Weighing a condo glut

From the converted Plaza Hotel to Place 57, from developer Jules Demchick to Donald Trump, do signs point to a glut of new condos about to hit the market in Manhattan?

Those are the questions The Real Deal set out to tackle in this month’s issue. Even by conservative estimates, the amount of new development hitting the market in Manhattan in 2005 will be double that seen in 2004. When it comes to new development, how much is too much?

From the converted Plaza Hotel to Place 57, from developer Jules Demchick to Donald Trump, do signs point to a glut of new condos about to hit the market in Manhattan?

Those are the questions The Real Deal set out to tackle in this month’s issue.

Using data from the New York state Attorney General’s office, which is in charge of approving new condo projects, we totaled up the number of new apartment units added in Manhattan for the last five years, broken down by neighborhood.

Even by conservative estimates, the amount of new development hitting the market in Manhattan in 2005 will be double that seen in 2004.

The Real Deal counted 4,827 new apartment units approved for sale in Manhattan last year. There have already been 3,028 units approved for sale in the first four months of 2005, putting Manhattan on pace to have 9,084 new units added in all of 2005. (The numbers don’t include rental units, which aren’t required to file similar offering plans with the state.)

Some real estate brokers are saying the number will be even higher. “In 2005, more than 20,000 condominium units of new construction will be arriving on the market,” Robert Knakal, chairman of Massey Knakal Realty Services, predicted recently. The number of new units for sale has climbed slowly since 2000. Around 1,300 units hit the market in 2000, rising to 2,200 in 2001, 2,900 in 2002 and more than 3,000 in 2003.

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Several neighborhoods are slated to see more units added this year than in any of the last five years, including the Lower East Side, Chelsea, Flatiron District, Madison Square Park, Times Square/Fashion District, and Midtown and Midtown West. The Times Square/Fashion District area has seen the most new units for sale so far this year 1,295, which is largely the work of three large projects: the Orion on West 42nd Street, 325 Fifth Avenue, and the conversion of the 692-unit McAlpin Hotel across from Macy’s to condos.

In addition to units approved for sale, the study also looked at projects in the pipeline offering plans submitted and not yet approved by the Attorney General’s office, and offering plans still in the testing phase.

Lower Manhattan is the standout for projects in the pipeline. While only 94 units have been approved for sale so far this year, another 1,900 units are in the works.

Harlem has the most individual projects approved and in the pipeline for 2005 some 26 developments though those projects are small compared to those in other neighborhoods. The total for Harlem won’t likely rival numbers there for 2003 and 2004 (more new units were added in Harlem in 2003 than any other neighborhood in the city), perhaps a sign that some view the market as saturated. Soho and Tribeca also don’t look likely to break previous years’ paces.

At the foot of the Upper West Side, the large amount of planned development, recently reported, hasn’t yet reached the offering plan stage, and isn’t reflected in these numbers.

Despite the talk about whether there is too much new construction in Manhattan, and whether units will sit on the market unsold or drive prices down if the market turns, there is still only a limited inventory of condos in the city.

Condos represent only 65,000 of the roughly one million units of for-sale housing in the city, according to census figures.

 

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