Manhattan’s muddled luxury market
A rough year for the top of Manhattan’s residential market may have started to see a turnaround near the midway point of 2019. In June, Amazon’s Jeff Bezos set a Downtown record with his $80 million purchase of a triplex at 212 Fifth Avenue, while hedge fund honcho John Griffin paid a whopping $77 million to buy financier Philip Falcone’s Upper East Side townhouse.
The end of June also saw Manhattan’s lagging luxury sector have its best week of the year with 29 contracts signed for a combined $291 million, per a market report from Olshan Realty. The contracts for units signed at $4 million or above were split among 22 condominiums, five co-ops and two townhouses — the ninth week in a row with 20 or more sales — and came on the heels of another week in which 22 contracts were signed totaling about $195 million.
But industry sources were skeptical about a broader recovery, telling The Real Deal that the string of big deals says more about the overall economy than it does about the luxury market, which is still hurting. Luxury sales in Manhattan were down 3.2 percent during the first quarter, while days on the market rose 23.5 percent, according to data from appraisal firm Miller Samuel.
“It’s clearly a paradox where you have a softening super-luxury market segment that occasionally churns out all-time records,” said Jonathan Miller, head of Miller Samuel. He noted that the super-luxury market is an entirely new segment created in the wake of the financial crisis. “There was a perfect storm of a flood of capital looking for higher returns after [2008] and a lot of wealth creation coming out of Asia that didn’t exist a decade ago,” he said.
Ultra-rich buyers in Manhattan are now largely domestic and capitalizing on a buyer’s market. Compass’ Michael Graves said the current wave of buyers made their fortunes in technology and communications, and they’re gravitating Downtown. “They’re buying up properties that would never have been purchased—or, frankly, built—10 years ago,” Graves said. “We’re seeing a new concentration of wealth in north Downtown, north of the Flatiron.”
New York City remains home to a high concentration of billionaires — at least 105, per a recent Wealth-X report — which helps facilitate high-end sales. Liam Bailey, global head of research at Newmark Knight Frank, told TRD that “there is a willingness to buy and there’s a feeling that this is an opportunity to strike.” Brokers also said buyers were eager to close deals before July 1, when New York’s new mansion tax went into effect.
— E.B. Solomont and Eddie Small
Brooklyn, Queens rents near $3K mark
Rental prices in two of the city’s outer boroughs continued their upward march as property owners continued to cut back on concessions heading into the busy summer rental season.
In Queens, landlord discounts dropped in May for the third consecutive month, to 33.3 percent, almost half the record rate set in April 2018, according to a Douglas Elliman market report. At the same time, the median rental price in northwest Queens surged 15.4 percent in May, to $3,000, when compared to the same time last year. Elliman data found that the net-effective rent, which includes concessions, jumped 17 percent in Queens, to $2,908. In Brooklyn, the median rental price increased 2.6 percent year-over-year in May, to $2,900.
Jonathan Miller, Miller Samuel’s CEO and author of the Elliman report, said it wasn’t immediately clear to him why rental prices are rising faster in the outer boroughs. He noted that Brooklyn is a tight, fast-moving market with strong demand. Development in the borough has often skewed toward the luxury tier, he said, which can affect rental prices.
The data from Queens should be considered with new development in mind, Miller said. New residential projects usually generate a higher volume of rentals than older buildings in Manhattan, which can affect overall rental trends. “[In May], 37 percent of [Queens’] rental activity was in new development. In Brooklyn, it was 19.9 percent, and in Manhattan, it was 6.5 percent,” Miller said. “The higher the rental activity is in new development, the more subject to skew the trends are.”
Elliman’s report also revealed that the number of new leases in Queens rose 15.9 percent in May, to 379. It was the 10th time in 11 months that a year-over-year increase in new leases was recorded in the borough.
— Sylvia Varnham O’Regan