clock menu more-arrow no yes mobile

Filed under:

Extell Chief on Manhattan’s Luxury Condo Boom: 'The Party Is Ending'

New, 14 comments

Is there a silver lining in the decline of Manhattan's luxury real estate boom?

Demand for the city's brand new ultra-luxury apartments is waning. That's been evident for a while with the diminishing price tags of unsold condos at One57, the split up of the prized $45 million penthouse at 10 Sullivan, and the abandoned plan to convert Philip Johnson's Sony Tower into astronomically expensive apartments. The Wall Street Journal took a dive into the tepid waters of high-end residential development in Manhattan these days and found more of the same, but also discovered a silver lining—sort of. Here are the top 10 takeaways, in quote form, for the WSJ's article "Luxury Condo Boom Is Ending in Manhattan."

1) "Demand in Manhattan’s super-high-end condo market has dried up amid global economic jitters, just as the market has been flooded with unprecedented supply. It is a potent recipe for a bear market in a sector that has reshaped the peaks of the Manhattan skyline in recent years."

2) "'There’s a lot of stuff that is chasing what happened three years ago or four years ago when there was a boom,' said Gary Barnett, Extell’s founder. 'They’re late to the party and the party is ending.'"

3) "Mr. Barnett...called the state of the high-end market a 'temporary imbalance' that would be absorbed in a few years."

4) "But developers said there are several hundred to a few thousand units being constructed or planned now under the assumption they will command at least $3,500 a square foot...Just in the blocks around One57, a tower being built next to the Museum of Modern Art has about 140 luxury apartments including a $70 million penthouse. Another slim tower at 520 Park Ave. with 33 units has an average unit price of $38 million."

5) "All of these builders have been counting on continued growth of global billionaires and near-billionaires who are looking for places to park money and get an apartment with good views to boot."

6) "Unlike demand for a rental apartment or an office tower, this segment of the market is considered highly volatile, whipsawed by forces such as currency changes and interest rates."

7) "Even generally optimistic condo developers recently have begun to acknowledge the slowdown. But they predict there will still be plenty of demand for the best projects—namely, the ones they are working on—and they say sales are continuing at high prices, even though the velocity slows."

8) "Mr. Stern [of JDS, the developer behind 111 West 57th Street] and many other developers have a few years before the loans they used to build these towers come due, giving them some time for the sector to recover."

9) Meanwhile, there is one silver lining for all the developers with projects under way. Because lenders have mostly left the sector, few other projects are getting started now, meaning the pipeline isn’t expected to get any fuller.

10) "'The good news,'" said Mr. Barnett, 'is we’re not going to see many more projects that are going to be built.'"