In New Growth, Consumers Favor the Boroughs

In New Development, Buyers Favor the Boroughs

When it comes to new developments, shoppers who choose to stay in New York – and have the funds to stay – choose Brooklyn and Queens.

Five months after Covid-19 paralyzed the city's property market, sales across the city fell. But the boroughs beyond Manhattan are doing better, in some rare cases even beyond pre-pandemic expectations.

While the New York exodus to the suburbs and beyond has so far been overrated, many of those who left were affluent residents with second homes and had played a disproportionate role in supporting the overpriced condo market in Manhattan, which collapsed before Covid-19 . According to Kael Goodman, the executive director of Marketproof, a real estate analysis firm, more than 60 percent of new condos remain unsold – and much of that supply had accumulated before the virus hit.

Now the market relies again on first-time and young buyers, many of whom work from home thinking less about commuting time and more about savings. New York was not an inviting market for young shoppers. In fact, some potential buyers have been evicted because of rising costs and job losses, while others may have moved to another location to await the pandemic.

But those who stayed, attracted by near-record-low mortgage rates and a plethora of choices, bet on the long-term revitalization of the city while they still have leverage. Discounts at the lower end of the market remain modest, but buyers get back-end concessions and initial cracks on units with better views and layouts that were often the first to sell.

These sales could rearrange the priorities of the new development for the coming years: more space outdoors, fewer bells and whistles and, above all, lower prices. The relocation could also be a blow to the ultra-luxury skyscraper, as more buyers prefer smaller "boutique" buildings and are less reliant on cramped elevators.

No market was immune to the slowdown. From the start of the New York Home Order on March 22 through the end of August, 488 new condominium contracts were signed across the city, a 40 percent decrease from the same period last year, according to Marketproof.

But outside of Manhattan, the withdrawal was less severe. According to real estate website StreetEasy, seven out of ten neighborhoods with the most signed contracts for new condominiums were in Brooklyn and Queens. The analysis only dealt with first-time sales or so-called sponsor units in new buildings.

Bedford-Stuyvesant in Brooklyn topped the list of 48 contracts signed during this period with an average selling price of $ 725,000. In contrast, Manhattan's Upper West Side, which had the most new condominiums listed for 144 homes during that period, had just 16 contracts and an average sale price of $ 1.88 million. But those deals represented a relative bargain for the Upper West Side, where the median asking price for new condos was $ 3.68 million, roughly double the price of what was actually sold.

Demand in these neighborhoods also challenges the notion that big cities buyers will turn down after Covid-19, said Jonathan J. Miller, president of Miller Samuel Real Estate Appraisers & Consultants.

"This is about wealth and mobility, not density," Miller said, noting that almost every major urban market he tracks nationwide, with the exception of Manhattan, has improved. Perhaps one reason for the inequality, he said, is the astronomical rise in prices in Manhattan over the past decade, aimed at a shrinking pool of wealthy buyers.

Their departure has meant more opportunities for first-time buyers who often compete with cash flush investors looking to buy multiple units to rent or flip. The percentage of cash buyers from co-operatives and condominiums in Manhattan fell to just under 41 percent in the last quarter – the lowest level since 2014 after having been around half of all buyers for years, Miller said.

In search of relatively low prices, new development buyers headed to Long Island City in western Queens. From June 22nd, when in-person screenings resumed through August 23, condominium signings dropped 21 percent from 98 in the same period last year to 77, according to Patrick W. Smith, a representative of Corcoran Group back.

However, the majority of those sales, 62 percent, were signed for less than $ 1 million, compared to just 40 percent for the same period last year. It's a big change from early last year when speculators snapped top dollar units in anticipation of an Amazon campus that local residents turned down. From late June to late August last year, five contracts were signed for more than $ 2 million. There weren't any this year.

"The people who buy today intend to use it for their primary residence," he said.

The demand has changed. At the Skyline Tower, a skyscraper in a Long Island City condominium with over 800 units in which the majority of units have not yet been sold, only 8 contracts were reported from late March to late August, compared with 193 in the same period last year. Eric Benaim, the executive director of Modern Spaces who oversees sales there, said 13 contracts were signed during that period. A slowdown is expected a year after its initial sale, but the tower also has some of the most ambitious prices in the area, such as a 678-square-foot one-bedroom that's nearly $ 1.2 million or more than 1,760 US dollars per year required square feet.

The building size is also a concern for the buyers. Since the pandemic began, consumers have been requesting information on larger buildings, from 50 to 199 units, about 25 percent less per listing than the same period last year, according to Nancy Wu, an economist at StreetEasy. The only category that saw a modest surge in interest, a 3 percent increase, was buildings with 10 units or fewer, including townhouses, she said.

