Buyers taking advantage of New York City’s condo glut

Half of Extell’s current projects will lose money, and it’s not alone

New York /
Apr.April 02, 2021 11:45 AM
The soft market for luxury units has some developers hard up. (Getty)

The soft market for luxury units has some developers hard up. (Getty)

One of economists’ favorite expressions is Herbert Stein’s “if something cannot go on forever, it will stop.

Just ask luxury condo developers.

Contrary to the belief of activists who believe New York City rents and home prices defy gravity, builders cannot keep apartments empty indefinitely in a Captain Ahab–like quest to land a whale of a buyer.

They must offer concessions and cut prices to move units before their lenders foreclose, even if they buy time with an inventory loan — secured by unsold units — to repay construction loans that come due.

That’s exactly what has happened in New York City, where the luxury market has seen prices erode since 2017. Prices have slid even further after pandemic turned the central business district into a ghost town last March.

In response, shoppers are beginning to snap up homes for cheap, at least compared to the prices of a few years ago. “A home buyers’ bonanza in Manhattan,” a New York Times article deemed it Friday.

As the story noted, developers have been slashing condo prices by as much as 50 percent in Manhattan, where the market is weaker than in Brooklyn and Queens, relative to what it was. “From soaring condos in affluent enclaves like Tribeca to boutique buildings on gentrifying blocks in the East Village, Manhattan is awash in price cuts,” the article said.

Bloomberg News reported that 97 percent of the 2,457 Manhattan homes that sold in the first quarter of 2021 went for at or below the asking price, the highest share since 2009, according to a Miller Samuel analysis.

Some projects are converting to rentals or selling units in bulk to investors at a discount.

Even famously successful builders are seeing red ink in the depressed condo market. Extell Development’s Gary Barnett admitted to the Times that he would lose money on three of his six current projects.

Barnett then delivered a quote unlikely to join Stein’s in the pantheon of economic classics. “From here on in,” he declared, “it has to go up.”





    Related Articles

    arrow_forward_ios
    One Manhattan Square Extell Development CEO Gary Barnett (Credit: Curbed NY)
    Extell lands $690M refinancing package for One Manhattan Square
    Extell lands $690M refinancing package for One Manhattan Square
    Clockwise from left: John D. Rockefeller, Izzy Englander, Steven Mnuchin, David Koch, Jacqueline Bouvier, and William Zeckendorf (Credit: Getty Images and StreetEasy)
    For 15 years, David Koch lived at the world’s “richest building”
    For 15 years, David Koch lived at the world’s “richest building”
    Extell Development's Gary Barnett (Credit: Getty Images and iStock)
    Chelsea residents paid Gary Barnett $11M to protect their views from a planned tower
    Chelsea residents paid Gary Barnett $11M to protect their views from a planned tower
    Man pluggin ears in front of construction
    More myths, drivel and balderdash hurting real estate
    More myths, drivel and balderdash hurting real estate
    Terra Capital's Vik Uppal, RedSky's Benjamin Bernstein with 658 Driggs Avenue and 625 Driggs Avenue (Terra, ICSC, StreetEasy)
    RedSky founders accused of failing to repay bailout
    RedSky founders accused of failing to repay bailout
    Arthur Zeckendorf and Gary Barnett with 1289 Lexington and Central Park Tower (Terra holdings, Getty, RODE, Central Park Tower)
    The bargain hunters: Buyers target cheaper new development units
    The bargain hunters: Buyers target cheaper new development units
    Gary Barnett with Central Park Tower (Getty)
    Central Park Tower condo sells for $20M off asking
    Central Park Tower condo sells for $20M off asking
    (Getty)
    The conspiracy theories plaguing real estate
    The conspiracy theories plaguing real estate
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...