Posted by Leonard Steinberg on January 12th, 2013
In the coming weeks and months, over 7,000 units of new construction LUXURY apartments will be coming to the market in New York……that is a VAST number of units and will significantly alter the bland inventory landscape we are currently experiencing. While one could argue that the record prices achieved by those few developers who actually had a building to sell were as a result of great product, the reality is those prices were also probably fueled by the lack of competition. How would pricing at One 57 have fared if 432 Park Avenue, the MOMA Tower, One Madison Park, the new Extell Tower and Michael Stern’s Tower on 57th Street were all on the market simultaneously?
Until recently most developers and their bankers speculated that every buyer is looking for a really large apartment with super-duper-luxury finishes and amenities. This theory will now be put to the test as we enter the chapter where the consumer will give us the ultimate reality check.
We are working on several new buildings Downtown in the West Village (150 Charles Street), Tribeca, West Chelsea, Soho and Noho: All will be thoroughly unique and special and distinctive: There is really no room in the ultra-luxury market for anything less.
Again, averages will be the curse of the market: Just because a certain AVERAGE price was achieved for the past 12 months, is that price applicable to all product? I think not. I firmly believe that the buildings in the best locations with the best balance of quality, design, structure and price such as 150 Charles Street in the West Village will win and I am afraid there will be some sore losers where a disturbing reality check will come to those developers whose pricing expectations simply are not based on reality. Excessive, overly ambitious pricing will be met with resistance I believe because no-one knows exactly the depth of demand. Yes, there certainly are a strong group of buyers who are waiting to buy these large, very expensive apartments…….but are there enough of them to absorb all this inventory that seems to be focused on the exact same profile buyer? Only time will tell. I believe the very best will win and be perfectly successful, but I think there are several rather average products coming out whose expectations of well-above-average pricing will be met with disappointment.
Moving forward, developers will have to be much more innovative: This week, I met with a mega-developer planning a rather exciting new building. It was refreshing to hear him talk about the need for innovation and beauty before dollars per square foot…..all are important, but the blind focus on pricing alone may prove to be a wake-up call to many developers and their bankers in the coming months.