New condominiums coming to market are getting cheaper, as developers work to capture buyers in the popular sub-$5 million market.
In Manhattan, the average unit price on condos approved for market by the New York Attorney General’s office has been steadily trending down over the past two years. Back in 2015, developers were shooting for an average unit price of just under $5 million, according to The Real Deal’s analysis of accepted offering plans for the borough. In 2016, that average had dropped 24 percent to just below $3.8 million. And it looks like the trend is here to stay. In the first four months of 2017, the analysis showed, the average accepted unit price in the borough was $3.1 million, down 18 percent from 2016’s average accepted price.
It’s more evidence developers are shifting gears to provide product for the lower end of the market.
“We’re trying to make sure apartments aren’t too big or too expensive, given where the market is,” said Steven Rutter, the director of new development at Stribling Associates. “It’s a larger strategy to design stuff that is more affordable. We know the under $5 million market is stronger.” Stribling is handling sales at Gluck + and Cogswell Lee Development’s 150 Rivington Street, a project that was approved for sale last year with apartments starting at $995,000. Rutter said many developers are now planning buildings with a different mix of unit sizes than two or three years ago. “Buyers are looking for value right now. There’s a lot for them to choose from.”
At Corcoran Sunshine Marketing Group, president Kelly Kennedy Mack said in some cases they are telling their developer clients to adjust their unit mixes to remain below certain prices — although it’s not a blanket approach.
“There’s been an intelligent and necessary response to supply and demand dynamics,” she said. Corcoran tracks when buildings open for sale, which the firm define’s as when a sales office opens, rather than when the AG approves the offering plan. Mack said five of the seven Manhattan developments that have become publicly available this year are targeting a mid-market price of between $1,800 and $2,400 per square foot. It’s now been a year since a development with an average asking price of $4,000 per square foot and above has opened, with Related Companies’ 70 Vestry the most recent last big-ticket item, according to Mack.
The shift towards cheaper new development product has also broadened the buyer pool, developers said. “We’ve introduced the new development market to people who haven’t been able to afford it it before,” said Dan Hollander, managing principal of DHA Capital. Its project at 75 Kenmare Street in Nolita, approved earlier this year, has an average unit price of $3.7 million, according to the AG’s office. The company opted for lower prices following the success of its previous project at 50 Clinton Street, according Hollander, which launched in 2015 offering one-bedrooms for under $1 million and two-bedrooms for under $2 million. All but four of the 37 units are in contract at 50 Clinton, according to StreetEasy data. Hollander said targeting the lower price points and building more efficient-sized apartments was “experimental” at the time, but paid off because there’s so much demand in the sub $5-million market. “A lot of people want to get into a new condo… It’s a very appealing prospect, but there’s been little out there in their price range,” he said.
For other developers, the lower part of the Manhattan market has always been a safe bet. “We’ve been working like this for years,” said Gaia Real Estate’s Danny Fishman. “We always said we don’t care about the top 5 or 10 percent.” The company is joining with Acro Group to develop the Vantage, at 97-unit condo conversion at 308 East 38th Street where 30 percent of the units are priced under $1 million. Fishman said their business plan is to keep the unit cost down, and to design buildings with fewer amenities so there are lower common charges. The Vantage, approved earlier this year, has a gym but no swimming pool. The firm took a similar approach at its Hell’s Kitchen condo conversion at 416 West 52nd Street, where Gaia launched sales last year with the sub-$3 million buyers as the target. “I’m giving up the market of the billionaire, but how many are there?” said Fishman.
CORE’s Emily Beare agreed that more new development product is becoming available for buyers who would normally only be able to buy resales. “For a few years the new development was geared towards the ultra-luxury, $10 million and above, and much larger units…. I think developers have switched direction a little for people who were priced out,” she said. The strategy shift may benefit buyers seeking new apartments with multiple bedrooms at a lower price point, she added.
Still, Beare said there’s still plenty of demand coming from buyers looking to spend upwards of $5 million on new apartments — particularly with developers now offering a suite of concessions like paying transfer taxes. “Now that they are seeing a bit of flexibility from the sponsor…. they want to revisit because they could get opportunities.”
Will Parker contributed reporting.
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