It’s an odd time for new condo development to be making a comeback. The national economy is still in shambles, unemployment is high and getting a mortgage is still no picnic. And yet, industry experts are reporting unmistakable glimmers of life in New York’s long-suffering new condo market, which has struggled mightily since the financial crisis of 2008 and lagged behind the resale market on the recovery front.
Buyers are showing a renewed interest in new developments, brokers say. Suddenly, units in newly built projects — with prices marked down substantially from the boom — are moving faster than expected.
Of course, many buyers are still nervous about new condos, but their desire for a good deal is at least starting to outweigh their doubts.
Plus, with prices down but no longer free-falling, many potential buyers are less nervous.
“Buyers have been waiting for two years in many cases, and they feel they have waited long enough,” said Pauline Evans, a broker at Sotheby’s International Realty.
Developers are doing their best to capitalize on this new activity. For the first time since before the downturn, a critical mass of new product is now hitting the market. Some are condos entering the market for the first time after finishing construction, like Extell’s the Aldyn, where Yankees star Alex Rodriguez reportedly took a private tour before the condos even hit the market. Others, like the Sheffield and 1 Rector Park, are older projects that have emerged with reorganized financial structures and lower prices.
While activity may be picking up, that doesn’t mean that it’s back to business as usual for new developments. Until now, new development has been a notoriously nontransparent sector of the real estate industry, with buyers often unable to get basic information about their new buildings. But after an avalanche of post-boom lawsuits, buyers are demanding a much higher level of disclosure from developers and brokers before signing on the dotted line.
Similarly, some developers are getting frustrated with the conflicts of interest that can occur when brokers within large firms take on the marketing of new developments. In response, some are hiring their own staffs directly or migrating to firms that focus specifically on new developments.
Meanwhile, experts say developers who suffered with failed projects during the downturn should not be counted out going forward. Although it may be hard for them to get funding now, if they handled themselves well with their lenders during the worst of the downturn, they should be able to secure financing when the economy fully bounces back. Nonetheless, many New York developers are branching out while waiting for the economy to recover, often with smaller projects or new locations.
Many of them opted to do so because acquiring buildings to redevelop in New York is becoming too costly. In fact, as assets finally start changing hands again, experts say a mini-bubble is forming. That’s because so much dry powder has accumulated and some are overpaying for properties in their haste to deploy their capital.
For more in this month’s package on new development, rebooted, see the stories below: