“Developers used the 2010’s to reshape the New York skyline with soaring condominium towers, many of which will struggle to sell units well into the next decade,” wrote Stefanos Chen for the New York Times recently.
Exuberant buyers, often from overseas, jumped in to these ultra-lux developments. The problem, however, was there simply were not enough luxury buyers willing to pay the enormous record-breaking prices for these units.
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Some of these condos are still selling but most often, these units are selling on the resale market for substantially discounted prices. Jonathan Miller, president of Miller Samuel Appraisers, said, “We think of the 2010’s as this boom of new (ultra-luxury)product never before seen but all of that is now a distant memory. The second half of the 2010’s) was a reckoning with reality.”
Manhattan wasn’t the only borough affected by these ultra-lux developments. Gentrification, rezoning and cheaper land near public transit hubs ignited new building in all of New York’s boroughs.
To help understand what’s coming in the 2020’s, it’s useful to look back into the 2010’s to reflect on what has been happening in all of New York’s boroughs.
According to the December 2019 analysis done by Nancy Parke’s Data Services, nearly one half of all new condo units came to the NYC market after 2015. Of the 7,727 new units that came to market, 3,695 of those units remain unsold.
Parke’s analysis of new condo construction from 2009-2019 looked like this:
- Manhattan – 23,207 new units and 530 new buildings
- Brooklyn – 20,328 new units and 1,383 new buildings
- Queens – 10,826 new units and 300 new buildings
- The Bronx – 366 new units and 17 new buildings
- Staten Island – 125 new units and 19 new buildings
In 2011, the average sale price of an ultra-lux condo was $1.15M, just 9% over resale prices. In 2019, that same average sale price of an ultra-lux condo was $3.77M, an 18% premium over the resale price. Additionally, this glut of unsold lux units, 7,050 more coming in 2020, according to the latest Halsted Development Marketing report, these “excess” lux units translate into 6 years of inventory at the current sales pace.
Gary Barnett, founder and president of Extell Development with some of the most pricey units on the market, said, “You never had this kind of supply in this price range. The $5M – $10M market is hammered – there’s way too much of it.”
Brooklyn, considered the “most changed borough of the decade” and now a brand unto its own, reflects the 2010-decade of price changes the most. Median rent in the Brooklyn neighborhoods of Williamsburg and Greenspoint now comes in at $1,854/month, a 54% increase since 2010.
What happens to these ultra-lux units in the 2020’s? It seems the only way “out” is deep concessions to buyers because, as Packe told the New York Times, “Someone who has $30M has four or five homes – they don’t need to buy another.”
Thanks to Stefanos Chen of the New York Times for source material.