May. 17, 2008 - door or dollars? cost v. benefits for attended lobby
a reader writes
I have had an off-line email dialogue with a condo board member about the pros and cons of having an attended lobby in a Manhattan loft building downtown, in her case, part-time. On the one hand, some owners "just don't want a doorman. Even the best doorman possible, which [she reports] we do not have, cannot really do much for us in our building, which has a small lobby. Many of us find it more pleasant to come home to a quiet, clean and empty lobby than to someone there that we have to be pleasant to." On the other hand, there are "the typical arguments about safety and property value, etc.".
She wonders, "if there were some sort of formula about the value a doorman adds and the value that is lost for every dollar spent on common charges." What follows is the core of my response plus some additional thoughts since we corresponded.
money costs money
The easiest thing to do is to compute what the expense of having a door person in common charges is equivalent to in borrowing costs (roughly, representing the impact on purchasing power). Some parameters: assuming current mortgage rates around 7%, $665/mo as interest will carry $100k in principal; so if the attended lobby increased per-unit-common-charges by $665/mo, that represents a reduction in purchasing power for a buyer of $100k; if the common charge increase were $332/mo, that's $50k in borrowing power absorbed by the common charges.
real numbers! (dated, but real)
As luck would have it, I used a NY Sun article in September 2006 in my post How much is that doorman in the doorway? What owners pay for staff , which found that full-time door shifts would cost a 20 unit building $665/mo in per-unit-common-charges. Less than full-time coverage costs less; larger buildings share the costs over more unit owners ... you get the idea. (And, yes, labor costs have increased since Fall 2006, but this gives you an idea of the ballpark.)
So do the math to determine "cost" in purely dollar terms, and its impact on the buying power of a potential buyer.
whose value is it anyway?
One point I made to the reader who asked, is that having an attended lobby has a use value to current residents that is different from the re-sale value when an owner seeks a buyer for the unit. Both values depend on personal opinions about whether the dollar cost in increased common charges justifies whatever net benefits flow from having a door person, but use value for current owners depends only on the current owner's opinion whereas the re-sale value depends on whether potential buyers want an attended lobby at all, and then (if they do) on whether the dollars work.
Any idiosyncratic use value calculation will consider (1) deliveries, (2) convenience, and (3) safety issues, tempered by (4) privacy. In many loft buildings, there are various alternatives to having to have a door person to receive apackage, FedEx, dry cleaning, or even furniture -- from a regularly scheduled super being on premises to a corner store with a friendly staff to a neighbor who is home during the day. As I told the reader who asked, " [a]s for convenience (getting out of a cab with packages; residents juggling strollers or packages and keys from the sidewalk), your present door person may or may not help in that setting, depending on how well they see and whether they get off their butts". In other words, if the lobby attendant won't or can't see to open the door when it is raining or your hands are full or you have a baby in a stroller, there may not be much 'convenience' here. For many people concerned about convenience, having part-time door coverage during the day (when packages are being delivered, when children are coming home from school) can be worthwhile.
safety or nosy?
I find that it is pointless to 'argue' with people about safety. They either 'feel' that a given location is 'safe enough' for them, or they don't. But having an attended lobby might make the difference for some people. As I presented to the reader who asked, "‘Security’ is a vague and idiosyncratic ‘value’: (1) if your present door person cannot see much of the sidewalk, that’s not much help; (2) if your block is ‘desolate’ (as [parts of 'downtown'] can be at night), that may be more of a concern; (3) if your block has other ‘active’ buildings at night, the added safety from your door person is more limited. First time buyers and people not familiar with loft neighborhoods tend to value each these things more highly (i.e., want a door person) than others; but [larger] lofts don’t attract many first-time buyers, and people who don’t like downtown tend to not buy (d’oh!) in your area." For many people, an attended lobby contributes to feeling secure more at night (when people are coming home, in the dark) than in the daytime, which is probably why some buildings have part-time coverage only at night.
Of course, the downside to having someone who can watch you and your guests come and go is that you have someone who can watch you and your guests come and go. There is certainly a market segment of people who so value their privacy that they view having an attended lobby as a negative at any price. My sense is that this segment is much larger among people who prefer, all in all, to live downtown than to live on either the Upper East or Upper West Sides.
what is a buyer to think?
The answer about re-sale value used to be easier and simpler: there was a large segment of downtown loft buyers for whom not having an attended lobby was not a deal-breaker and there was a large enough segment of downtown loft properties without door folk that there was little or nocompetitive disadvantage of re-selling in a no-door building. In other words, there'd be 'enough' buyer interest in a (say) $3mm no-door loft that a seller would get a true market price, without a big discount.
tastes change, markets change
While I still believe that is true, the proliferation of uber-loft developments (including small 'boutique' buildings with amenities such as concierges) changes the property mix a bit, and attracts more of an uptown crowd with tastes that include an attended lobby. I still believe that there are 'enough' loft buyers to have a healthy market for no-door lofts.
appraisers know what they know
I don't know the formula or framework for analysis that appraisal firms use when the value lofts for mortgage purposes, but I know they assign added value for an attended lobby. Whether they have data specific to the loft markets that controls for door vs no-door, I don't know. Giventhe relatively small sample size, I suspect it is very hard to get straight comps that isolate the door vs. no-door additional value.
Your thoughts?
© Sandy Mattingly 2008
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