In Philadelphia in the 1980s — the decade in which the Phillies won the World Series, city police dropped a bomb on a West Philadelphia neighborhood, and the Frankford Slasher killed at least a half-dozen women — the City of Brotherly Love also made history in a quieter way: selling its first million-dollar condo.
Compared with its urban neighbor just 100 miles north — New York City was no stranger to million-dollar listings, even then — the nearly $1.3 million purchase at the Rittenhouse Hotel and Condominiums in 1989 was unprecedented for Philadelphia, a city then battling massive population decline and job loss, and where the median price of a home hovered around $40,000.
Now, of course, real estate in Philadelphia is an entirely different landscape. Once an oddity, million-dollar condo listings are no longer rare. In 2017, the city recorded 144 deed transfers of condos costing $1 million or more — the highest volume of million-dollar sales in the city's history. Even more, Philadelphia real estate continues to break big records: In December, the sale of developer Tom Scannapieco's 500 Walnut penthouse — once rumored to have been purchased by Beyoncé and Jay-Z — finally closed for $17.03 million, the highest price in city history, going to a local buyer.
The combination of record-breaking prices and volume has produced what many observers have begun to call Philadelphia's first, robust ultra-luxury condo market. Since the housing recovery began in 2012, Center City has increasingly seen condo listings for $5 million, $10 million, $15 million or more — prices unheard of 10 years ago. In the last week of January alone, more than a dozen Philadelphia condos were on the market asking at least $4 million — the price point that many observers agree defines the local ultra-luxury segment. It's estimated that even more ultra-luxury units in that price range are available for sale, despite not being listed publicly online.
Listing an ultra-luxury condo is one thing, observers say. Selling it is another.
Since Philadelphia's ultra-luxury condo market burst on the scene with projects such as Scannapieco's 1706 Rittenhouse and Craig Spencer's Residences at the Ritz Carlton, the response from buyers, observers say, has generally been strong — with some exceptions. Many high-end condo buildings have experienced tremendous success, selling units at record-breaking speed and price-per-square-foot, property records show. Others, meanwhile, have struggled to find permanent owners, with some ultra-luxury units — and even penthouses — sitting on the market for many months or years.
The difficulty that developers and owners face in selling some of Philadelphia's poshest penthouses and units stems not from diminishing demand — if anything, data show, Philadelphia is becoming wealthier. Instead, ultra-wealthy buyers are ultra-choosy, observers say. And, with Philadelphia lacking the same long history of strong real estate price appreciation that other cities such as New York City and Miami have historically seen, many buyers are apprehensive about being a trailblazer in the ultra-luxury market.
"It's not that we don't have the buyers who could very well afford it, but I think they are sometimes a little gun-shy about being the big-fish buyer," said Valerie Patterson, director of marketing at Kurfiss Sotheby's International Realty. "You have seen it happen a couple of times, with 500 Walnut and 1706 Rittenhouse penthouses. … I think that could help give some confidence to some of those very upper-end buyers."
Indeed — with the exception of a few anomaly sales — the richest buyers in Philadelphia have largely stuck to sales in the lower million-dollar range within the last few years. According to an analysis by Drexel economist Kevin Gillen, using data from City Councilman and real estate broker Allan Domb, only eight of 144 condo sales in 2017 attained prices of $4 million or higher. (Gillen said a few transactions may be missing from the list, given a two-to-three week lag in data.) In contrast, 65 percent of the condos — 95 in total — purchased last year were for prices of between $1 million and $2 million.
Even with sales hovering around the lower-end of the million-dollar market, Philadelphia has, over the years, still experienced multiple unparalleled sales. In 2010, Scannapieco sold his penthouse at 1706 Rittenhouse for a record-breaking $12.5 million — commanding more than $1,600 a square foot, an all-time high in Philadelphia for a condo at that time. Six years later, the top floor of the Residences at the Ritz Carlton sold for $12 million. The top floor of the Residences of Two Liberty Place sold for $10.9 million in 2016, too. And then, in December of 2017, Scannapieco broke the record again by selling his 500 Walnut Penthouse for $17.03 million.
To be convinced to buy in that price range, ultra-luxury buyers need more than previous high-price sales to lure them to the market, local observers say.
"The ultra-luxury buyer does not want to compromise on anything," Scannapieco said. "They want to live in what anyone in America would consider a perfect house on a perfect street in a perfect neighborhood. … That applies to the size of the rooms, the height of the ceilings, the street, the neighborhood, who else lives in the building."
"Just because you have a unit that is high up in a building doesn't mean you have the right product," he continued.
Determining what kind of features or finishes today's ultra-luxury buyers want can be a gamble, both the developers and real estate agents acknowledge. For developers, condos are considered one of the riskiest real estate investments largely because margins are small and budgets are tight, meaning that developers generally will not make a profit until 80 percent to 90 percent of units are sold, industry experts say.
In other words, choosing the wrong location, design, or price — and having units sit unsold — can be devastating.
Meanwhile, real estate agents say, it can be difficult for resales of previously owned condo units to compete with newer, sleeker units.
"You know darn well that [a buyer] has looked at every other ultra-luxury unit" before finally buying one, said Steven Mullin, president of Econsult Solutions, a Philadelphia economic consulting firm.
Still, developers and real estate agents trying to sell ultra-luxury units that have been listed in Philadelphia for months or years say they are not worried.
"Selling a piece of property — an exceptional piece of property — takes time," said Melanie Stecura, a Kurfiss Sotheby's listing agent on a $14.5 million property, Unit 4604 at the Residences of Two Liberty Place, which has been on the market as a resale for more than eight months. The property, on half of the 46th floor, includes 2,400 square feet of massive outdoor space. "I expected this to take longer than a typical luxury property."
And at the Residences at Ritz Carlton — where two entire floors of raw penthouse space remain unsold — Gary Greenip, vice president of sales operations, said there are no plans to slash the prices on three available raw-space units, listed at $14 million, $8.1 million, and $7.6 million.
Developer Carl Dranoff, who recently finished the penthouse condo at One Riverside, said his team expects the 4,409-square-foot unit — which includes an additional 1,700 square feet of outdoor living space — to move quickly. The two-story condo featuring floor-to-ceiling windows, an in-unit elevator, and two roof decks is priced at $7 million.
"An ultra luxury penthouse-type unit that's priced appropriately sells very quickly," Dranoff said. "And we have had no issues selling penthouses in any of our buildings because we price appropriately."