There’s a palpable boom at the top of the new development market as a growing supply of high end products sizzles with through-the-roof pricing. At the same time, price conscious home buyers are choosing from a shrinking inventory of resale properties. Both phenomena are reasons for optimism.
At the market’s upper end which is buoyed by foreign demand, a growing crowd of global moneyed buyers is setting all time price records. Gary Barnett’s One57, which has been billed by the New York Times as the city’s newest “Billionaires’ Club,” will offer concierge services from the 5-star Park Hyatt Hotel which sits at its base. Though the 1,004’ glass curtained skyscraper is not expected to be completed until late 2013, a purported 60% of its 90 residences have gone to contract since the sales office opened last December. The numbers realized are staggering and unprecedented: $115 million, $95 million, $90 million to cite a few. Featured this week in NY Magazine as the residence that will be bought by the “Kings of New York,” this steel and glass tower developed by Extell near Carnegie Hall is being likened to a safe deposit box where global citizens can park their currencies in a relatively safe haven, adding a Manhattan trophy to their collection of homes much like a new piece of art.
Vying with One57 and creating much broker buzz is 432 Park Avenue now a hole in the ground at 56th and 57th Streets. Rivaling One57 as New York’s tallest residential building, Macklowe’s ground up construction will climb nearly 1,400’ high. Formerly the site of the Drake Hotel, its 90 stories will offer 129 residences above a retail and office complex and is anticipated to open by April 2015. Ten full floor 8,000 square foot homes starting at $64 million will be available in addition to smaller apartments of approximately 1,400 square feet. The Penthouse with helicopter views is for sale at $85 million even before a show room opens by year end.
Indeed selling from floor plans has returned. Another example is Walker Tower at 18th Street west of Seventh Avenue in the heart of Chelsea. Even before this project officially opened its sales office in late June, approximately 25% of the units had been spoken for. Meeting the demand for a high end new development product downtown, this outstanding conversion of a 1929 Art Deco building offers homes ranging from 1,350-6,500 square feet with price tags from $4.5-$50 million and is attracting celebrities, entrepreneurs and techies. The historic building’s wedding cake shaped structure has multiple terraces, widened windows, 12-14’ ceilings and will probably average out at $3,500+ a square foot.
Uptown, on the Upper East Side in a 19 block span from 60th to 79th Streets, Park to Lexington Avenues, there are at least eight high profile projects that will offer about 400 apartments averaging $3,000 per square foot. After a four year hiatus, the current wave of new development projects either from ground up construction or rental conversion underscores that developers are not only confident and bullish on New York, but they are properly leveraged and capitalized.
While the upper end of the market seems to be running away with itself, in sharp contrast, everywhere else buyers are supremely price conscious and continue to hunt for value. An expected flurry of activity before year end to avoid an additional 3.8% capital gains tax next year has yet to materialize. For some time now, rising rents and low rental vacancies have been contributing to an expanding pool of first time buyers seeking to secure historically low mortgage rates. All the while cash purchasers continue to be preferred over those who are unable to waive a financing contingency. Because the lending climate is so radically altered with regulatory scrutiny and delays caused by time consuming checks and balances, sellers are recognizing that it’s often worth more to take less from an all cash buyer. Increasingly, loan approvals are averaging 45 days or longer with equally comprehensive examinations of the borrower and of the property being financed. Clearing to close can take weeks more as the property and borrower get reviewed a second and even third time with repeated requests for more documentation.
In all price ranges, the number of sales continues to outpace the number of new listings coming to market. With inventory levels of resales at the lowest they’ve been in seven and a half years, even if demand remains flat, sellers who price realistically will achieve a good outcome. There is every reason to believe that for the foreseeable future, the Manhattan market will sustain a high level of activity. If there is price movement ahead in resales, it is more likely to trend up rather than down. Bolstered by capital flight, the spiked pricing of the flourishing high end broadcasts confidence to the rest of the market.