Posted by Leonard Steinberg on February 16th, 2014

The world keeps asking “what’s next?” With over 20,000 high priced apartments currently under construction, that is a fair question. Many Manhattan developers who very recently talked about $ 2,000/sf are now talking $ 3,000/sf. “DUBAI 57”, the 57th Street corridor that looks a wee bit like DUBAI with (possibly too) many ultra-towers, $ 10,000/sf pricing is being discussed for units under construction, almost completed, or in planning. Our economy is strengthening….but is this strength based on substantive foundations? We live in the ROLLER COASTER 2000’s, in an interconnected world economy, where daily occurrences anywhere matter more than ever before. Growth is a key factor in this success. What happens when the three most vibrant vehicles of growth withdraw?

1)  We have to adjust to the record credit expansion in China and quantitative easing in the USA: Both are coming to an end with no growth model replacement on hand.
2)  The US stock market rose more than 30% in 2013: was it because of quantitative easing and cheap money and what happens now as that gets tapered and Chinese growth slows?
3)  Emerging Markets generate more than 50% of Global GDP: the effects of recent turmoil in these countries should not be under-estimated.
In Bloomberg and Crain’s this week, an article addresses New York  ‘sky’s the limit pricing’: are brokers fueling this insanity or is it mostly the insatiable ego’s of some sellers whose less-than-trophy apartments are simply not worth what they are asking? Are there enough $20 -50 million+ buyers out there to absorb this inventory? Some of it is certainly worth it, but much of it seems overkill.
I feel certain a reality check is coming for some, but more than likely it will be on the ultra-high-end where at least they can afford bumps.