Whether it’s in a supertall skyscraper, modern mid-rise or renovated pre-war structure, there are luxury buyers willing to shell out millions for their perfect property. And in each of these building types, in cities around the world, there’s a sub-market: the penthouse buyer.
But what does it mean to be a penthouse buyer today, when the term no longer translates only to a single top-floor unit with views, privacy and a spacious terrace, as it had in the past?
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Though the definition of penthouse has evolved to encompass a lot in recent years, said Darren Sukenik, a luxury sales agent with Douglas Elliman, the word’s core meaning has remained the same.
"A penthouse has always been the best unit—or units—in the building," he said. When you consider that many new buildings have multiple penthouses, and some lack terrace space, calling an apartment a penthouse is just shorthand for making its first-in-class status clear.
Simple enough, until you try to figure out what to expect from a penthouse based on the building’s location and when it was built, or what sort of premium you can expect to pay for it.
While there’s no clear-cut way to figure these things, said Jonathan Miller, chief executive of appraisal firm Miller Samuel, there are a couple of general rules to keep in mind when thinking about penthouses.
The first is that each penthouse is unique within a market, and can’t be easily compared on a price-per-square foot basis with other units in the building or in the area because they have so many additional amenities, the first being a luxury of space.
While in the mid-1980s, New York City developers would often place studio apartments or smaller units straight up to the top floors of buildings—and some would even put health clubs or other amenity spaces at a building’s peak—they quickly realized that height and size were premiums, and that they were leaving money on the table, said Mr. Miller. So, by the early-2000s boom, they started putting bigger units at the top of buildings, eventually creating full-floor living spaces.
According to data compiled by CityRealty, a New York real estate website, penthouses sold in new Manhattan developments in the past year had just over 4,000 square feet of indoor living space. In contrast, other luxury units sold in the same 31 buildings were about half the size, with 2,000 square feet of indoor space per unit. This extra space, which is also found in resale penthouse properties, not just new developments, often appeals to a buyer who craves privacy, especially when there’s a full-floor or multiple-floor unit, as is the case of duplexes or triplexes.
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It also allows for flexibility in terms of the layout, said Maria Morris, a Dubai-based partner at Knight Frank. Ms. Morris is currently managing sales at the recently launched Royal Atlantis Residences, in which the building’s smallest of four penthouses—and the only one that’s on the market yet—is 5,800 square feet, and listed at the equivalent of US$10.2 million.
While a penthouse buyer in that building might want extra bedrooms for staff or guests, which are separated from the master suite, the luxury of space in the 11 penthouses at 30 Park Place, the Four Seasons Private Residences in downtown Manhattan, means that many of those units have a formal dining room, kitchens with adjacent breakfast room, and master bedroom suites with sitting rooms and dual master baths, said Melissa Ziweslin, a managing director at Corcoran Sunshine Marketing Group.
In addition to size, many penthouses have expansive outdoor terraces that average luxury units do not. Since outdoor space should be valued at somewhere between 25% to 50% of the price per square foot value of indoor space, and some of these penthouses have terraces that are thousands of square feet, at times with a private pool, that can add significant value, too.
Most penthouses also have top-line features and amenities that go above and beyond what’s found in the other units in the building, Mr. Sukenik said, like high ceilings that are 12- to 13-feet instead of the typical 9- to 10-feet; bathrooms with oversized spa showers; and upgraded and extra kitchen appliances. For example, "instead of a double oven, a penthouse will have double oven plus a steam oven and a speed oven," he said.
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Fireplaces, floor-to-ceiling windows, extra parking spaces and more choices in interior finishes are also commonly found in penthouses or offered to penthouse buyers.
When you adjust the price for these differences, you still typically see a premium of 5% to 10% for penthouses, Mr. Miller said. Ms. Ziweslin put that figure closer to 15% to 20%. Either way, these premiums look much better than the straight price-per-square-foot increase you see in new luxury Manhattan buildings between non-penthouse and penthouse units, which can top 100%, said Gabby Warshawer, the director of research at CityRealty. For instance, two penthouse units sold last year in the ultra-luxury 10 Madison Square West sold for an average of $34.8 million versus $5.3 million for the 90 non-penthouse units, which translated to a 108% increase on a price-per-square-foot basis. In mid-luxury buildings, Ms. Warshawer said that price-per-square-foot increase between non-penthouse and penthouse units is less dramatic.
But if you see a penthouse that doesn’t fit these criteria and has no price difference at all when compared to non-penthouse units in the same building, it’s not necessarily too good to be true, Mr. Miller said, especially if it’s in an older building. That’s because in the past, developers in New York would often build little houses on top of a pre-war building, which didn’t have any of these extra amenities or a surplus of space. "Penthouses are almost always more valuable than other units in the building," he said, "but there are some quirky exceptions."
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Then there’s the increasingly common developer trend of including multiple penthouse units in a single building. Just because a building has two to four of these penthouses—or even more—it doesn’t necessarily mean those units lose their premium, experts say. "Resist the urge to write this off as a marketing ploy," Mr. Sukenik said.