The shift could reflect concerns about sharing common areas and elevators with more residents, agents said, but others say the problem is exaggerated.

"It's such nonsense," said Gary Barnett, chairman and founder of Extell Development, which owns New York's tallest residential building, Central Park Tower, as well as several other skyscrapers. He said tall buildings with large elevators and common areas can be much less crowded than boutique buildings with less common space.

Price was the most sensitive issue in Manhattan. "We just can't get these prices anymore," he said, noting that discounts in the ultra-luxury condominium market can range from 5 to 30 percent. "It exceeds our margins," he said of the current market, noting that his company is losing money on more than one project.

There were a few exceptions. JD Carlisle Development's Madison House, the tallest tower in NoMad, priced between $ 1.4 million and $ 13.73 million for its 199 units, has signed 38 contracts since July, according to Marketproof, although some of those units may be ahead of Covid were bought.

In Harlem, the apartment at 300 West 122nd Street postponed its launch in April and spent time retooling the design, such as scrapping two units to create a job for residents. The developer, Happy Living Development, decided to begin sales in July ahead of the planned rollout in September due to strong interest from potential buyers, said Rachel Medalie, principal at the firm and agent at Douglas Elliman.

"We had 700 registrations" for a 170-unit building, she said. "In normal times that was a large number, in those times it was excellent." Studios start at under $ 500,000 and the most expensive unit is $ 3.4 million with four bedrooms. Fewer than 20 apartments have private outdoor space, but they have been very popular, she said.

The sales team is waiting for 20 deals to be signed, all for one price, and many buyers are coming from Midtown or downtown Manhattan looking for a cheaper new development. Still, it's worrying to see $ 1,350 per square foot, the mixed average in the building, as a bargain, especially when the average price in Harlem a decade ago before a recent wave of new developments was $ 587 per square foot, according to HarEyy.

However, the strongest condominium sales were in Brooklyn. According to Brown Harris Stevens Development Marketing, the district had signed 338 new development contracts by mid-March to late August, compared with just 198 in Manhattan. Stephen Kliegerman, the company's president, said units in Brooklyn tend to be a bit larger and cheaper than what's on offer in Manhattan, and the district's parks and green spaces have become an increasingly popular facility.

The outdoor space was critical to Tabrez Haider and Anjuman Ara, who are under contract to purchase a two-bedroom apartment with outdoor space on 567 Ocean Avenue, a nine-story apartment under construction in Flatbush, Brooklyn. According to Andrew Barrocas, the executive director of MNS Real Estate, which is handling the sale, prices range from $ 400,000 for a studio to $ 1.375 million for a three bedroom studio.

Mr. Haider, 33, who works in banking, and Ms. Ara, 32, who is training to be a teacher, had been watching the market closely from their rent in nearby Midwood. Even before Covid-19, the couple knew they wanted sun and space outdoors without breaking their budget, which is why Manhattan was excluded early on. It's been months since Mr. Haider worked in his Midtown office and Ms. Ara has been taking virtual classes.

Although they couldn't move into the new apartment until next April, shortly after the demonstrations restarted in June, they took a hard hat tour of the unfinished building and were one of the first buyers in the building. He said they got a modest discount, less than 5 percent on concessions, and maybe they could have negotiated harder if they waited, he said. However, the combination of very low mortgage rates, a lower 10 percent down payment and the availability of sunny high-floor units convinced them to close the deal in July.

"If we allow ourselves to be pushed back by any uncertainty, we will probably never be able to make a decision," said Haider, who is used to economic headwinds: He graduated from college at the height of the Great Recession. and began his career in the middle of the European debt crisis.

For Anu-Raga Mahalingashetty and her partner Patrick O’Donnell, both 36, a six-month search led to 88 Lexington, a new eight-unit walk-up in Bedford-Stuyvesant, priced between $ 769,000 and $ 1.175 million. They searched nearly 400 homes online, almost all of them in new builds, looking for solid construction, outdoor space and reasonable transportation costs.

Ms. Mahalingashetty, who works for a global healthcare company, and Mr. O’Donnell, an engineer, bought a two-bedroom apartment in the building in April when the city was struggling with soaring infection rates.

"I think the city will bounce back," said Ms. Mahalingashetty, although so much of what she love about New York has changed in the short term.

"Half of our friends moved out of town – and they were all Manhattan residents," she said. Those stayed in Brooklyn and Queens.

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