New York Business Journal
August 26, 2022

There's a strong demand for turnkey residential real estate in Manhattan, broker says

There's a strong demand for turnkey residential real estate in Manhattan.

That's according to Bespoke Real Estate's co-founder Cody Vichinsky.

"What we've seen more than anything is a lot of our clients don't really want to get into long-term projects," Vichinsky said. "It's a lot of work."

Robert Dankner, a licensed real estate broker for Prime Manhattan Residential who primarily deals in Manhattan's luxury residential market, echoes those sentiments.

"That is absolutely where the strong demand picture is because people want it now," Dankner said. "People don't want to have to wait, whether that's in a townhouse, a condo or co-op."

Vichinsky's firm focuses on selling homes that cost more than $10 million. Over the last four years, Bespoke Real Estate has produced public micro-market reports on Manhattan, the Hamptons and Miami.

This year, Vichinsky's firm released its first national report.

"We've created a framework that allows us to splice the market and give a really accurate perspective," Vichinsky said.

Vichinsky spoke with the New York Business Journal about his biggest takeaway from Bespoke Real Estate's Q1 & Q2 2022 $10M + Market Report, asset classes in Manhattan that have good supply and his predictions for Q3 and Q4.

According to your firm's report, there has been a 49% increase in sales quantity and a 33% increase in volume in Manhattan the first half of this year compared to the first half of 2021. Why is this significant?
I think what it clearly indicates is that the market is fertile. It's the market with the most volatility. In our opinion, markets need volatility. If everything is just going straight up and there's not enough supply to meet demand and there's no real friction in the deal, then the market just becomes stale. It's just like a no-movement market or sort of a stalemate.

Manhattan has good supply left. There's opportunity to rerate the market and find value in that market and buy things well. It's a bifurcated market. You look at sales of $100 million-plus deals going in condos and you're looking at 50% haircuts on certain asset classes.

What are some examples of asset classes where we see a ton of supply?
The Upper East Side townhouse market is a great indicative market. And you've got to look at it on a longer-term horizon than just the pandemic. Go back to 2014. If you look at the numbers there, they're much higher from a transactional perspective than they are today. The supply was much more limited. You couldn't really get anything. Now, there's options for you at big numbers.

It's a great example of a climate where there are plenty of options for someone if they want to buy a townhouse on the Upper East Side. Now there's nuance there. Maybe someone says, "Well, there's really no product that's brand-new. I want a 25-footer and I don't want to have to do any work." That person's 100% right. There's no supply. But there's 25-footers where you've got to do considerable amount of work. It's all about the specific product type that you are seeking. But there's hundreds and hundreds of homes available over $10 million.

What did you think was the most significant finding contained in your firm's report?
I would say the price range. If you're really looking at breaking down the price points, the low-teens segment of the market just ripped. And if you looked at that year over year, I think that tells a story of where people are spending their money.

[That price point] made up two-thirds of the entire trades. It has been pretty significant. You're looking at two-thirds in a very small price range [in] the low teens. That's where the market is. That would indicate to me if I'm a developer, that you play into where the demand is most.

What are your predictions for Q3 and Q4?
Based upon what we've seen, I bet you we finish somewhere around 250 trades. I don't know if that's exceeding pre-pandemic. I think it illustrates sort of the bounce back of right after 2019, which was 261 trades. In 2020, we saw 137 trades, which was basically half. And then 2021, it sort of ripped right back to its levels. I think we're going to see some homeostasis this year.

I'm bullish on Manhattan for turnkey product. What we've seen more than anything is a lot of our clients don't really want to get into long-term projects. It's a lot of work. What I mean by turnkey is if it's move-in ready and it makes sense — we're seeing a strong appetite for that. And also quality new development in good locations that are decently priced. They are expensive, but they aren't [going to] rock your world. I think they will do very well.

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