As I think about what to share each month on the blog, I break the newsletter into its pieces, including the New Development Round-Up.
This month, I was remarking to myself that I didn’t have any new developments to share- and my mind started to riff on this.
No new developments to share.
Well, almost no new Manhattan properties to show.
There are a number of holes in the ground, properties which will be online very soon, including 150 East 72nd Street, a 22-unit pre-war condo conversion comprised solely of 3 bedroom and 5-bedroom units.
I found out today that they will be asking between $2800 per square foot and $3500 per square foot.
Macklowe is doing the development.
I will be in there as soon as I can, which will be in about 45-60 days’ time.
The Toll Brothers’ Touraine on 65th and 3rd sold out in almost no time, a similarly small and well-appointed new construction, nearly topped out and getting finished.
It’s striking how fast these sell.
So my questions, which I’ll try to answer are:
Who is buying new development?
Who is buying condominium in general?
The myth is hard to separate from the reality, or is it the other way around?
As I’ve seen the market movement lately, I’ve seen way too many New Yorkers buying new development and condo that I cannot conclude that it’s one group or the other.
I think that the New Yorkers are going to really kick the condo market into overdrive, and what will drive the big apartment purchases, largely.
When I was working on new development pre-crash (2006-2008), I met with those you might call “Captains of Industry.”
Americans who have built great businesses in all sectors, who enjoy New York City for all it offers, whose business, actually, have survived and thrived until today.
I firmly believe, and I’ve heard from sales offices, that these buyers are snapping up very, very expensive units at buildings such as One 57, which I wrote about last month.
Yes, we have foreign buyers who want new development.
It affords them the ability to either move right in while doing no work, or find a tenant instantly with no down time.
For a buyer who has enough difficulty simply navigating the purchase process, no need to go through the craziness of renovation.
So you have foreign buyers who don’t want to purchase something that’s been lived in before, buyers who believe there’s more value in the brand-new, buyer who don’t want to contend with anything related to disclosure of assets, or buyers who want everything that’s available in the new development that is rare in other apartments.
Amenities such as an amazing gym, high ceilings, cutting-edge appliances, the best in new design, etc.
But it is definitely not just foreign buyers who want this.
It is busy professionals, New Yorkers, who also want what recent new developments have to offer.
Location, amenities, and absolutely stunning finishes.
At least for properties showing larger units, I would argue that that it is the exception, not the rule, to see properties that are built now that are done poorly in the same way that we saw poor quality in new development product pre-2008.
I’m only talking about Manhattan not talking about Brooklyn, by the way, and furthermore I’m not going to engage in the snarky discussions that you can choose to read about on Curbed or Brownstoner.
Recently, I had a long discussion about Long Island development in the 40’s, 50’s and 60’s.
Part of its attraction was the brand-new.
For these newly wealthy, an entire
generation of wealthy who grew up from nothing, being able to choose finishes, being able to have something customized to your needs, hard-working professionals who wanted to buy something that’s never been touched by anyone else- sound familiar?
I would argue that the buyer profile in the city isn’t entirely overlapping in the strictest sense, but I do think that brand new, in the context of the high cost of B-grade workmanship, has major appeal.
In the city sometimes that becomes expressed by people buying fully renovated apartments, resale units.
Generally, when a seller wants to get top dollar they will renovate from top to bottom before they sell.
It’s not always possible to do that and some apartments have definitely seen their share of tough times selling unrenovated two-bedroom apartments and smaller.
That said, with three-bedrooms and large units, while I still believe that renovated units get the best price, buyers will more often have the stomach for more renovation as a general rule.
But looking on the macro level on the level, zooming out if you will, many unrenovated apartments still take quite long time to sell.
Where am I going with this?
For investors, get in now.
Prices are going to move up.
I’m simply seeing the base price for condominium going up.
For instance, there is almost no good reasonably priced condominium on the east side of Manhattan under $700,000, which is absolutely amazing to me!
This article from today touches on what I’m seeing out there right now.
For a foreign investor, I don’t believe that I would even discuss apartments under $1 million since I don’t think that it is a reasonable expectation to set that if someone has a half $1 million to spend on condominium product in prime Manhattan that they’re going to find it.
They’ll need to wait, which is probably a bad idea, or consider something that needs work.
Which leads me to a discussion of new development, where it is, when is it going to come online and is the appetite for it here?
My answer is: ABSOLUTELY.
If people are patient they are going to see some significant product, much needed product, roll out to market-
but not until 2013/2014, and what comes out will be beautifully done, likely at astronomical prices.
This article in Crain’s touches on the pickup in housing permits- but still doesn’t touch what became a glut of inventory in 2009-2010.
If someone needs new development now or wants and condominium now, they’re going to pay significant prices.
Prime condominium is trading higher and higher dollar per square foot numbers properties.
But probably not as high as it will be in 2-3 years.
Condominium properties that have been sitting on the market for a while in parts of Manhattan such as Chelsea, with already low inventory,
are all of a sudden trading with bidding wars.
I have seen it with my own listings and I’ve seen with others.
For now the new development in the condominium market which was pretty beat up over the last couple of years is seeing a massive resurgence
over the last 12 months and finally prime buyers are coming out of the woodwork to join the party.
Local all-cash buyers and those with significant liquid assets are still purchasing co-ops but condominium holds significant attraction and lenders are happy to lend on all, given normal downpayment levels.
Essentially, the real estate market has been ebbing and flowing with with the stock market, and the market seems to be rebounding at a time when there is little to sell, giving extra oomph to our Spring market.
European money seems to be flowing out into US real estate as a safe haven (read today’s discussion of country bond defaults in the WSJ).
France may very well drive all of its wealthy people out due to the potential of a new president in that country and higher taxes.
And despite some of the positive news coming out of Europe, the vast majority of it is simply scary.
New York City Real Estate is looking very well-positioned to have a good Spring, and a good year.