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The label alone of “penthouse” isn’t necessarily enough to get a seller top dollar anymore, a new Manhattan penthouse report from Jim St. André at Compass suggests.
Several key factors can add a premium to penthouse sales today, including outdoor space, size and location, according to a report exclusively shared with Inman.
Looking ahead to the heart of the selling season, St. André added that sales will likely be stymied by the limited inventory left following the past two banner years of penthouse sales.
“The spring selling season is likely to be light in terms of volume, as scarcity is the key characteristic in the current penthouse market,” he said in an email to Inman. “There is very little existing or new product and significant pent-up demand with so many apartments selling during 2021 and 2022.
“For the first time since before COVID, we are also seeing many more foreign buyers who are traditionally active buyers of penthouses. This will translate into higher prices and frustrated buyers with so few penthouses available.”
Those penthouses that are still available will get the best price per square foot if they have the right combination of features.
Penthouses that include outdoor space that’s located right off of an entertaining area, for instance, can command a much greater premium than those with outdoor space located on a rooftop or off of a bedroom.
In 2019, a penthouse unit with outdoor space off of the entertaining area could command an average of $3,032 per square foot, whereas a unit with outdoor space off the bedroom only commanded an average of $2,292 per square foot. Rooftop space landed sellers a price per square foot in between those figures at an average of $2,433 per square foot.
Fast-forward to 2022 when outdoor space located right off of an entertaining area has increased in value even more. Penthouses that feature such outdoor space sold for an average of $3,402 per square foot, while units with rooftop outdoor space sold for an average of $2,789 per square foot, and those with outdoor space off of the bedroom sold for an average of $2,474 per square foot.
“Buyers appreciate being able to see their outdoor spaces as well as being able to easily access them from rooms that are used more frequently,” St. André’s report says. “Buyers additionally don’t value outdoor spaces that are located above their living spaces (such as rooftop terraces) for the same reason: Out of sight, out of mind. They don’t like to pay a premium for outdoor space that they don’t see and often forget that they even have!”
Total square footage
When it comes to penthouse living, total size also plays a huge factor in price per square foot. Buyers are much more willing to pay more per square foot when a penthouse’s scale allows for lots of entertaining options, dramatic space and views, as well as outdoor space. Buyers were willing to pay a 45 percent premium per square foot in 2022 for penthouses that encompassed more than 5,500 square feet of space versus those that were under 3,000 square feet.
Price per square foot on units that are over 5,500 square feet has also accelerated much more rapidly over the last few years than units of smaller sizes. In 2019, a penthouse over 5,500 square feet was an average of $3,022 per square foot. By 2022, that price per square foot rose to an average of $4,358. Comparatively, penthouses between 3,001 and 5,500 square feet commanded an average price of $2,779 per square foot in 2019, which rose only to an average of $3,285 per square foot by 2022. Likewise, penthouses less than 3,000 square feet cost an average of $2,538 per square foot in 2019, and that price rose just to an average of $2,993 per square foot as of 2022.
With supply chain and labor shortages still persisting, penthouse buyers have also been keen to purchase renovated penthouses and pay a premium for them. In 2022, buyers were willing to pay a roughly 19 percent premium for renovated units. Out of 138 penthouse sales in 2022, just 23 were for as-is units, which were priced at $2,393 per square foot, on average, compared to the $3,482 per square foot that sold renovated units commanded.
Location, location, location
A penthouse’s location also plays a significant factor in the price-per-square-foot level. Those in Midtown on Billionaires Row and Central Park South garnered the highest price per square foot in 2022 and have since 2020. In 2021, during the market’s peak, penthouses in the neighborhood commanded a staggering average price per square foot of $8,000. As of 2022, that figure came down back to Earth a bit to an average of $4,880 per square foot, which is still about $800 more per square foot than the average commanded by the neighborhood with the next highest prices, the West Village.
The Upper East Side has also seen prices climb in the last few years, with an average price per square foot hitting $3,921 in 2022, making it the third-priciest market per square foot.
“The biggest surprise has been the re-emergence of the Upper East Side, where average price [per square foot] has increased 75 percent in the last four years,” St. André’s report says. “This is a result of significant new construction and renewed demand from buyers frustrated with higher prices downtown and increased traffic making work/school commutes more painful.”
Is it really a ‘penthouse’?
And finally, those “penthouses” that are on floors just below the top-of-house penthouse? Those units will still command a premium compared to units on the floors below without the “penthouse” label, but they won’t quite match the worth of a building’s true penthouse.
“Not all penthouses are created equal,” the report states. “Developers began adding additional ‘penthouses’ to high-rise condos to elevate pricing for the highest floors. While these apartments are clearly not ‘penthouses,’ buyers have shown that they will pay a premium for the cachet of a penthouse and the exceptional views from higher floors even if there is no outdoor space and the apartment is not a true penthouse.”
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