The South Street Seaport neighborhood of Manhattan is extremely interesting right now. The cobblestone streets combined with the low-density feel of the area give it a historical vibe that is second-to-none in the borough. As reported in the Wall Street Journal, there is a new rental project that will soon open its doors. The project – 254 Front St. – has eight stories, 40 apartments, and ground floor commercial space that will likely be either a restaurant or a bar.
While the article mainly focused on the building’s compliance with the ever-so-onerous Landmarks Preservation Commission, the main things that stood out to us were the unit mix of the building and the projected pricing of the units. According to the article, “[m]ost of the apartments are one-bedrooms, and many have balconies.” Although Manhattan has a strong population of young working professionals, isn’t it risky to devote an entire building to nearly all one-bedrooms?
We here at Kwelia are curious as to the science behind their unit mix calculations. The article sends a mixed message given that it quotes the developer touting the area’s friendliness to families, yet it mentions that the building only has one large penthouse that could potentially accommodate a family. Even more interesting is the projected pricing of the units. The article states that prices for the 540sqft one-bedroom units begin around $3000 per month. On first glance to us, that seemed a bit high. Perfect. Why not do a data-driven pricing test with our RNTMRKT app. Let’s try two formulas:
First Test – Rental
From the article, we’re given a lot of information about a sample 1BR unit. We know its square footage, the number of bedrooms it has, and that there are balconies with views of the bridge. We can deduce the remainder of the information. For example, we can assume that the units have central air, that there is a doorman, and that there is one bathroom in the unit. The leaps of faith we have to make here involve the quality of finish work. Finishings in a unit can often be highly correlated to price. We capture this in our app by certain keywords like whether the unit is a condo (which implies that it is of a higher finishing grade given that it is an ownership units), or whether the unit has granite finishings (a proxy for other high-end finishings). So, for this test, we will mark off all of the variables that we know and we will guess that it is not a condo unit.
Our app suggests that the price should be $2600 per month based on our quantification of specific attributes that are significant to the price.
Second Test – Condo
Now what if we assume that the unit has condo finishings? I’ll take this moment here to disclaim that this keyword is somewhat amorphous because there is no hard and fast definition as to what a condo unit is at the moment. Nevertheless, let’s try our calculation of the unit as a condo.
Interesting. Our model prices the condo’d unit at $3150, which is right around the number that was originally quoted in the article.
What this means is that the pricing of these units are likely highly dependent on the finishing quality of the unit. Should these units be upscale rentals with granite countertops and stainless appliances, then we would agree strongly with the pricing. However, should these units merely have white appliances and Home Depot countertops, then let’s all be prepared for some angry renters and vacant units. We sense, that Ben Shaoul’s Magnum Real Estate Group is up to the task and will deliver quality units at fair prices. We will be looking forward to tracking how these units move when they become live.