Without throngs of Wall Streeters, one high-end neighborhood doesn't get hit as hard
October 12, 2009 04:30PM By C.J. Hughes
From the October issue: If imitation is flattery, as the saying goes, Soho, the downtown Manhattan neighborhood that gets its name from its location "South of Houston Street," has admirers far and wide. Indeed, many once-derelict industrial sections of U.S. cities, where warehouses have given way to loft-style apartments, now boast similarly styled names melded from the landmark points that make up their location, whether San Francisco's SoMa ("South of Market Street") or Denver's LoDo ("Lower Downtown"). But buyers, particularly out of towners, haven't forgotten the original, which has fared better than other upscale parts of Manhattan during the real estate downturn.
If imitation is flattery, as the saying goes, Soho, the downtown Manhattan neighborhood that gets its name from its location "South of Houston Street," has admirers far and wide.
Indeed, many once-derelict industrial sections of U.S. cities, where warehouses have given way to loft-style apartments, now boast similarly styled names melded from the landmark points that make up their location, whether San Francisco's SoMa ("South of Market Street") or Denver's LoDo ("Lower Downtown").
But buyers, particularly out of towners, haven't forgotten the original, which has fared better than other upscale parts of Manhattan during the real estate downturn.
As part of a monthly feature looking at what kinds of deals are closing in different neighborhoods, The Real Deal found that activity in the Soho area has seen a 50 percent drop in closings in the past year, which is better than Manhattan's performance overall. Similarly, prices seem to be toeing the line.
In August, the most recent month for which data was available, five deals closed in Soho and the area directly to the west, Hudson Square. The area zeroed in on is bounded by Lafayette to the east, Canal to the south, Houston to the north and West Street to the west.
The average price of those closed deals was $2.28 million, according to data provided by StreetEasy and verified through the city's Department of Finance. The number of closings may not be completely inclusive because there's sometimes a lag between when closings occur and when they're reported, but brokers say the figures seem representative of what's happening in Soho. The analysis did not count commercial or building transactions.
The closed sales ranged from $1.4 million for a two-bedroom unit at 255 Hudson Street, a glassy condo near Canal Street, to $4.5 million for a penthouse at 304 Spring Street. The latter, which like 255 Hudson is a recent addition to the burgeoning Hudson Square area, is located on the edge of the neighborhood, but StreetEasy and the city technically considers it part of Soho. In fact, this micro-neighborhood, which is located west of Sixth Avenue at Soho's westernmost extreme, accounted for three of August's five closings.
By comparison, Soho saw 10 sales in August 2008 with an average price of $2.81 million. That month, prices ranged from $805,000 for a two-bedroom co-op at 2 Charlton Street, a 1960s-era high-rise, to $8.3 million for a three-bedroom condo at 40 Mercer Street, a three-year-old Jean Nouvel-designed building.
While activity in the area is off by half, Manhattan-wide activity plunged 60 percent, according to the Corcoran Group's second-quarter report. And prices have dropped nearly 19 percent in Soho, according to Prudential Douglas Elliman's second-quarter report, versus a 21 percent drop for Manhattan as a whole. However, the 19 percent decrease in average price shows a shift to slightly less expensive properties.
Attribute the area's relative stability, in part, to non-New York buyers, said Eric Malley, founder of the Malley Group, a boutique firm that does much of its work in Soho. Malley sold one of the five units that closed in August, the two-bedroom condo at 255 Hudson, to a resident of Italy.
"For certain people from overseas, Soho has social cachet. It's a destination," said Malley, adding that he's sold 75 apartments in the neighborhood in the past five years.
He said it helps that international buyers typically have their finances in order.
Brokers say local Soho buyers tend to work for fashion, media and design companies -- some of which are based along Varick Street and Sixth Avenue in a newly emerged office district -- as opposed to in finance. As a result, the income and savings of the typical Soho resident presumably wasn't decimated by last fall's economic collapse.
Indeed, while sales in the Soho area are down 50 percent, next-door Tribeca, which is popular with Wall Streeters, has seen a sharp 91 percent drop in volume (see The Real Deal's August issue).
A relative lack of supply may also explain the statistics. About half of Soho, or 30 blocks, lies in city landmark districts, meaning that building large high-rise condo towers is very difficult, explained Rob Geils, a broker with the Corcoran Group. He said even under-construction buildings, like 350 West Broadway, which offers seven full-floor apartments, don't threaten to upset the balance of supply and demand.
In addition, older lofts found behind the landmarked, cast-iron façades, particularly on Wooster, Mercer and Greene streets, rarely present redevelopment opportunities, as they often house rent-stabilized tenants -- many of them artists who colonized the area in the 1970s -- with few reasons to budge.
But when prized loft units do come up for sale, the competition can be fierce, like with the two-bedroom co-op Geils sold in August at 64-66 Grand Street.
It received 10 offers before selling for $1.64 million, Geils said, though it needed at least $500,000 in renovations. The French family that sold it actually made money on the deal, despite purchasing it in 2006, at the market's height, for $1.48 million, he said.
"A lot of people thought they could steal it with low offers," Geils said. "But there's just not that much available."
He said that, according to Corcoran's database, the homes on sale in Soho early last month were priced at an average of $1,602 a square foot. He said the fact that it's above the $1,000 per-square-foot threshold is a sign of health, even if the units end up trading below that.
If there's one knock on Soho from brokers and residents, it's that the area often gets too crowded, especially on weekends. That's because the
bottom floors of many of its historic five- and six-story buildings, which contained art galleries in the 1980s and 1990s, now feature a mall's worth of trendy shops, including outposts of Patagonia, Georg Jensen, Tse, Ben Sherman and Apple.
Those dense crowds have some brokers betting that activity will shift in the long-term toward Hudson Square, which is far quieter, with less retail.
That feeling is part of what initially drew Jill Meilus, a broker with the Corcoran, to purchase a two-bedroom condo at 505 Greenwich, which boasts a "Zen garden" and dog spa. Last September, as Lehman Brothers was imploding, she listed the apartment for $1.85 million.
She reduced it twice and it finally sold this August to a Greek family for $1.45 million. Although Meilus now sublets in Greenwich Village, she said that she sold to cash out for her daughter's college tuition, not because she wanted to leave Soho.
"It's so nice to walk through the streets in early morning, because it feels like Europe, with old buildings and great light quality and all the best-dressed people," she said. "That will always be there."