When the team behind 111 Leroy, a 10-floor, 13-unit condo in the West Village, wrote up the building’s offering plan, they planned to sell Unit 5 for $9.75m. The four-bed, five-bath unit counts 3,370 square feet, a prime location, and the cutting-edge amenities characteristic of ultra-luxury NYC condos among its assets. But when unit 5 sold last month, it sold for 30% less than its initial offering price, a reflection of changed times.
While 30% is a particularly sharp dip from offering to sale price, 111 Leroy’s story is not uncommon, Marketproof New Development data reveal. In fact, across the city, developers are offering increasingly large discounts to lure buyers into the ultra-luxury segment. Their efforts are fueling the highest volume of sales in that segment in years, just months after the struggles of last year’s downturn.
The upshot is a major opportunity for buyers with deep pockets to acquire NYC’s ritziest condos at relatively modest prices. For that, buyers can thank surplus inventory and sponsors’ willingness to cut deals to move units in the wake of a down year.
“Sponsors are sensing buyers’ eagerness to capitalize on discounts after a difficult year under the cloud of the pandemic,” said Jason Thomas, managing director of new development at Elegran Real Estate. “They’re meeting the moment, spurring some of the most rapid activity the city has seen in years.”
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Discounts drive ultra-luxury NYC condo sales
In 2015 and 2016, the average discount from initial listing price to sale price for NYC condos routinely came in below 5%. As supply grew, political headwinds emerged, and foreign investors exited the market, average discounts rose to five to 10%. In the wake of COVID, discounts have hit new highs. The average listing price discount for sponsor units last quarter was a record-high 15.4%. It hasn’t sunk below 10% since Q2 last year.
The results are striking. Last month, the city reported more than 30 sponsor contracts for $5–10m for the first time since December 2015. This month, the figure will be even higher. The data suggest that developers sense renewed demand and are capitalizing on the opportunity.
Unit 36A at the Woolworth Tower Residences in Tribeca accounted for one of those sales. The 3-bed, 3.5-bath, 3,261-sf unit asked for $9.975m but sold for $6.95m. The Witkoff, Cammeby’s, and Alchemy condo began sales four years ago and has sold 75% of its units despite somewhat adverse conditions for ultra-luxury apartments.
How low prices can go
Even though the number of units changing hands has increased drastically early this year, prices remain near the lows of the COVID recession.
The median price for sponsor units worth $5–10m in Q2 of last year, the early days of COVID, was $2,472 per square foot. Last quarter, it was just about unchanged at $2,498. In the four quarters prior to COVID, it hovered in the range of $2,788–2,924.
The wave of discounts has led to some significant bargains in the $5–10m segment. Unit 33A at The Woolworth sold for $1,963 psf, a rare sub-$2,000 price point for ultra-luxury NYC condos. Unit W22 at 111 Murray St in Tribeca sold for $5.8m, a 21% drop from its offering price of $7.4m. That worked out to $2,160 psf for the 2,685 sf 4-bed.
Condos asking more than $10 million
Among condos selling for $10 million or more, the jump in discounts has been even more pronounced. Average discounts from listing prices to sales skyrocketed to 28.7% in the third quarter of 2020. They dipped to 12% in the following quarter before jumping back up to 22% in the first quarter of 2021. The data are more sparse given the relative rarity of transactions in this price range, but the discounts are still striking when compared to the rates of previous years, when the average discount rate rarely hit 10%.
What’s more, as in the $5–10m segment, prices plummeted last quarter as the volume of sales steeply jumped. The average PPSF for a $10m+ sale in Q2 2020 was unusually high by historical standards at $6,136. (This was partially due to a small sample size — just seven $10m+ sales occurred that quarter.) But by Q4 2020, that figure dipped to $4,717, and last quarter it sank to $3,290.
At the same time as prices dropped, volume started to rise, again signaling that developers are accepting discounts to move inventory. Sponsors reported 16 contracts last quarter after reporting eight in Q4 2020 and just five in Q3. This month alone, sponsors have reported 13 $10m+ contracts, the most in a month since February 2018.
Among the recent sales in this category was Unit 62B at the supertall One57. The 3-bed, 3.5-bath, 4,193 sf unit sold for $16.8m, a 30% discount from its listing price of $23.9m. The sale’s PPSF was $4,018. The initial offering PPSF was $6,010.
Greenwich Village’s The Flats accepted an even more dramatic discount for its penthouse. The 4-bed, 4.5-bath, 6,325-sf unit sold for $15.5m, a 53.7% discount from its listing price of $33.5m. The PPSF was $2,451.
Rare opportunity for ultra-luxury buyers
These discounts point to an opportunity for ultra-luxury NYC condo buyers, who may be able to purchase some of the city’s most rarefied real estate for as much as half off initial offering prices. It also signals a bright future for NYC real estate, which contrary to pandemic-era pessimism, is hardly short of buyer interest, even in the priciest market segments.
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Photo above courtesy of 111 Murray St.