The boom of skyscrapers for the rich peaks in a New York in crisis

After three months with the frozen economy, the city of New York tries to turn the page. The stores reopen, although like restaurants they only serve on the street. The traffic through its avenues becomes more intense and the subway returned to normal service. The bulk of the reactivation, however, is initially concentrated in construction, a vital industry for the great metropolis and that defines its imposing profile. The pandemic, however, threatens to put a plug.

The new skyscrapers are one of the most visible indicators of the health of the financial capital of the world. And not just because rise with Wall Street. It is a fundamental source of income for the city to function, especially the luxury housing segment, which before confinement showed symptoms of exhaustion after a decade of strong expansion, with structures that rose like needles defying gravity.

The new housing complex that was to be built in the 45 Broad Street It is the best example of the new reality that exists in the concrete jungle. It was called to be the tallest ever built in lower Manhattan. I had above plane 340 meters high and it was intended to rival the coveted towers that stand south of Central Park. But the ambitious project fell under its own weight. Market conditions simply don’t allow it. The idea of ​​the developers is to wait for inventory to be released and the complex already anticipates that it will not be that high.

It is not the only major project to succumb, but the remaining hole in the financial district is the clearest proof that the boom in the luxury market has come to an end. Many of the apartments built in that segment since the Great Recession, indicate from Miller Samuel, they are empty. Street Easy he estimates that they are one in four of those that have been on the market since 2013. There are plenty of examples and reality contrasts with the headlines after the record purchases led by Ken Griffin O Jeff Bezos.

The largest complex at the moment is the One Manhattan Square, with 815 newly built units. Data before the coronavirus showed that 223 apartments were sold and 39 were under contract. If you count the inventory away from the market, there are currently about 9,000 units waiting to be owned.

The past was already a difficult particular year. The reforma fiscal de Donald Trump and other tax changes in New York State contributed to putting more pressure on the market. That caused luxury home sales to fall in 2019 to lowest level in seven years. A rebound was expected in 2020, because prices had been falling from the peak in 2016 and the correction exceeded that experienced after the last financial crisis. That will not happen. Mark Zandi, chief economist at Moody’s, already warned in January that if the United States went into a recession, the luxury market would suffer enormously because it is a business closely linked to the economic cycle. Social confinement and remote work also led to an unexpected flight from the city to the suburbs. As real estate agents say, “It is very difficult to sell a luxury apartment in current conditions.”

Freezing projects before construction begins is a tactic to stay afloat during the economic downturn. But the consensus among real estate agents is that the prices of four years ago are impossible and will not return. The oversupply, the routing of foreign buyers and the general uncertainty force developer firms to be creative when selling inventory. One of the tactics they are exploring is selling them in blocks of 20 apartments at an attractive discount. It is an unusual formula, but one that responds to the changes that the pandemic is introducing in all sectors.

That can cause a major transformation in the appearance of buildings, because investors may choose to rent the units a few years before selling them for a higher price. It’s already happening. The most recent StreetEasy data shows that a significant portion of the units sold returned to the market as rental housing.

Changes also in the type of projects. The skyscrapers that were built during the last decade south of Central Park, like 111 West 57, the thinnest in the world with one unit per floor, they were thought for fortunes that almost do not exist or that now avoid being ostentatious. That would partly explain that 40% of the apartments that are sold in the eight large skyscrapers that rise in the so-called ‘Billionaires broker’ on 57th Street are vacant, according to Miller Samuel’s analysis. The One57, as pointed out by the Compass agency, was in its day a great idea. There was no similar building in Manhattan and that resulted in record prices being paid. But the resale value is still very disappointing. The luxury market in New York is very fragmented and the crisis is forcing a change in the type of projects, towards a smaller model of the boutique type with less than 50 homes per complex that move away from the huge skyscrapers.

History, therefore, repeats itself and is not very different from the script that followed in crises that New York City had to face in the past. Skyscrapers will continue to be a fundamental part of Manhattan. But the excesses exposed during the boom of the last decade in the luxury market, exacerbated by the restrictions imposed by the coronavirus, threaten to put the most distinctive symbol of the might of the global financial capital on a long hiatus. (END)

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