With Inventory Tight, Speculative Luxury Homebuilding Heats Up
Three years ago, Alessandro Cajrati Crivelli, an Italian who founded commercial developer Est4te Four, purchased a 1.3-acre parcel in Holmby Hills, one of Los Angeles’ most exclusive neighborhoods. The lot was right next door to the Singleton Estate (listed at $75 million and currently in escrow) in the heart of L.A.’s prestigious Platinum Triangle—the perfect location, Crivelli decided, to build his first single-family home. This week the result, a 16,000-square-foot Modernist mansion, is being quietly offered off the MLS for $48 million–making it the most expensive speculative home for sale in Los Angeles.
Crivelli says the wealth flooding from places like Russia and China into the U.S. attracted him to the gamble of building homes on speculation, without a buyer lined up. “It was not exactly a strong interest in doing single houses, it was just an opportunity that we decided to embrace,” he says. “With the configuration of Los Angeles, in the nicest areas, you can only build single family–so the supply is extremely, extremely limited.”
Crivelli is part of a comeback in speculative building of luxury homes in centers of wealth across the country. While speculative building helped create the housing bubble, it ground to a halt after the housing crash. As the market recovers, more high-end speculative properties are coming to the market. “The appearance of spec homes in the upper price range is an indication of the maturation of the housing cycle,” says Stuart Gabriel, director of the Ziman Center for Real Estate at UCLA. “It’s an indication of increasing levels of confidence on the part of home builders.” The latest evidence underscoring the demand for high-end properties: Fleur de Lys, an estate on and off the market for seven years (always at $125 million), recently closed after a sudden bidding war that resulted in a $102 million sale, according to the Los Angeles Times.
It’s not just Los Angeles. Three thousand miles away on Long Island, East Hampton-based spec builder Jeffrey Collé recently sold his first spec home since the housing crash, and is currently working on three others. Bridgehampton-based Farrell Building Company has some 40 spec homes in the pipeline, priced from just under $2 million to $10 million. The company is also building six speculative houses homes in Florida, priced from $4.3 million to $32.5 million. “We’re busier than ever at the moment. It’s a little bit of a wow factor, even for us,” says Travis Tinker, assistant operations manger. “This year is an all-time high.”
In Aspen, developers Austin Lawrence Partners completed renovation of an historic cottage in February and are reportedly asking nearly $18 million for the property, which includes a new modern wing. In Vail, a handful of spec properties are being developed at the higher end of the market, where buyers reportedly want something “new” or “refreshed.”. In Chicago, too, real estate reporters are noting a similar trend.