If there are multiple penthouses, most of the time they’re architecturally set back from the rest of the building—as is the case at 56 Leonard in Tribeca, where there are 10 penthouses—or facing different directions, he continued. And if a developer did tack the penthouse label onto a unit that wasn’t worthy of that designation, a penthouse buyer wouldn’t be duped. "They’re a very discerning audience," he said.
Here is a look at other news from around the world compiled by Mansion Global:
Rents In Ireland Grew At Record Pace In 2016
Residential rents in Ireland grew by a national average of 13.5% in 2016, according to the latest rental report from Daft.ie. This represents the largest annual increase since the firm started tracking rents in 2002. The average monthly rent, which stood at €1,111 (US$1,182) in December, also hit a new high for the third quarter in a row. Dublin rents saw a 14.5% rate of inflation (their highest on record), while rents in Cork rose by 12%, in Galway by 10%, and Limerick by 12.5%. The steep increases are due in part to lack of supply, and TCD economist Ronan Lyons, who authored the report, said, "The latest figures from the rental market remain very concerning. Not only do rents continue to reach new peaks, rental inflation continues to increase in both Dublin and nationwide." (World Property Journal)
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Cost Of Living In Abu Dhabi Has Taken A Dip
Both rents and sale prices have been softening throughout Abu Dhabi in the past year, per a new report from Chestertons Mena. Average apartment rents fell 7% over the course of 2016, while villa rental rates dropped 10%, and villa sales prices fell 6%. Apartment sales prices dropped 1% between the third and fourth quarters. "Tenants are seeking lower rental rates as housing allowances have been reduced," said Robin Teh of Chestertons Mena. However, yields have been stable since the second quarter of 2016, hovering at above 5%. "There is a similar situation in Dubai, with residential sales and rental prices falling and yet yields remaining fairly consistent throughout the course of 2016," Mr. Teh said. "We expect the pressure on rents to remain throughout the first quarter of 2017." (Khaleej Times)
BMO Deems Toronto’s Hot Housing Market A "Bubble"
Canadian bank and financial firm BMO is warning that Toronto’s housing market has become a bubble, with home prices "dangerously detached" from economic fundamentals. "Let’s drop the pretence. The Toronto housing market—and the many cities surrounding it—are in a housing bubble," BMO Chief Economist Doug Porter wrote in a note to clients this week. "The market is far too hot for comfort." With prices in Greater Toronto up 22.6% year-over-year, Mr. Porter noted that the market has seen its most dramatic increase since the 1980s, a period widely considered to be another bubble. And given double-digit increases in newly built condos, BMO expressed skepticism that the issue is simply one of lack of supply.(BNN)
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To Avoid Stamp Duty, London’s Foreign Billionaires Are Now Renters
After the introduction last year of a 15% stamp duty tax on properties bought by offshore trusts, London’s wealthy foreigners are increasingly turning their attention to ultra-luxury rentals. Rentals that cost more than £3,000 (US$3,752) a week, or £156,000 (US$195,000) a year, jumped by 28% in the fourth quarter of 2016, according to numbers from LonRes. "Since the start of 2017, the market above £4,000 per week has been very buoyant," concurred Georgina Bartlett, head of lettings at Savills. As a result, some owners who had previously planned to sell are now hanging on to their properties as high-end rentals. One luxury investment fund in London has shifted gears to rent out Kensington homes it had planned to sell. (The Guardian)
Million Dollar Listings Are Increasingly The Norm In Suburbs Surrounding Brisbane
Brisk demand in Brisbane is rubbing off on nearby suburbs, and the number of outlying areas with a median price of $1 million or more has more than doubled over the past two years. The number of Brisbane suburbs with million-dollar medians jumped from 7 in May 2015 up to 17, according to numbers from CoreLogic Market Trends, with growth expected to continue apace. Teneriffe remains Brisbane’s most expensive suburb, with median prices at $1.9 million, and thanks to a construction boom, median prices in South Brisbane soared to $1.765 million. Additionally, median prices in Clayfield, Pullenvale, West End, Chelmer, Chandler, Burbank, Robertson, Tennyson, Wilston, and Highgate Hill have all jumped into the seven digits.(news.com.au)
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An Immigration Crackdown Is Unlikely To Harm Miami Real Estate
In spite of a heavy reliance on foreign buyers—around 70% of buyers in the Miami Worldcenter tower are foreigners—potential changes to immigration laws are unlikely to have much of an impact on Miami’s real estate market. This is in part because demand remains high and also because the majority of foreign buyers are investors who don’t live stateside, anyway. A serious change to this segment of the market would have to come from a crackdown on foreign capital, a move President Trump is not expected to make. Instead, local brokers blame the current slowdown on economic troubles in Latin America, but are still seeing high demand from Russia, China, and increasingly, Europe. "I’m even seeing more Europeans now," says OneWorld agent Peggy Fucci. "Lots of buyers from France. They’re just people with money who are not happy with the political situation there. They’re saying terrorism scares them and some are either looking to move here full time or just invest in Miami for cash flow." (Forbes)