Editor’s note: Weakness disguised as strength

It’s too early to tell, but it could be a lot cooler for residential real estate in New York this fall than previously forecasted.

Things that have looked like strengths, namely sky-high luxury prices, are now starting to look like potential weaknesses.

Real estate pros — even those who are usually cautious in their public statements — are saying those high price tags could start spooking buyers. They’re also acknowledging a decline in overall demand.

In some pockets of the city, brokers are also concerned that developers could overload the market with luxury condos.

We examine all this in our cover story by E.B. Solomont, dissecting what the future holds for the luxury market.

What happens this month could be telling. The month of September is always a big litmus test for the market, after the seasonal summer slowdown. This year that’s truer than ever.

In another story, we examine how brokers are seeing fewer “best and final” offers, which were ubiquitous earlier in the year.

Worrisome, too, is that luxury condo builders may have no “Plan B” for their projects. During the last cycle, developers built units that they were easily able to convert to rentals when the market went south. (Rentals, of course, perform better in downturns.)

This time, developers are building massive super-luxury pads, which are way harder to repurpose if the market shifts. (The logistics of turning a 5,000-square-foot apartment into ten 500-square-foot studios are quite difficult.)

Another continued sore point may be the industry’s relationship with the political establishment as we head into November’s statewide elections. Things arguably looked a lot better a few years ago when the pro-development Mayor Bloomberg was in office and Governor Cuomo wasn’t stained by fallout from the Moreland Commission (even if he is expected to win re-election in a landslide). That’s coupled with the fact that the industry’s biggest lobbying group, REBNY, is losing its longest-serving head, Steve Spinola, next year. Partly in response to all the uncertainty, the industry in doubling down on Cuomo. As reporter Hiten Samtani reports, one day after a damning news report that accused the governor of directing the Moreland Commission to stop investigating his real estate ties, some of the biggest names in the industry contributed to one of Cuomo’s biggest single-day campaign fundraising hauls, which raked in $329,000.

But, of course, the market is continuing to show signs of amazing strength as well.

(Whether you look at sky-high prices as the mark of a booming, or potentially declining, market is a matter of perspective, after all.)

We look at the residential records broken in 2014 so far. The list is extensive. It includes: NYC’s priciest co-op sale ever, the priciest Downtown sale and listing, the most expensive rental in the city, the most expensive Brooklyn listing, the priciest Queens condo sale and more.

Elsewhere, on the commercial and development fronts, retail rents are on the rise in emerging neighborhoods like NoMad, Chinese investors are pouring more money into deals, parking lots are disappearing in Manhattan because of frenzied building, especially on the West Side; and market-making developer Ian Schrager is set to unveil a number of buzzworthy Manhattan projects.

Another major trend that could have longer-term ramifications for the industry is the entrance of venture capital and tech money looking to shake up the real estate space. Investors are increasingly seeing the importance technology could play in real estate, particularly the residential side. Tech-infused firms like Urban Compass and CompStak are just the infancy of what’s being planned. We look at some of the biggest investors, who earlier were focused on digital darlings like Instagram.

“Real estate’s a massive asset class and may change slowly,” said David Frankel of Founder Collective, which invested early in Uber and BuzzFeed before getting interested in housing. “But there’s so much lucre in it.”

Another exec put it this way: “All of a sudden [investors] see everything as up for grabs.”

Enjoy the issue.