Frothy.
That’s the word some are using to describe New York’s current real estate market.
There’s too much product, others declare. Foreign investors are fleeing, the price of oil is down, the stock market is correcting, there’s no urgency. And so, the logic goes, everyone should sit on the sidelines with a wait-and-see approach to condominium sales.
But savvy real estate developers are ignoring haters who say the market has reached saturation point and are instead incorporating creative strategies to bring prospective buyers to their sites and entice them to close now, rather than later. With prices per square foot down some 20 percent for NYC’s top 100 condos since a year ago, unexpected tactics are still moving the needle at some Manhattan properties.
Alfa Development has tried some exceptionally inventive moves at its Village Green West property on West 14th Street. Founder and CEO Mike Namer and his team have orchestrated an intimate event for prospective buyers, with six singers from the Metropolitan Opera performing live in a full-floor apartment. They also partnered with Barneys, which is moving back to its former Chelsea home around the corner, to host a party catered by the retailer’s famed restaurant, Freds. Next up: inviting interested locals to an evening salon with photographer Sebastian Piras, whose work will be displayed in the 10th-floor model home.
“Right now, everything is on the table,” says Steve Rutter, head of Stribling Marketing Associates.
His firm is marketing 252 E. 57th St., a new 93-unit glassy tower by Skidmore, Owings & Merrill on Billionaires’ Row, which launched sales in September 2014. In January of this year, developers agreed to bump broker commissions from the typical 3 percent up to 4 percent.
“Since doing this, our traffic has increased probably 100 percent, and over the past three weeks we’ve closed four deals,” says Rutter.
Rather than keeping listing prices steady and urging brokers to negotiate in the showroom (“which I hear is happening everywhere,” he says), they made a decision to pre-emptively drop listing prices on some of the remaining 14 units, including bringing one three-bedroom apartment down to just under $4 million. He believes that offering a lower entry price to the building is a smart move, even though buyers might end up closing above that “psychological price ceiling.” Or better yet, they might walk in to see the $4 million home and instead sign a contract for the $16.2 million five-bedroom on the 56th floor.
Nearly everyone agrees that the highest end of the market — where prices hover at $5,000 per square foot — needs a price correction to see closings happen. “We have been very spoiled in the past few years with buildings selling out in the first few months,” says Leonard Steinberg, president of Compass real estate brokerage firm.
“Now we have to get real. This is a market about patience or price.” He believes that smart buyers are looking at absolute price — as opposed to price per square foot — and that the frothiness really lies in the $10 million-and-up market.
“Buyers at that level know there are options, and there isn’t really any urgency to close now,” he explains. He points to big-name developments that have made wise choices — 432 Park Ave. splitting up full-floor residences, for example, or One57 selling units that are entirely furnished and turnkey — as good strategies, but doesn’t believe that one or two new sales there represent market health as a whole.
Compass itself has one new development on the market, the Luminaire, near Gramercy Park, that caters to a so-called mid-market of $1 million to $3 million, and interest is strong.
Developer Ben Shaoul of Magnum Real Estate Group won’t allow brokers to raise prices until 50 percent of the building is sold, and he wants move-ins to happen quickly after close to entice itchy buyers.
“To be able to move into a new building and take advantage of low interest rates and all the tax benefits — I know it sounds crazy, but the smartest buyers will buy now,” Steinberg adds.
Stephen Kliegerman, president of Halstead Property Development Marketing (HPDM), has also been concerned about the very top of the market for years, and has taken steps accordingly.
“We have boots on the ground so … we can see a trend emerging two or three years out, versus only looking at data,” he says.
“We have been telling our clients for some time to build to a more reasonable price point at a reasonable size, so we are at a good place.”
To wit, Cadence Property Group’s Sorting House, at 318 W. 52nd St., is offering two-bedroom apartments through HPDM that clock in at less than 1,400 square feet and are selling below the current $2,300-per-square-foot average in Manhattan.
HFZ, which is developing numerous condo conversions in highly livable neighborhoods, is also waiting until buyers have an actual apartment to walk through before trying to sell anything. “We are not selling off of floor plans at most of our properties,” explains HFZ president Alicia Goldstein.
“Even if we do a ground-up development like the Bryant, on Bryant Park, we typically have a model residence, so people can really touch and feel our product.”
That has worked in HFZ’s favor at places like the Astor condo-conversion on the UWS, and even at high-end new-builds like 505 W. 19th St., designed by Thomas Juul-Hansen and set on the High Line.
“You can now come and see the two completed penthouses and experience what it feels like to live there,” she says of the $18.85 million and $22 million spots.
But waiting for 3-D visuals isn’t HFZ’s only strategy. “Buyers asking for closing costs to be covered by the sponsor is sort of typical in this climate,” she says.
Other firms have reported clients demanding concessions on mansion, title and transfer taxes — which can amount to 5 percent off the total sale price. Rather than asking for discounts or coming in with low-ball offers, “this is our customer’s way of saying, ‘We’d like a little something,’ ” says Goldstein.
They just might get it.