City Roof Decks Raising The Stakes On Housing
CNBC, January 2017
The push toward urban living is pushing the envelope for real estate developers, forcing them to become more creative with the space they have.
That means squeezing taller buildings into slimmer spaces, multiplying the housing stock with micro-units and taking living space over the top — literally. Roof decks are raising the stakes.
"The world is shifting toward higher density housing where you don't have much of a yard, or no yard at all and roof decks are becoming the new yard, so you'll see triplex or a large condo complex where the roof is the yard," said John Burns, founder of California-based John Burns Real Estate Consulting.
The cost to builders of adding the decks is easily made up in the returns. Pete Reeb, principal at John Burns, ran the numbers and found the following: More bare-bones decks typically cost builders $15,000 to $20,000 to add to a home and generate $20,000 to $30,000 in revenues.
Larger and more extensive decks are more typical in most markets and cost an average $32,000, but add an average $44,000 in revenues. Roof decks add an average of 6 to 8 percent to the value of a home.
Of course those returns can vary dramatically depending on the view and how tricked out the deck is. It also depends on location, and whether or not the demographic of buyer in the neighborhood really wants that added outdoor space.
Source: Evan Joseph | Instrata
Roof decks are an important amenity at new apartment buildings in New York City.
"The average person in New York City, if they have a weekend home, they may not want to feel like they're paying a lot of additional money for outdoor space," said Raphael De Niro, a real estate agent with Douglas Elliman in New York.
If it's a penthouse priced over $10 million, he said, "there is a lot of nuance to it. If you're talking about a certain price point, and anything at the top of a building, most buyers expect it to have outdoor space."
And that space has to be more than just space. Outdoor kitchens, gas lines, high-end furniture, partially covered trellis areas all add to the value and are expected in a luxury property. De Niro estimates the value of these roof decks at about a half to a third of interior square footage, depending on how upscale the outdoor space is.
Both urban and rural areas are seeing a rise in roof living, and the same rules seem to apply when it comes to value.
"Revenues attributable to roof decks can be even higher in areas where the roof deck also opens up desirable views and creates view premiums (ocean, lake, natural open space, city skyline)," Reeb wrote. "Despite higher home prices, new home projects with roof decks often sell at a faster pace than projects without decks."
Source: Evan Joseph
Roof decks are also becoming standard fare at new luxury rental apartments. As rents and demand rise, tenants are looking for ever more amenities, and outdoor space is a big one.
"It's the first thing they tour," said Caitlin Porpora, concierge for Instrata Lifestyle Residences, a portfolio of luxury rental buildings in New York, Washington, D.C., Dallas and Los Angeles. "I think especially in New York City, where you have these apartments, it doesn't matter how much money you put into them, the roof deck is really an amenity that is very special to the residents. It has to have a wow factor."
Residents at Instrata properties can use the roof decks for private parties, but the company will also throw special building-sponsored events to entertain tenants. While these are luxury buildings with high rents, their residents — many of them younger millennials — value the outdoor space even more than some owners do.
Source: Evan Joseph | Instrata
"It's very important because that age group doesn't have the money to go to the Hamptons or that weekend spot to get away to. Even though these buildings are super expensive, and even though it may seem like they have extra money, they're spending all of it on rent," Porpora said.
But with so many private and public roof decks sprouting atop city buildings, more people are letting it all hang out, which begs a little higher education in higher living. Porpora offers her top tips for rooftop etiquette: