The New York TimesDecember 27, 2013Rising demand and a record shortage of apartment listings set the stage for a seller’s market in 2013. But new development stole the spotlight.
After a four-year dry spell, a crop of new luxury condominiums aimed at the superrich opened in Manhattan and were snapped up faster and at prices surpassing those attained before the recession.
The total number of new development contracts jumped 20 percent, to 1,847, through the third quarter of 2013, compared with the same period last year, as wealthy buyers rushed to sign contracts for apartments still in the construction phase, according to the Corcoran Sunshine Marketing Group.
For the same period the average contract price surged nearly 60 percent, to a record $3.43 million from $2.16 million, surpassing the previous new-development high of $2.21 million in the third quarter of 2008. And the pace of sales was rapid-fire, underscoring the strength of demand for Manhattan condos built for the upper echelons.
“Newly introduced development absorbed far faster than anyone could have predicted,” said Kelly Kennedy Mack, the president of Corcoran Sunshine Marketing Group. “Extremely compelling properties, limited supply and a hungry pool of both domestic and international buyers drove rapid sales.”
Just 49 residential buildings opened in Manhattan in 2013, not counting Harlem and Upper Manhattan, with a total of 2,269 units, according to Corcoran Sunshine. That’s more than the 1,309 units across 30 buildings that came to market last year. But it’s still below historical averages of about 3,000 units normally required to meet demand, Corcoran Sunshine found. During the boom of 2007, 8,052 new units were listed.
Developers focused on ultra-high-end condos with every conceivable amenity to justify the expense of building amid surging land costs. In early December there were 256 listings for less than $2 million in new condo developments, down from more than 2,000 at the end of 2008. By contrast, there were 458 for more than $2 million, down from 1,129 about five years ago.
In many cases, prices met or exceeded expectations, particularly in the downtown market, where about 260 deals over $7 million took place, compared with 80 in 2012, with the majority in new developments.
Among the most talked-about buildings was 56 Leonard, a 145-unit TriBeCa tower by Alexico Group and Hines that was shelved during the recession, only to open to enormous interest earlier this year. More than 90 percent of its units were sold within nine months, at an average price of $3,200 a square foot.
In June, a penthouse at 56 Leonard went into contract for $47 million, a new high for a condo sale downtown. But it was soon outdone by a $50-million-plus penthouse atop Walker Tower, a newly converted luxury condominium in Chelsea.
Stories abounded of condos flying off the shelves. A luxury condominium developed by the Witkoff Group in the West Village, 150 Charles Street, had found buyers for all 91 luxury apartments just six weeks after sales opened in February. The average price was $3,400 a square foot, according to Susan M. de França, the president of Douglas Elliman Development Marketing, which handled the sales.
“We had a list of hundreds of individuals that were waiting for the property to be launched,” Ms. de França said. “We never even featured an advertisement.”
In NoMad, another Witkoff project, 10 Madison Square West, a 125-unit condominium conversion, had similar success, with nearly 90 percent of its one- to five-bedroom residences in contract within five months of opening sales in July. That included the penthouse, which was never officially listed but went into contract for about $36.5 million in under 90 days.
In TriBeCa, the Leonard, a 66-unit condo conversion at 101 Leonard Street by Bizzi & Partners Development, was more than 80 percent sold within two months of its July opening. Just three units are left, including a three-bedroom for about $3 million and a four-bedroom penthouse with a private rooftop terrace for $7.5 million.
The Jefferson, a project by CBSK Ironstate, was the only condo to open in the East Village this year. Its 82 units were priced from $795,000 to $3.595 million; the final contract was signed earlier this month.
The frenetic sales activity wasn’t limited to downtown. Sales began earlier this year at 432 Park Avenue, a Midtown luxury condominium developed by CIM Group and Macklowe Properties. When completed in 2015, it will be the tallest residential building in the Western Hemisphere. Half of its 104 units are in contract, for roughly $1 billion in potential sales, including a $95 million penthouse that will set a price record if it closes.
On the Upper West Side, the sales campaign at 101 West 87 Street, a 62-unit condominium by Bazbaz Development that opened in January, lasted just seven and half months, with the $7.6 million penthouse among the first units to go.
One Riverside Park, an Extell Development project overlooking the Hudson at 50 Riverside Boulevard, opened sales last month. Already half of the 219 units are in contract.
Although new development started its comeback in 2012, with sales velocity and prices rising in a market starved for fresh inventory, the pace only accelerated in 2013. “It wasn’t until this year when we saw new development was achieving success on such a widespread scale,” said Ms. Mack of Corcoran Sunshine. “New development was not only really back, but performing at a level not seen before.”
How long the frenzy can continue is anyone’s guess. Too many high-end units coming to market at the same time could lead to a softening. “Buyers are not going to be irrational in their purchases,” said Shaun Osher, the chief executive of the brokerage firm CORE in Manhattan. “I think there will be a pushback to price-per-square-foot numbers that don’t meet the quality or location of the product.”
Building permits for new developments are on the rise. Permits were filed for 3,399 units in Manhattan through the first 10 months of the year, as opposed to 2,328 for all of last year, according to the latest census figures.
The outlook has certainly improved since 2010, when Manhattan permits were filed for just 704 units, amid a lack of financing that squelched further growth. Yet even if all the permits filed for Manhattan this year were to translate into new units, said Gregory J. Heym, the chief economist at Brown Harris Stevens and Halstead Property, “you would still have what would be considered a neutral market.”
“This pipeline,” he said, “it can’t come fast enough.”
The Big Ticket
The pricing of resale apartments and townhouses clung to the stratosphere in 2013, and the luxury market was active, but most buyers did not let trophy properties entice them into sticker-shock territory.
The handful of residences priced for resale above $100 million, along with those priced above $50 million, lingered unsold as of mid-December, according to city records.
The most expensive sale to close this year was for $43 million: a former shoe warehouse at 144 Duane Street in TriBeCa. Built as a department store in 1862 and now destined to become a posh 21st-century family compound, it clocked in at $45 million less than the record-shattering $88 million paid last year for Sanford I. Weill’s penthouse at 15 Central Park West. It was also $7 million behind the 2012 runner-up, an 11th-floor co-op with 70 feet of Central Park frontage at 944 Fifth Avenue that sold at year’s end for its full $50 million asking price.
But the sale of 144 Duane Street, a historic limestone building that hit the market in 2011 for $45 million — and climbed to $49.5 million in 2012 — did establish, albeit temporarily, a downtown record. Tricked out with 23,100 square feet of residential space, including a triplex penthouse and a basement basketball court, it nudged just ahead of the pristine $42 million duplex penthouse at 18 Gramercy Park South for which Leslie Alexander, the billionaire owner of the Houston Rockets basketball team, paid the full asking price.
The lavishly appointed 6,300-square-foot PH17 on the 17th and 18th floors has four terraces and a heated infinity pool among its amenities.
There was no lack of variety at the top: the year’s third-most-expensive resale, at $34.35 million, was the Ellen Shipman Biddle house at 21 Beekman Place, an appealing century-old Turtle Bay townhouse named for the renowned landscape architect who lived there from 1919 to 1946.
The elegant brick house, restored in 2008 and priced at $48.5 million in 2012, set a record for a 20-foot-wide townhouse ($4,754 per square foot) when it was bought last summer by the State of Qatar, presumably as a diplomatic residence.
The restoration-ready Walter N. Rothschild Mansion at 41 East 70th Street finished in fourth place at $32 million, and a chic combination that created an 8,500-square-foot triplex penthouse at the Abingdon, at 320 West 12th Street, rounded out an eclectic Top 5 of closed sales at $29.78 million.
“I look at 2013 as a bit of an anomaly,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel. “All of the year’s records set by property type — co-op, condo and townhouse — were actually lower than last year’s records, yet the luxury market has not weakened. There is a randomness to pricing at the very top, and aside from trophy sales, price trends for the overall market were fairly mundane over the year, despite record low inventory.”
Two of the most prolific new developments were luxury reinterpretations of downtown antiques: 18 Gramercy Park closed 10 of its 16 spacious prewar-themed residences for an aggregate return of just over $187 million ($4,208 per square foot) for the sponsors, Zeckendorf Development and Global Holdings. In Chelsea, the sponsors of Walker Tower at 212 West 18th Street, JDS Development Group and the Property Markets Group, announced 22 closed sales, with three more scheduled before the end of the year, for a total of $226,904,290 (this does not include its most expensive units, a pair of penthouses for $55 million and $47.5 million).
Although 2013 was not a year of blockbuster closings, big money was in motion — a flurry of contractual commitments for extraordinarily expensive condos in as-yet unfinished luxury developments. Downtown at 56 Leonard Street, Penthouse 60, at the jagged pinnacle of the building, is in contract for $47 million; PH1 at Walker Tower is in contract just under its rather bold $55 million asking price and poised to break the downtown record upon closure.
In Midtown, where Central Park views authorize premium price points, 432 Park Avenue announced the signing of a $95 million contract for the top-floor penthouse, and at Extell Development’s juggernaut tower, One57, more than 10 condos priced above $45 million are under contract, two for more than $90 million. One57 is more than 70 percent sold, with total projected sales exceeding $2 billion.
At that rate, One57 appears to be positioning itself as next year’s “It” development. And if the avalanche of trophy contracts signed all over town in 2013 translate into closed sales, 2014 may well earn the sobriquet of the year of the splurge.
The seemingly endless debate about whether a landmark designation hurts real estate values continued bubbling in 2013, even as the New York City Landmarks Preservation Commission designated two new districts and one extension in the fiscal year ending in June, and began preparing to celebrate the 50th anniversary of the city’s landmarks law starting in 2015.
In the fiscal year that ended in June, the commission approved the East Village/Lower East Side Historic District; the West End-Collegiate Historic District Extension, roughly along West End Avenue between 70th and 79th Streets; and the Bedford-Stuyvesant/Expanded Stuyvesant Heights Historic District in Brooklyn. In the current fiscal year, the commission is to vote on the Harrison Street Historic District on Staten Island and the Central Ridgewood Historic District in Queens. The South Village Historic District, a 13-block area north of West Houston Street, was approved unanimously on Dec. 17.
Public hearings have been held on the Riverside-West End Historic District Extension II; the Crown Heights North III Historic District in Brooklyn and the Bedford Historic District, also in Brooklyn; and the Douglaston Historic District Extension in Queens.
The Real Estate Board of New York, known by its acronym Rebny, continued to be vocal in citing the downsides of historic designation.
In a June report, Rebny stated that more than one in four properties in Manhattan are protected as landmarks, and argued that designation as a historic district “effectively prohibits the full development potential of underdeveloped sites.” The report also stated that “there are numerous cases where properties with no historic value like vacant lots, parking lots and gas stations are included in the designation of a historic district.”
“There are many occasions when we’ve been supportive of landmark designation,” said Michael Slattery, Rebny’s senior vice president for research. “For example, the extension of the Park Slope District and the area in Chelsea where the Underground Railroad was. Where the process breaks down is when the quality of buildings is not up to standards — for example, when a district includes too many no-style buildings.”
In response, Elisabeth de Bourbon, the commission’s director of communications, said: “What critics don’t take into account are issues like neighborhood stability and neighborhood pride. Those sorts of benefits cannot be measured.”
Mitchell Moss, a professor of urban policy and planning at New York University, says both viewpoints have certain merits.
“On the one hand,” Professor Moss said, “some protected areas, like the proposed South Village extension, are of questionable historical identity. On the other hand, in many protected areas, landmarking has not been an impediment to development. Designation hasn’t stopped development in NoHo or West Chelsea. In many areas, landmarking has encouraged intelligent development. Dumbo is one of the great successes of landmarking.”
Ingrid Gould Ellen, the director of the urban planning program at the Robert F. Wagner Graduate School of Public Service at New York University and a director of the Furman Center for Real Estate and Urban Policy at New York University, points out that the Rebny reports study only Manhattan. “Both camps are focused on Manhattan,” said Professor Ellen, noting that designation might have a very different impact in Manhattan than on the rest of the city. In addition, she said, “the challenge for any study of historic district designation is that it’s always difficult to know what would have happened in the absence of a designation.”
The goal, in her view, should be a broader conversation about land use. “We need to balance the goal of increasing new construction and that of preserving the city’s cultural heritage,” she said.