No matter where we are in the cycle of real estate’s ups and downs, it’s appropriate to consider where we’ve been, evaluate where we are and think about where we are going. This year nearly every industry event I attended focused on the market’s upper end, a subject that has captured the most press recently. Last week’s Annual NYC Real Estate Showcase + Forum hosted by The Real Deal opened with the question “What’s Ahead For Luxury?”
Citing a “weight” on the upper end of the market, publisher Amir Korangy invited four very experienced developers to opine on the future of high end new developments.
Sparks flew early as real estate agent turned developer (and the most aggressive on this particular panel) Michael Shvo disputed a weakening market preferring instead to describe present conditions as more of “a mood issue.” He was joined by third generation developer Terre Holdings Co-Chairman Arthur Zeckendorf in blaming journalists for exaggerating the slowdown. Billy Macklowe, CEO of William Macklowe, a company he founded six years ago when he split from his father Harry Macklowe, suggested that high end activity was experiencing “a temporary pause.” The fourth panelist Bruce Eichner, founder and Chairman of Continuum Company with projects in New York, Miami and Las Vegas, hit the proverbial nail on the head, declaring there is an overabundance of new development apartments priced above $10M which is causing buyer urgency to exit the marketplace and an undersupply of units priced below $3M. All agreed that although there are exceptions, there is an oversupply of overpriced just average properties for sale. With so many so-so product options, buyers are taking their time to shop and they are seeking discounts.
Less combative as the conversation continued, the panelists addressed amenities and financing. They agreed that views topped luxury buyers’ wish lists. Too many extraneous amenities compensated for building challenges like an out of the way location or poor layouts. Each developer acknowledged the difficulty of getting new construction loans in today’s tough lending environment—a fact that will cut back new development. Similarly the repeal of 421A will impede new building construction, especially of rentals. All concurred that if there is an opportunity to purchase land, they would buy and hold for two to three years. Now is not the time to put a shovel in dirt.
Addressing the “flight to quality,” the four developers had an opportunity to hawk their respective wares.
· Eichner who launched sales of 45 East 22 Street in January 2015, where 50% of the building sold in the first ten months, admitted that viewing activity was down by as much as 50%. Predictably heralding the Flatiron district as the new center of the city, he boasted that his 800’ tall building was cleverly intended to capitalize on high floor city views which commanded higher prices. Designed by Kohn Pederson Fox, winner of Eichner’s architectural design competition, the building rises pyramid-like from a masonry base of 75’ and widens with each story as it goes up a glass curtain wall to stretch 105’ at the top.
· Zeckendorf sang the praises of 520 Park Avenue, characterizing his newest project as the east side version of his enormously successful 15 Central Park West which set “the gold standard.” Anticipating a 2018 occupancy, the Robert Stern designed building will rise 54 stories with a $130M Penthouse price tag at the top. Three of the 33 full floor apartments have been released for sale with prices of $20.5M, $28.250M and $33.850M.
· Macklowe’s 21 E 12th Street designed by Annabelle Seldorf on the former site of Bowlmor Lanes will offer supply constrained Greenwich Village buyers 52 large one bedrooms on 23 floors, which he predicts will sell easily when launched shortly.
· Noting four developments in his pipeline, Shvo was cagey and revealed few specifics: 125 Greenwich is projected to rise 91 stories with 275 apartments of mostly studios and one bedrooms with amenities on the 88th floor and will be targeted to pied a terre buyers; in Soho, 555 Broome broke ground last December after financing was secured from Chinese lenders and investors; The Getty at 239 10th Street, named for the Getty gas station site that cost a reported $800 per buildable square foot of land in 2013 will be designed by Peter Marino. Launch dates have not been announced.
Later this month, REBNY’s Education Committee will host “2016 CEO Summit on The Outlook for New York Residential Real Estate” with the heads of the city’s seven leading brokerages: Brown Harris Stevens, Compass, Corcoran, Core, Douglass Elliman, Halstead Property and Warburg Realty. Their agenda will cover the uber luxury market and a whole lot more. Stay tuned!