller counterparts.
The median price for a studio came in at just $1,404 per square foot in the fourth quarter, compared with $1,675 and $2,089 for one- and two-bedroom pads.
Studios don’t always gel well with the image a building is trying to portray.
“A lot of these new developments are marketed toward sophisticated, well-to-do buyers, and those people may not want to be living with first-time homebuyers, who tend to be more transient,” said new development sales exec Robin Schneiderman of Halstead Property Development Marketing, who is marketing a new condo building with very limited studio inventory at 51 Jay St. in Dumbo.
Howard and her client, a scientist for a pharmaceutical firm, have been scouring Manhattan listings in search of an affordable condo in a new building and have come up almost empty, she said.
It’s no wonder. The studio inventory crisis is a boroughwide — and even citywide — issue and doesn’t just apply to the uber luxe high-rises going up along Billionaires Row.
In Lower Manhattan, neither a new 191-unit condo going up at 50 West St. nor a 157-unit building at 30 Park Place will have a single studio. Ditto for similarly large projects such as 50 United Nations Plaza, an 88-unit project, and the Adeline, an 83-unit condo in Central Harlem.
Brooklyn hasn’t escaped the studio curse, either, with new condos such as 345 Carroll St., developed by Sterling Equities, being marketed exclusively toward two- to four-bedroom homebuyers.
And the affordable studios Howard found — in a Midtown tower at 325 Lexington Ave. and at 540 W. 49th St. — were mostly sold. At the W. 49th St. project, just four of the 37 studios included in the project are still available for sale, according to the developer.
In the meantime, sellers of existing studios are reaping the benefits of the shortage.
Real estate broker Reba Miller listed a rare, but tiny, 359-square-foot studio at 26 E. 63rd St. for a massive $880,000 last October — and two months later sold it for $20,000 above an asking price that originally seemed overly optimistic.
“I kept telling people that these studios are good investments, just based on basic principles of supply and demand,” Miller said.
When Benjamin Barry, a 37-year-old financial executive, listed his studio at 72nd and Columbus Ave. with Christine McAndrews from Mirador Real Estate last year, demand was so intense that they were able to limit the search to exclusively all-cash buyers. The 279-square-foot unit sold in only a month, setting a price per square foot record for the building.
The dip in new studio inventory will freeze out first-time homebuyers, forcing them to keep renting or leave the city — a disaster for the housing market.
“It’s important for a balanced market to see an entry point where people can make the transition from rental to purchase,” Miller said. “It’s really not good if there isn’t one.”