Report: NYC Real Estate Has A Luxury Glut Problem
In one of the most worrisome signs yet that the top-end of the city’s real estate market may be about to crater, a new report says that one in four new luxury condos built over the last six years are unsold.
Moreover, the glut is poised to grow as even more brand new high-end units are expected come on the market.
The study by Streeteasy examined public and proprietary data and concluded that 25 percent of the more than roughly 16,000 new luxury units built since 2013 are still up for grabs. And as sobering as that statistic might sound, the real estate listings website suggests that because they looked only at projects where closings have begun, the reality might be worse.
“I think we’re being really conservative,” Grant Long, Streeteasy’s senior economist, told the New York Times.
The report is likely to stir further outrage over a changing skyline dominated by high-end real estate. The city’s luxury condo boom has occurred amid the backdrop of an ongoing housing affordability crisis. Homelessness is at an all-time high. There are some, albeit unclear, signs that people are fleeing the city. And earlier this week, the Manhattan Institute, a conservative think tank, issued a report that the income gap between the richest and poorest New Yorkers has remained essentially the same since Mayor Bill de Blasio took office in 2014.
From Central Park today: what to make of the fact that the height of 157W57, the first of the super tall towers, has now been surpassed by not one but three new towers, which create a skyline that makes 157—now completely invisible behind the trees—seem puny. When will it end? pic.twitter.com/XYvDborWzu
— Paul Goldberger (@paulgoldberger) September 12, 2019
According to the report, Manhattan had the largest surplus, with over 2,400 of unsold luxury units, roughly 60 percent.
Drilling further down in the borough, the Lower East Side had the lowest percent of new condo sales. To blame is One Manhattan Square, Extell’s 80-story behemoth in the Two Bridges neighborhood that has struggled to sell. According to a Commercial Observer story last month, only 173 condos of the 815 total have closed, or 21 percent. The sluggish sales have come despite an aggressive in-your-face marketing campaign and an unprecedented enticement in the form of a 10-year waiver of common charges on the priciest units.
Prices at the skyscraper range from $1.2 million for a one-bedroom to more than $13 million for a penthouse.
A spokeswoman for Extell told the Times that there are “hundreds of more units” under contracts that have not yet closed.
Meanwhile, at the high-profile mega development Hudson Yards, a recently completed 285-unit tower is 37.5 percent sold through late August.
In light of the shrinking demand, developers are resorting to desperate tactics, according to the Times.
Vickey Barron, an agent at Compass, told the paper that she recently received a grapefruit-sized “trophy” from a developer that read “5%,” a pledge to pay above the standard 3 percent commission.
“It was hilarious,” she said.
On top of everything else, a looming recession is making the real estate community even more jittery. Long said an economic downturn could very well scare off investors, who have propped up the luxury market in New York City. The report found that nearly 30% of the condos built since 2013 have since been listed for rent. “That’s the group of folks that could go away at any minute,” he said.
Mark Chin, the chief executive of the brokerage Keller Williams TriBeCa, told the Times, “I can smell it from here, I just can’t figure out yet where the stench is coming from. But it’s guaranteed to be happening.”