New condo sales
hit a new pace

Brokers say lack of urgency among buyers and influx of new product
is slowing market

Jan.January 02, 2015 01:00 PM

As 2014 wound down, a curious trend emerged among real estate heavyweights. Even amid a new development sales boom, one top developer after another voiced concern about the ultra-high segment of the market.

Combined with expectations for an influx of new condos that will come online in 2015, the developers’ anxiety made waves among marketers and brokers. “I see all these people still building buildings for that market,” said Andrew Gerringer, managing director for new business development at the Marketing Directors. But, “You see the guys building — Kevin Maloney, [Gary] Barnett — they’re saying it’s a slowdown.”

Of course, few would argue that 2014 was a flop in terms of high-end new development. The number of sales at new development properties priced at $10 million and up rose 39 percent last year, according to Corcoran Sunshine Marketing Group. Meanwhile, prices continued to climb: The average price for apartments in new developments in Manhattan was $3.8 million, up 3 percent, while the average price per square foot rose 2 percent to $2,314.

Still, it’s less clear how some of the newest projects are faring, since many deals have yet to close.

Overall, the pace of new development sales is slowing. According to Corcoran Sunshine, the total number of new development sales at all price points in Manhattan in 2014 was 1,785, a 25 percent drop from 2013.

Meanwhile, new residences spent a median of 80 days on the market in 2014, according to data from real estate website StreetEasy, a 21 percent increase from 66 days in 2013.

And industry veterans said no one is sure how deep the ultra-luxury market is.

“It’s somewhat of a market blind spot, because of the contracts held back until projects actually close,” said Jonathan Miller, president of real estate appraisal firm Miller Samuel. He noted, however, that inventory is up. “The influence of that is that the pace is slowing,” he said. “Part of this equation [is] consumers waiting to see what’s coming on. The sense of urgency has been removed.”

Lagging luxury

For better or worse, Extell Development’s One57 has become a bellwether for ultra-luxury condo development — which explains the outsized interest in the sales slowdown at Barnett’s 94-unit tower.

Click to enlarge

Click to enlarge

While closings at One57 dominated the list of priciest sales of the year only one unit at the building sold during 2014’s third quarter, leaving 24 apartments on the market. In May, Unit 58A — the building’s first flip — sold at a discount of $2 million off the asking price of $36 million.

“When Gary started One57, he started this whole super-luxury category.… That price range and that category didn’t exist,” said Roy Kim, the former Extell design executive who is now head of new development at Urban Compass, which is currently working on 12 projects worth $2 billion, including 287 Park Avenue and 125 Elizabeth Street.

While there are a number of buyers who can afford those prices, Kim said, it’s not the kind of inventory that sells every day. He noted there were fewer ultra-luxury projects announced in recent months.

Fears of an inventory glut at the top of the market have fueled speculation about the pace of sales at Zeckendorf Development’s 50 UN Plaza, Harry Macklowe’s 432 Park and the Baccarat Hotels and Residences, where the condos may have had a harder time selling than the hotel rooms, which reportedly are close to being sold to investors for $2 million each.

“It all comes down to simple supply and demand,” said Nest Seekers’ Ryan Serhant, one of the stars of Bravo TV’s “Million Dollar Listing New York,” who said competition has increased on the upper end of the market. “At one point, it seemed like there was just 150 Charles, 56 Leonard and One57,” Serhant said. “Now, there’s a new one almost every week.”

Sticker shock

As a rule, new development prices eclipse the resale market.

The median asking price for new development units was 128 percent higher than the median asking price for the overall market in 2014, according to StreetEasy. In addition, the median 80 days that new development units spent on the market was well above the 56 days for the overall market.

“There are two key facts that set units in new development buildings apart from the rest of the market: they are far more expensive and will take longer to sell,” said Alan Lightfeldt, StreetEasy’s director of research.

