Kelly Mack on the new development boom of the 2010s
The Corcoran Sunshine president revisits record-breaking deals and trends
The 2010s were a time of decadence for real estate, according to Corcoran Sunshine chief Kelly Mack.
The decade birthed the likes of uber-luxury condominiums like One57, 432 Park Avenue and 220 Central Park South. Ambitious developers and investor appetite pushed the median sale price in Manhattan to $1.025 million in the third quarter of 2019. That’s a jump from $850,000 in 2009, according to appraisal firm Miller Samuel. Since 2013 alone, more than 16,200 new condo units have been built citywide, and prices have shot up on every level.
In January 2019, Citadel founder Ken Griffin paid an eye-popping $240 million for a condo at 220 Central Park South, setting a new U.S. record. Around the corner, Central Park Tower topped out at 1,550 feet, becoming the tallest residential building in the world.
But as the decade comes to a close, the same faces and names that reset the bar for luxury in New York City have to contend with a glut of inventory — one in four new condos remain unsold — and foreign buyers have pulled back.
Mack — whose firm marketed the decade’s biggest projects, including Gary Barnett’s One57 and Vornado Realty Trust’s 220 Central Park South — sat with The Real Deal this month to reflect on the burst of new development in the 2010s. She said deals are now happening when sellers and buyers find common ground on price. And to her, the newest luxury amenity is value.
What was the biggest shift in condo development over the last decade?
There are three outstanding shifts, the first being the growth of the luxury market; the second being that these amazing new master plans have created new neighborhoods; and the third being the rising status of Brooklyn as a place people really choose to live. These new master plans are creating new neighborhoods and enlivening parts of the city. You think we’re an island with limited opportunities for transactions but it continues to happen over and over. As for Brooklyn, no other area of the city has transformed as a residential destination in the last decade. It’s pulling in buyers from Manhattan who needed no convincing to live there. In some ways, it’s become Manhattan’s newest neighborhood.
How do you quantify the changes in luxury?
For the last 10 years, it was like the decade of real estate decadence. The luxury market reached unprecedented levels. Prices reached heights no one ever could have predicted. From 2000 to 2009, there was one sale over $50 million. From 2010 to 2019 there were 64. For the $20 million-plus market, there were 100 sales between 2000 and 2009. From 2010 to 2019 there were 489.
As buyers’ expectations continued to grow and went up, developers continued to up the ante in terms of design, starchitects, higher-end interior design, more amenities, more services. More of basically everything. We use this joke internally that starchitecture became the new Sub Zero refrigerator. It’s not a rarity anymore. It’s an expectation at a certain price point.
We saw record-breaking prices happen over and over and over. You first had the $88 million at 15 Central Park West, then $90 million at One57 and then $100 million there.
When was the moment you knew the luxury market had changed?
When we first launched One57 and the pricing came out, everyone said it was crazy. It was a completely new benchmark. But Gary [Barnett] believed, and rightfully so, that there had been a few very high-end transactions at 15 Central Park West and the Plaza and he believed there was a market that would pay for really special, unique, bigger-is-better units with direct on-views of Central Park. And he was right.
I thought it was a big bet, but I also knew the demand would be there. I was just surprised by how quickly a lot of those very expensive residences went. I did not realize how deep the market was at that point at $25 million-plus.
Within a couple of months, I recall sitting in a meeting at Goldman Sachs and we were talking about bringing out 56 Leonard. Everyone questioned whether it was the right time. With so much demand, we sold $1 billion worth of residential inventory in four months.
Has Corcoran Sunshine adapted its approach?
Our business model has not changed in the last decade. It changed in the previous decade, after Lehman and Bear Stearns and the market fell off the cliff. A lot of the banks were taking over [failed condo projects] and they were looking to us for clear, concise data. The old days of flying by the seat of your pants or pulling comps from a computer and putting it on one sheet of paper — that went by the wayside a long time ago.
Do you think fears of an inventory surplus are well founded?
Inventory is at its highest level since 2010. New development listed inventory is 1,156 with 6,150 shadow units, up 5 percent year over year. It’s not that developers are keeping things, but you can only list so many units. So there is definitely a lot of inventory and there is more coming — though probably less than was originally projected as people have put projects on hold.
Despite all that, it’s crazy to me that all these people are out there paying outrageous rents in glamorous apartments because they’re so concerned about [sale] prices coming down. This is an amazing time to buy. There are so many options. Some of the best apartments in the city are available now and in some cases you can grab them at great prices.
How do you advise your developer clients?
A lot of our time is spent having pretty difficult conversations. The market has been changing over the last couple of years, but it stabilized to a point that we are seeing transactions happen, although they’re lower.
People are unwilling to transact unless they think they’re getting good value. Most buyers are moving toward properties that are offering immediate occupancy, which is not really surprising. Why should they wait when there’s great stuff available now?
But the psychology behind the purchase is very different. Buyers want discounts, often beyond reason and rationale. There is a divergence in the market — some units are wildly overpriced, others lowered their prices or came out later in the cycle. But it’s confusing for buyers. They don’t understand why they might get 20 percent off somewhere and 0 percent somewhere else.