Condo Developers Prefer Midblock Projects

Once overshadowed, squeezed-in sites are suddenly fetching corner-lot prices.

For his next condo development, Michael Stern has “starchitecture” firm Roman and Williams designing a building with an ornate terra-cotta façade, copper-clad windows and other nods to classic Manhattan luxury.

But though the project would fit nicely in the city’s toniest precincts of yesteryear, Mr. Stern, who heads JDS Development Group, will raise his latest high-end residences not on a grand avenue or a sunny corner lot but crammed between buildings midway down a block of West 24th Street, between 10th and 11th avenues.

“We do market-leading projects, and this will be no different,” Mr. Stern said, citing his successful recent conversion of nearby Walker Tower—the former Verizon building on West 17th Street—into high-priced condos. “Buyers want to be on the midblock because they want the privacy, and they respond to its distinctly quieter, more residential feel.”

A midblock locale may not have been anyone’s idea of prestige in the past, but with the city’s condo market at record highs, hordes of developers share Mr. Stern’s conviction that Manhattan’s once-sleepy side streets have gone from second-best to top-tier. Not only have premium sites on the avenues virtually all been developed, forcing builders onto the side streets, but condo buyers’ tastes have changed, and more are willing to pay top dollar midblock.

“For buyers, it’s more about the neighborhood now than their exact location in it,” said Kevin Maloney, chief executive of development firm Property Markets Group, which is planning a midblock residential condo building on West 22nd Street between 10th and 11th avenues.

Illustrating the huge potential that developers see in midblock parcels are the exorbitant sums that many are increasingly willing to pay to build on them—amounts that only grand sites could achieve in the past. Massey Knakal broker James Nelson, for instance, sold a midblock development site, 455 W. 19th St., between Ninth and 10th avenues, for about $825 per square foot earlier this year—roughly what he got last year for a prime corner lot on West 24th Street next to the High Line. Now he’s seeking $900 per square foot for another midblock site, at 532 W. 20th St., between 10th and 11th avenues. The price would tie a record set this summer for the area.

“There’s an unprecedented demand for land, and yet there’s less land than ever before available to build on,” Mr. Nelson said. “It has created a rush for what’s left.”

Compensating for constraints

The hefty prices builders are paying for the chance to put shovels to dirt have left them little room to be hampered by the classic constraints of midblock projects—such as odd-shaped apartment layouts or poor light and air—that might seem unsightly to discerning buyers.

Developers who have found a way to compensate are reaping rich rewards. Alchemy Properties, which is building a 24-story condo at 35 W. 15th St., used setback requirements typical for midblock parcels as inspiration for the building’s signature architectural element, its angled façade, which cost millions of dollars more to build than a conventional exterior.

Alchemy President Kenneth Horn also bought up surrounding air rights so his building could rise higher than any other in the area, giving it better views than the typical midblock property. He is netting an average of $2,600 to $2,700 per square foot and has sold 45 of the 55 apartments.

Builder goes big

Developers have found a way to turn sites into luxury projects without the same ability to go vertical. At 151 E. 78th St., a midblock building between Lexington and Third avenues, Spruce Capital Partners dealt with the tight confines of the space by building big apartments with as many as six bedrooms. The strategy allowed the developer to share the limited number of windows among fewer units. The project was well received in a market starved for large family apartments, and more than 80% of its units quickly sold.

At 510-514 W. 24th St., Mr. Stern also aims to develop a high-end project despite cramped surroundings. He plans to mitigate that by designing setbacks to make it as airy as possible. And he noted that the building across the street is low-rise, allowing his property to have views to the north, including the Empire State Building.

“There’s a right and a wrong way to space your setbacks correctly,” Mr. Stern said. “And if you do it the right way, a midblock building can have great light and air.”

Correction: The name of the architecture firm designing 510-514 W. 24th St. for developer Michael Stern is Roman and Williams. That fact was misstated in a previous version of this article, originally published online Sept. 22, 2014.

A version of this article appears in the September 22, 2014, print issue of Crain’s New York Business.

By Daniel Geiger, Crain’s New York

Original Article: Click Here

Print: Click Here

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