1212 Fifth AvenueWhen the stock market is plummeting and panicked investors are pouring money into gold, it would seem a less-than-prudent moment to predict the next cycle of new residential development in New York City. But despite the economic turmoil, some New York City developers and their consultants are holding fast to the theory that the increasing demand for living space in the city means that it’s a good time to bet on new residential buildings.
“We’re starting to see purchasers willing to pay, if not above-peak prices, pretty close to peak — where they were in the second quarter of 2008,” said Kelly Kennedy Mack, president of Corcoran Sunshine Marketing Group. Developers “are optimistic about future market conditions. … They have a real appetite to jump back in after sitting on the sidelines” during the downturn.
While developers may be getting their feet wet once again, the pipeline of projects looks quite a bit different than it did during the last round.
For one thing, most of the condo projects slated to open in the immediate future are of a much smaller scale than they were during the boom, thanks to a still-tight credit market and developers who are still wary of bringing hundreds of units online at once. Anything getting financed on a larger scale today is likely a rental building, industry experts say.
A review of condo offering plans submitted to the Attorney General’s office shows fewer offering plans this year than last, and shows that the vast majority of projects coming online through the beginning of 2012 have fewer than 20 units. And with the remaining inventory at boom-time projects like the Edge and the Sheffield now selling at a fast clip, it appears that boutique buildings with a couple dozen units or less will be dominating the market for at least the next couple of years.
With the exception of Extell Development’s 1,000-foot One 57 condo and hotel tower, which is slated to launch sales in the fall, the next wave of mega condo projects isn’t likely to come to the market until 2014, 2015 and beyond. While there are hundreds of condos planned at sites like the former Drake Hotel, St. Vincent’s Hospital and 99 Church Street, groundbreaking still appears far off.
In the meantime, ground-up boutique condos and big, luxury rental buildings will be joined by condo conversions, which are on the rise. These are also easier to finance than ground-up mega condos, and aren’t as risky, since they take less time to produce.
And, as they did during the downturn, the affordable housing developers, propelled by Mayor Michael Bloomberg’s ambitious New Housing Marketplace Plan, will continue to be a boon to the construction industry, though they are also favoring rentals these days and bracing for what could be some major cuts to important federal funding programs.
What’s really in the pipeline?