Found the perfect home in NYC that comes with its own outdoor space? Sounds like a dream come true. However, you may be surprised to see that the size of the outdoor space is not included in the listing.
It's still included in the price of the home. But, outdoor space is valued differently than interior square footage, and there is no steadfast rule for how to do it. So, how exactly do you come up with a valuation? Here is a complete guide to help you accurately assess the cost of an outdoor living space in Manhattan.
How is Outdoor Real Estate Valued?
It's no secret that the square footage of New York City real estate is very valuable. So buyers want to know that they're getting their money's worth. Even though private space outside an apartment is both precious and desirable, it’s not quite as practical as the space inside the home.
Most exterior space is completely unusable for several months out of the year due to the weather. Even in the nicer months, other factors can diminish your ability to fully utilize the outdoor square footage. So, even though apartments with outdoor space in NYC are highly desirable, the value of that space is priced differently than the interior space.
Generally, most industry professionals use 30-50% of the price per square foot of the interior to value the outdoor apartment space. However, there is no set rule, and it can vary depending on the type of space, the intended use, and a range of other factors.
Different Types of Outdoor Space
First, it helps to identify what type of outdoor space it is. Four different types of exterior areas are commonly found throughout New York City: balconies, terraces, backyards, and roof decks.
Balconies
Balconies are a common fixture in New York City. They are the small platform structures that hang off the side of a New York apartment outside a door or window. Balconies do not count as square footage; however, they do increase the desirability and appeal of the home. But they also tend to be small and don't add much to the apartment value because they are more of a luxury than a utility. According to a spokesperson at Hauseit, "On average, balconies could be estimated to be worth around 20-25% of indoor space."
Terraces
Terraces are a bit more valuable. A terrace is an open outdoor space that rests upon the building's setback. They are much more spacious than a balcony and offer greater opportunity for outdoor living. Terraces can have space for outdoor furniture, unobstructed views, and other amenities that make them highly desirable. Therefore, they tend to be valued on the higher end of the spectrum. According to the Wilkinson Lefevre Team at Keller Williams, "{Terraces} are considered the best, especially when they are square shaped and are off of the kitchen/dining area of the apartment. Usually, we assign a 50% adjustment value to setback terraces."
Private Yards
Private yards are another great feature that can increase your NYC property value. Backyards are a common feature of garden apartments, townhomes, and brownstones in Brooklyn. They are a bit rare but can be a coveted feature for families and anyone looking for a quiet oasis to escape the hustle and bustle of the city. However, it can be challenging to assign an exact value to backyards in NYC, and it depends on a range of factors, including size, access, privacy, views, and more. A good way to estimate the value is to look for similar outdoor spaces in the area and consider any unique attributes that may make your backyard more or less expensive.
Private Roofs
Private roofs are also a highly desirable outdoor space often found in NYC. Private roof decks are great for entertaining and often offer spectacular views and space for outdoor furniture. Along with terraces, they tend to be on the higher end of the spectrum regarding valuations. However, they are slightly less valuable because roof decks usually require a staircase to access. According to Yoreevo, disconnected roof space is worth about 30-35% of the interior space, while connected roof space is worth up to 40%.
Factors that Impact the Value of an Outdoor Space in NYC
The value of outdoor space is also impacted by several other factors that impact its potential uses and desirability. Here are the main factors that will influence the value of outdoor spaces in NYC.
Size and Shape
The size and shape are major considerations when valuing the space outside the apartment. Is it a massive backyard or a tiny Juliet balcony that you can barely stand on? Is it a perfect square with plenty of space for furniture, or is it an awkward shape that limits what activities it can accommodate? These are some questions you should ask yourself when evaluating outdoor space.
However, don't get into the trap of thinking bigger is better. A backyard that is double the size of another isn't necessarily twice as valuable, so there may not be a direct correlation between the square footage and the price. If the space is more than 50% larger than the home's interior, the contribution to the overall price is much lower.
According to Undivided founder Mukul Lalchandani, "There is also a thing with too much outdoor space, compared to indoor space. When buying a home, be sure the outdoor space is proportional to the indoor space. If you are buying a 500 sf studio and it has a 1,000 sf outdoor space that you can only use 5 months of the year, it probably won't sell that well compared to a 1,000 sf residence with a 500 sf outdoor space."
Condition and Amenities
Beyond the size and shape, you should also consider the condition of the space and any amenities present. Is the space clean and well-maintained, or could it use an upgrade? Is it nothing more than a small patch of grass or a fully furnished outdoor living space ready for entertaining?
Or, on the flip side, is there a noisy bar next door or neighboring apartments that overlook the area, creating privacy concerns? Similar to the interior, the condition of the outdoor space will influence its value. So, take note of any special features or upgrades that may make it more or less attractive.
One pro-tip Mukul recommends, "You will get a better return on investment if you upgrade your outdoor area, compared to selling a raw space."
Lighting and View
Lighting and view can also significantly impact the value of an outdoor space. Does the space get good natural lighting, or do the surrounding buildings block it? Does it offer breathtaking views of the Manhattan skyline, or are you staring at a brick wall?
Good lighting and a quality view can dramatically increase the appeal and functionality of an outdoor area. So, consider that when trying to estimate the value.
Mukul says, "Did you know that the best time to sell a home with outdoor space is the summer? This is when you get the most amount of natural light, it's enjoyable to step outdoors, and prospective buyers can imagine themselves in the sun, compared to being holed up in the winter."
How to Calculate the Value of Outdoor Living Space
Now that you understand all the different variables that impact the value of outdoor space let's look at a few practical examples. First, start by estimating the price per square foot of the property without the outdoor space. Then, consider the type of space it is and the other variables discussed in the previous example.
Let's say the interior of the home is 1500 square feet, and the price per square foot of the interior space is $1500. Here are a few different examples of how to calculate the value of the outdoor space.
Example 1: 50 square foot balcony with a modest view of the city
50 sf x $1500 x 25% = $18,750
So, in this example, a modest balcony could add an extra $15,000 to $20,000 to the purchase price.
Example 2: 400 square foot terrace with an unobstructed view
400 sf x $1500 x 50% = $300,000
A decent-sized terrace with an unobstructed view is one of the most coveted outdoor spaces you can have in NYC. As a result, it could contribute up to about $300,000 of the total purchase price.
Example 3: 500 square foot roof deck with a semi-obstructed view
500 sf x $1500 x 30% = $225,000
Even though the roof deck in this example is larger than the terrace, it still contributes less to the purchase price because the view is obstructed, and you’ll have to climb a flight of stairs to access it.
So, as you can see, many different variables can affect the value of an outdoor space. These are also just general examples, and the realities of valuing the cost of outdoor living space in NYC can be much more complex. The best way to get an accurate estimate is to work with an experienced partner who understands the nuances of New York City real estate.
If you are considering making a move in the near future, I highly recommend that you give our team a call, our premium service will ensure your home gets the undivided attention you desire. To get started, email us at sales@undividedre.com.
