Are you one of the lucky New Yorkers who has outdoor space where they can enjoy dining al fresco, sip a drink or just relax? According to Jonathan Miller who is a top appraiser and does all of my firm’s market reports, one in seven residents that sold in the city last year had some type of outdoor space.
Of course, apartments are typically more expensive that have outdoor space however the good news is that the price for the outdoor space is generally one half of price of the interior space. If it is just a narrow balcony it could be a quarter of the square foot price of the interior space. I have been practicing real estate for over 20 years and that calculation was the same then as it is today. Some new developers recently have tried to price outdoor space the same as indoor space, but their attempt hasn’t really worked for them.
Here is an example: If you have an apartment with interior square footage of 2,000 sq. ft. and the value is $2,000 a square foot then your 500 square foot terrace would be worth $1,000 a square foot (½ the dollar per square foot of the interior square footage) or $500,000. Your apartment would be worth $4,000,000 plus the $500,000 terrace value or $4,500,000.
That said this is just a formula and the price for outdoor space can vary significantly depending on the combination of the amenities and time. So, this formula is literally just a rule of thumb.
Outdoor space adds a high value in a larger luxury apartment than in smaller apartments where buyers are more concerned with staying within their budget. It is more important to them that they get as much interior square footage for their budget. Outdoor space while nice is a luxury for them not an essential.
When considering looking at apartments with outdoor space you need to know the different types.
- Most balconies jut out from the building. They are typically smaller and narrower than terraces. Also, they can create a discomfort for people who fear heights. Some of them are as small as 50 square feet and have limited use. That said balconies are the budget friendly alternative to owning an apartment with a terrace.
- The smallest of balconies are referred to as Juliet balconies. While they can’t be used for people to sit outside they are great for planters with flowers and bring a bit of the outdoor experience inside.
- Terraces recede into a building which reduces a person’s anxiety about heights and allows for a great range of shapes and sizes. A deep terrace that can accommodate a table and chairs has much more appeal and more dollar value than one that is long and narrow.
Can a terrace be so big that it is actually less valuable? I have sold some apartments where the square footage of the terrace was more than 50% more than that of the interior space. In cases like this the value of the terrace drops off in incrementally according to Johnathan Miller a top appraiser and author of our marketing reports.
Other factors that can affect the price of a terrace negatively include parapets or other obstructions. Low floor terraces can be noisy and dirty if they are facing north and south streets not to mention the lack of security issue.
So, as you can see there are a lot of variables to take into consideration when deciding the dollar value of outdoor space. Your broker will be able to take all these variables into consideration and advise you about the value of outdoor space.