Developers in Manhattan can breathe a sigh of relief: New condo inventory is finally falling in the borough.
The 6,302 new-development units in Manhattan at the end of the second quarter represented an 11.5 percent drop from 2019, according to a report by Brown Harris Stevens Development Marketing.
A drop like this hasn’t been seen since about 2013 when the market began to bounce back following the Great Recession, said Stephen Kliegerman, BHS Development Marketing president.
It’s a sign that buyers’ confidence is back and driving sales at a brisk enough pace to reduce the Manhattan condo glut that was plaguing developers, lenders and brokers even before the pandemic turned the borough into a ghost town.
“Everyone was concerned that there was going to be 10 years worth of inventory, the New York City real estate market was going to be devastated by this,” Kliegerman said. “Fast forward to July of 2021 and low and behold, we’re absorbing units at a faster pace than we have in a decade.”
Builders, not just buyers, play a role in reducing the condo glut. The drop in inventory means developers are putting fewer units on the market than buyers are taking off.
The report looks at sponsor units on the market or in buildings that are for sale, as well as units in buildings that have not launched sales but are fully financed.
Four hundred ninety-six sponsor units across new developments were listed as new inventory in the second quarter.
The biggest changes in new development inventory occurred in Midtown West, which had 62 percent more units than in the same quarter of 2019, and Lower Manhattan, which had 51 percent fewer.
If contracts for new development condos continue to be signed at the current pace, about 2,000 would be sold by the end of the year, which is 30 percent more than the annual average, said BHS Development Marketing managing director Robin Schneiderman.
Any remaining new development inventory would be sold in as little as 3.5 years.
Lower inventory alleviates financial pressure on sellers and sponsors, as they can produce and sell units and quickly move on to the next one, Kliegerman said.
“If we’re absorbing units, that means developers will continue to build units in the future, adding new inventory, developing underdeveloped areas of the city and providing the latest and greatest in amenities and finishes for future buyers,” he added.
It helps that the majority of new projects offer completed products, which often result in contracts signed at higher rates.
“We anticipate another 4,000 units in the pipeline coming to the market over the next two years including several previously stalled projects coming back online,” Schneiderman said.