After five years, condo market comes back.

After five years of declining sales and unit prices, condominiums made a dramatic resurgence last year in Manhattan.

Historically low interest rates accounted for much of this surge, as home buyers secured attractive, long-term mortgage payments. But the recent spate of activity also signaled a shift in buyer preference, from co-op to condominium units, a feature that will distinguish the city's residential market for years to come.

By the Numbers

Statistics bear this out. Recently released figures by Douglas Elliman show condominium sales surging 17.4 percent in 1993 over 1992; the research firm of Yale Robbins Inc. put volume even higher, up 20.7 percent, for the same period. This marks a turning point for condominiums, which saw sales drop steadily from 1989. Elliman also reported that the higher end of the market - million dollar-plus units - saw their third consecutive price increase in so many years; last year alone, prices rose 3.9 percent and volume 52.2 percent.

Co-ops, in contrast, have seen sales stagnate and prices weaken. Minus a modest increase in price and volume in 1992, million dollar-plus units have seen sales and prices fall dramatically since 1989, according to Elliman. From 1989 to 1993, prices have fallen approximately 11.5 percent, or $28,500, and volume has decreased 16.4 percent.

New York City has seen little or no new condominium construction for the last five years. But with condominium sales increasing, and the number of available units decreasing, a critical need is developing for new product. In addition, modern units are particularly difficult to find, as the city's apartment inventory ages, yet goes unreplaced.

The nearly-complete Millennium Tower at the Lincoln Square Condominium addresses both these concerns, representing the first newly-constructed condominium units in Manhattan in recent years, as well as the finest in modern living. With an increasing investor preference for condominiums and declining inventory, Millennium Tower offers a rare opportunity to acquire high-end residential space at a modern, premier site, and within easy walking distance of New York's finest cultural, dining and shopping experiences.

Millennium Tower

Sponsored by a partnership which includes Zeckendorf Realty, L.P., and Sumitomo Real Estate Sales (NY), Inc., Millennium Tower is comprised of 83 luxury units on the uppermost 11 floors of the 56-story Lincoln Square building, which occupies the entire city block between 67th and 68th Streets, and Broadway and Columbus Avenue. Located on a charming tree-lined street, the Tower is a building within a building, with its own private entrance, lobby and elevators, and servided by its own doormen and 24-hour concierge. Scheduled to open in mid-September, Millennium Tower will command some of the city's most breathtaking and unobstructed Central Park, river and city views.

A Residential Recovery

In the heart of the Lincoln Center area, Millennium Tower is already benefiting from the revitalization of retailing on Broadway, which is pulling along the apartment sector.

Bankers Trust research recently noted that as upgrading along Broadway continues, "apartment prices are firming and rents are increasing in this market." The merchant bank added that the opening of a Barnes and Noble superstore and Filene's Basement, along with four new mixed retail and residential projects near Lincoln Center, are providing a "boost to the Upper West Side neighborhood."

The city's steadily improving economy is another source of optimism. Last year, New York City showed its first year-over-year increase in employment (15,000 jobs) since August 1989, according to Bankers Trust. Bankers Trust estimates New York City will add another 25,000 jobs in 1994 and 40,000 jobs in 1995.

Why Owners Prefer Condos

Although interest rates are still relatively low and the city's economy is improving, two residential markets are nonetheless emerging in New York City, with condominiums rising and co-ops falling. What appears to be happening is a wholesale change in buyer thinking, with condominiums being viewed now as the preferred means of residential ownership.

In depressed real estate markets, coops often struggle, for buildings are frequently burdened by unsound underlying mortgages. Co-ops usually consist of a property lease, where each owner pays a portion of the building's underlying mortgage. This tends to contribute to high maintenance costs or increase a building's financial instability - particularly in buildings that are less than 50 percent occupied - for each piece (or unit) supports the whole.

Also hindering co-op ownership are some of the more archaic rules co-op boards have frequently imposed on would-be buyers. For example, co-op boards can require high down payments for buyers, sometimes 50 percent or more in luxurious neighborhoods. Naturally, this narrows the pool of potential buyers, a primary motive for such a policy. But whether this exclusivity is sound policy, especially in markets with vast oversupply and relatively few buyers, is debatable. Co-op boards also must approve any prospective owner, therefore leading to a time-consuming process and, inevitably, numerous "lost" buyers.

In addition, most co-op boards prevent owners from renting their units out for extended periods, sometimes even for just one year. Others prohibit subleasing completely. These restrictions offer prospective owners little flexibility.

Condominiums, in contrast, know none of these restrictions. Because owners have title to their own residential unit and are only responsible for their own mortgage, similar to buyers of a private home, condominiums are easier to buy, sell and rent, and as such, are more adaptable to market conditions. It is therefore not surprising to see condominiums in their second year of recovery, while co-ops are still feeling for the ground.

Increasingly, condominiums are being viewed by potential home buyers as the right vehicle for residential ownership in Manhattan. Although the market may remain challenging in the near future, the long-term outlook for condominium apartments is positive, as the last 12 months clearly indicate.