One Sign That Manhattan's Super-Luxury Condo Market Is OverBy
Builder says days of `super pricing' are probably past
Latest project in Chelsea to have smaller units, lower prices
Manhattan’s growing inventory of ultra-luxury condominiums has another big developer seeing signs of a glut.
Toll Brothers Inc., the largest U.S. luxury-home builder, is zeroing in on smaller apartments with lower prices in Manhattan after watching expensive units sit on the market, said David Von Spreckelsen, the New York division president of the company’s City Living unit. Its latest project, at 55 W. 17th St. in Chelsea, will have an average asking price per square foot less than at new buildings in the rest of the borough.
“The days of super pricing and of raising prices every other week, I think, are probably past,” Von Spreckelsen said in an interview. “Supply has started to catch up with demand.”
Toll Brothers is switching gears as sales of new Manhattan condos slow -- and prices continue to escalate -- in a building boom. Developers have focused almost exclusively on larger and lavish apartments as a way to capture demand from ultra-wealthy investors who view New York real estate as a secure place for cash.
While record-shattering sales such as the $100.5 million penthouse at Extell Development Co.’s One57 tower have grabbed headlines, there’s a limited pool of billionaire buyers. Newly constructed apartments that sold in the second quarter spent an average of 130 days on the market, up from 117 days a year earlier, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.
“We’re starting to see an oversupply of really large units and really expensive units, and we think those are sitting on the market,” Von Spreckelsen said.
Other developers have cited a possible oversupply in the market that’s affecting their decisions. Ziel Feldman, chairman and founder of HFZ Capital Group, said he didn’t want to “be hostage to a $10-to-$20 million condo market” at his full-block site near the High Line in West Chelsea. Plans call for apartments of 1,500 to 2,000 square feet (139 to 186 square meters), with prices starting at less than $4 million, he said in May.
Steven Roth, chief executive officer of Vornado Realty Trust, which is building condos starting at more than $12 million at 220 Central Park South, said at a Bloomberg forum in April that he thinks luxury condos are at risk of being overbuilt.
The 53 units for sale at Toll Brothers’ Chelsea building, located between Fifth and Sixth Avenues, will start at $1.5 million, Von Spreckelsen said. Asking prices for the apartments, almost 80 percent of which will have one or two bedrooms, will average $2,200 a square foot. That’s less than the average of $2,663 for new-development listings across Manhattan in the second quarter, according to Halstead Property Development Marketing.
Fifty percent of new-development listings were priced at more than $5 million in the three months through June, according to Halstead.
The strategy for other sites Toll is developing on Barrow Street in the West Village and on lower Broadway in Tribeca is likely to be similar, Von Spreckelsen said.
“We’re seeing it in the market data that we observe, and we’re seeing it in some of our buildings,” he said. “There only a few buyers who are going to have north of $7 million to spend on an apartment.”
The broader development market may be starting to shift. Of the 2,267 newly built units expected to be listed in Manhattan by the end of the year, 73 percent will be in buildings where the average price is less than $2,400 a square foot, according to Corcoran Sunshine Marketing Group.
Toll’s Chelsea project will still have many of the luxury features that are hallmarks of New York condo developments, such as walk-in closets, oak floorings and wine refrigerators. Amenities include concierge service, a billiards lounge, a movie screening room and landscaped terrace.
The tower will have 26 two-bedroom apartments with an average size of 1,492 square feet, and 15 one-bedroom units with about 824 square feet, according to Von Spreckelsen. The nine three-bedroom units will average 1,955 square feet, and three four-bedroom apartments will average 4,374 square feet.
A duplex penthouse with a rooftop sun room and pool will span the tower’s top two floors. That unit and a few others haven’t been priced yet.
The tower’s average price per square foot is “compelling” for the Chelsea market, Von Spreckelsen said.
“It’s pretty targeted to where we think the market is,” he said. “We anticipate that we’re going to sell rapidly and have some price increases.”