Stuart Siegel

Stuart Siegel

Stuart Siegel, head of the brokerage Engel & Völkers NYC, said the top 1 percent of the market is resilient; whether the rest of the luxury market can keep up is another matter. “I just don’t see how resilient that market’s going to be” to price increases, he said.

Siegel said that he’s seen several buyers walk away from apartments that were priced too high, confident that there’s enough product on the market to find something else within their budget. For example, a client who was “very, very excited” about a $5 million new development unit walked away from the condo after a bidding war ensued. “The ultimate price was above the ask, by about 10 percent to 12 percent,” Siegel said. “They dropped out.”

“Winning the trophy isn’t what it’s all about,” he said.

Eddie Shapiro, president of Nest Seekers International, said the energy in the market has shifted. What used to be a “frenzy” of, “‘I have to buy, I have to buy,’ is now, ‘Let’s look at all options and see what’s out there.’”

‘Affordable’ luxury

According to Corcoran Sunshine, the 25 percent drop in new development sales was driven by a lack of entry-level and mid-market luxury product, defined as product priced below $2,300 per square foot.

One Morningside Park

One Morningside Park

“Affordable luxury is really what’s determining the day in terms of absorption and in terms of sellouts,” agreed Shlomi Reuveni, managing director of Town New Development. He echoed other market observers in pointing out that it’s the high cost of land and building that’s driven the prices of new condos. That, in turn, has raised the bar for the quality of new development.

For example, One Morningside Park, a 22-story condo building at West 110th Street built by Artimus Construction, is 85 percent sold, said Reuveni, and the average asking price is $1,769 per square foot and rising. “I believe for development today, if you build it well, you will sell. The high price points will sell, as well,” he said.

For Nest Seekers’ Shapiro, affordable luxury means product between $1 million and $5 million; buyers with $10 million to $15 million to spend have ample choices.

“The market is dying for [relative] bread-and-butter,” said Shapiro. “For two or three years, we’ve just been seeing the mega projects.”

At developer Michael D’Alessio’s 230 East 63rd Street, Nest Seekers took over marketing in mid-2014 and sold four out of six units within 30 days, according to Serhant. Prices included a 1,734-square-foot two-bedroom that sold for $3.25 million.

“It’s the East Side, condos close to Second Avenue. There’s nothing else new in that location that people are jumping on top of,” Serhant said. “Everything on the Upper East Side is either very expensive or very old. So there was strong demand for it.”

New neighborhoods

Despite buyer hesitation in parts of the luxury market, condos located Downtown are selling briskly.

Statistics from real estate website CityRealty show 36 percent of new development sales were Downtown in 2014, followed by the Upper East Side, with 29 percent. But after new development inventory was snapped up in 2013, the number of sales Downtown dropped 45 percent in 2014 to 673, according to Corcoran Sunshine. Meanwhile, the number of sales in Midtown jumped 152 percent to 313 sales as new buildings were introduced.

At 100 Norfolk, a 38-unit cantilevered building on the Lower East Side, sales launched in mid-September, and the building was 70 percent sold as of mid-December, said agent Ariel Tirosh of Douglas Elliman. The developers, Adam America, The Naveh Shuster Group and The Horizon Group, raised prices twice. “It’s a very striking building,” Tirosh said. “Being in this kind of gritty area, with a lot of contemporary culture, the architect was able to attempt something he wouldn’t in a more traditional area.”

30 Park Place

A rendering of 30 Park Place

Similarly, units at the Robert A.M. Stern-designed 30 Park Place, which is being developed by Silverstein Properties, are going fast. The building is over 50 percent sold, six months after sales launched.

“It’s an exceptional product, and Downtown is becoming a destination again,” said Stephen Kliegerman, president of Halstead Property New Development Marketing, who is not involved in marketing the building.

Urban Compass’ Kim said that developers who’ve designed product with native New Yorkers in mind are reaping rewards. As an example, he cited Matrix Development’s 12-unit condo project, Seven Harrison Street in Tribeca, where 10 units are in contract. Kim said the blended sales average is $2,600 a foot, up from the pro forma price of $2,000 a foot. Urban Compass is marketing the development.

