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During Manhattan's luxury boom, apartments of 4,000 square feet or more—some occupying all of a single floor and featuring soaring ceilings and ballroom-sized "great rooms"—were the maisons du jour for the super-wealthy.
I remember how stunned I was, during a 2012 tour of the under-construction One57, to see that a full-floor apartment of 6,240-square-feet would have unobstructed Central Park views on one side, and of the Empire State Building and Statue of Liberty (from an oversized bathroom) on another.
It was, to say the least, a heady moment. Buyers bought condos from only the floor plans, and developers eagerly sought to build for those who could afford to pay $20 million or more. And at that price point, they were more likely to do so in cash.
Now those winds are shifting. Signs are mounting that the era of the mammoth apartment is fading. Developers, sensing mounting softness in the luxury condo market, are starting to carve up units and adjust their plans for buildings under development.
"There was a huge focus on large apartments for a long time," said Leonard Steinberg, the former Douglas Elliman superbroker who is now president of Compass. "Now the focus has definitely shifted to a more attainable price point."
One57 went up during the height of the luxury craze, at a time when the 22-year-old daughter of a Russian billionaire purchased, at least on paper, a 10-bedroom apartment at 15 Central Park West for $88 million. Extell Development's Gary Barnett targeted global billionaires, and who else could afford a nearly 11,000-square-foot duplex penthouse that sold last year for a record $100.5 million?
The luxury big-unit craze "all kind of made sense until you could look out the window and see your competitors building all around you – and there were more coming," said Jonathan Miller, president of Miller Samuel, the consulting and appraisal company.
Today, just under 20 percent of One57 remains unsold, including pending contracts, an Extell spokeswoman said this week, declining to provide more detail. Extell has been selling about one unit every three months, Miller said. At that rate, it will take five and a half years for the building to sell out.
The luxury competition has become fierce. Just down the street, at 220 Central Park South, Vornado is selling units at an even higher price per square foot level than One57. Hedge fund manager Kenneth Griffin reportedly agreed last year to purchase three full floors there for $200 million.
"In the case of New York, it is not that there are too many units being constructed, it is that there are too many competing units in a narrow price bandwidth that are being constructed," Miller said.
So far, Extell hasn't shown much willingness to negotiate sizable price reductions nor to divide units, brokers said. But other developers have opened up recently about the need to scale back their offerings and to trim prices.
Last week, Kevin Maloney of Property Markets Group said he had chopped up an 8,400-square-foot triplex apartment at 10 Sullivan Street into two smaller units. The penthouse was priced at $45 million, but he was concerned about the slowing Manhattan market. "The air is very thin up there in that buyer pool," he told Bloomberg.
Now PMG is selling a 5,400-square-foot duplex for $29.5 million, and a 3,000-square-foot apartment below it for $11 million.
Maloney's move followed news in November that CIM and Harry Macklowe, the developers of 432 Park, the city's tallest residential tower, were splitting five full-floor apartments in half. The smaller units, on floors 91 to 95, have asking prices of about $40 million each, Crain's reported. That compares to an 8,000-square-foot unit on the 88th floor listed at $76.5 million.
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The developers have sold more than 70 percent of the building's 106 units, including the 8,000-square-foot penthouse on the 96th floor, which is under contract for $95 million.
Then there is Ziel Feldman, who has said he plans to build smaller than the competition at 501 West 17th Street, a West Chelsea development. Feldman paid $870 million last year for a full square block in West Chelsea, one of the most expensive land deals on record, Bloomberg reported.
In a telling statement, the HFZ Capital Group chief said he didn't "want to be hostage to the $10-to-$20 million condo market."
Rather than reduce the price-per-square foot, Feldman plans to offer apartments in the 1,500-to-2,000-square-foot range—about half the 3,311 square feet that Manhattan apartments averaged during 2014 and 2015, according to Miller Samuel.
But developers need to be cautious not to get greedy on the way down. They need to respect that larger contiguous spaces generally command a premium in price-per-square-foot terms, a "1-plus-1-equals-2.5" axiom Miller likes to tout.
Other developers are quietly adjusting their prices downward. At 50 United Nations Plaza, Zeckendorf Development had sold less than half of the 87 available units in the 43-story tower as of December, after starting sales in 2013, Crain's reported. Nearly two-thirds of the condos closed at discounts of up to 16 percent, the publication said.
While not exactly a fire sale, William Zeckendorf said the developers may have over-priced some of the upper units, while also noting that 10 sales were in discounted bulk purchases, including four units sold last year to Qatar's United Nations mission for $45 million.
Brokers say buyers' changing attitudes are driving developers' new thinking. "There is a frumpy stock market that is scaring people who afford those types of large apartments," said Ryan Serhant, a broker with Nest Seekers International. "People today will save their money. That is exactly what happened in 2009."
"The emphasis on billionaires has been embarrassing, almost."
Developers are deciding that "relying on a very small finite group of buyers is too much to swallow," Steinberg said. "The emphasis on billionaires has been embarrassing, almost."
The buzz today is a "broad awareness" of the need to build more for "middle class" New Yorkers, which in Manhattan means apartments below $4 million, Steinberg said.
For Serhant, slicing up floor plans "worked in our favor" at Ben Shaoul's East Village redevelopment at 100 Avenue A. Instead of doing one penthouse floor at the 32-unit property, the developer created four penthouses that are in line with the other one- and two-bedroom units in the building. One penthouse, a 991-square-foot two-bedroom, is in contract for $2.5 million. Contracts are also out for another, a 632-square-foot one-bedroom, for $1.635 million, said Serhant, who is marketing the property.
The danger in all the concern over constructing apartments that are too big to sell in the emerging climate, of course, is that Manhattan developers will veer too far from the boom years, too fast.
"Manhattan has a tendency to have herd mentality where everyone does exactly the same thing at exactly the same time," Steinberg said. "There may come a moment pretty soon where all of a sudden people say, 'We need bigger apartments.' But do we need bigger apartments at $30 million, or at a more attainable level? We'll have to see."
- Property Lines archives [Curbed]
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