Roy Kim

Roy Kim

Another example is Quinlan Development Group and Tavros Development Partners’ One Vandam, between Prince and Spring Streets on the western edge of Soho. Kim said the building, which is being marketed by Stribling, is banking on neighborhood to appeal to buyers. “It’s very much about New Yorkers who know New York and know it’s an interesting location,” Kim said, “versus if you’re reaching someone in China or Russia who knows New York only marginally, the bigger marquee neighborhoods and intersections would appeal to them.”

Dave Maundrell, founder of, cited tremendous interest in three Brooklyn developments with a range of prices, a sign, he said, of broad interest in the borough.

At developer Boaz Gilad’s 954 Bergen, in Crown Heights, brokers gave tours to 80 prospective buyers in the span of four hours on Dec. 14, Maundrell said, and there were contracts out on 16 of 36 units within six days. Prices are around $900 a foot.

Similarly, Maundrell is seeing high demand at Gilad’s 531 Vanderbilt in Clinton Hill ($1,050 a foot), where he’s scheduled 130 appointments to see 18 units, as well as Greystone’s Waterbridge 47 in Dumbo, which has 500 appointment requests for 25 units. Prices there are almost $1,500 a foot, he said.

“People who are buying today, they lived through the downturn in the market already,” he said, adding that they see the potential for price appreciation. “You have the investor mentality in the typical customer, who wants to live there, too.”

Sweet spot at $2,000 a foot

Along with developments like Seven Harrison, buildings in the $2,000 per square foot range have the most traction with buyers, brokers and marketers said.

“I think that market has still got some legs to it,” Gerringer said. “There’s not enough product.”

At Time Equities’ 50 West, 40 percent of the units sold after five months. “We’re selling faster than projected,” said sales director Roberta Axelrod, who said the first units will close in 2016. The 191-unit building, which is in the pre-construction phase, has one bedrooms starting at $1.82 million ($1,723 per foot) and two-bedrooms listed for $3.98 million ($2,292 per foot).

At a condo conversion at 498 West End Avenue, Halstead sold five units within a week. Units are priced at $2,196 per square foot, according to StreetEasy. “In this price point, we saw a very good demand 12, 18 months ago [and] we’re seeing even more now,” said Kliegerman.

Related Articles

(Image by Wolfgang & Hite via Dezeen)
Hudson Yards megadevelopment inspires a new line of sex toys
Hudson Yards megadevelopment inspires a new line of sex toys
Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)
Ruby Schron lands $500M refi for sprawling Queens apartment portfolio
Ruby Schron lands $500M refi for sprawling Queens apartment portfolio
Wendy Silverstein (Credit: Getty Images)
Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
Suneil Setiya and the One Hyde Park complex (Photos via Wikipedia Commons/Rob Deutscher and Synergos)
Phat flat: Hedge funder nears deal for $153M London penthouse
Phat flat: Hedge funder nears deal for $153M London penthouse
The Venetian and The Palazzo in Las Vegas. (Getty, The Venetian)
Sands Corp. leaving Las Vegas in $6B sale of properties
Sands Corp. leaving Las Vegas in $6B sale of properties
Gulf Islamic Investments Chairman H.E.  Mohammed Rashed Alnasri with Paris’ Altais Towers. (GII, Reichen Et Robert & Associés)
UAE-based GII closes its biggest trade with $301M purchase of Paris’ Altais Towers
UAE-based GII closes its biggest trade with $301M purchase of Paris’ Altais Towers
Mack Real Estate CEO Richard Mack and one of his new hotels at 51 Nassau Street. (Getty, ING)
Mack Real Estate takes over 7 distressed Manhattan hotels
Mack Real Estate takes over 7 distressed Manhattan hotels
1440 Broadway and CIM Group’s Shaul Kuba (Google Maps, Getty)
CIM closes on $400M refi for 1440 Broadway
CIM closes on $400M refi for 1440 Broadway

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