Blocks & Lots

How Much New Development Inventory Does Manhattan Have?

After three years at record highs, new condo inventory in Manhattan declined about 5% from 2020 to 2021, according to Marketproof New Development data.

A combination of strong sales and a decrease in new inventory has propelled the total available inventory downward, a good sign for a market facing a years-long excess of supply.

How we got here

Between 2015 and 2018, available inventory grew substantially from 5,680 to nearly 9,000 units. Rapid development fueled those numbers. The market added a record more than 3,100 condos in 2015. In 2016 and 2017, even as new development outpaced demand, more than 2,100 units hit the market per year. The figure was just over 2,800 in 2018.

In these years, sales hovered between about 1,000 and 1,400 units per year. This is how available inventory reached about 9,000 units, where it lingered from 2018 until this year.

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But times are changing. The market added fewer units in 2019 and 2020 while demand outpaced new development. As a result, inventory dropped to the current level of fewer than 8,000 sponsor units.

What’s more, this year could be a game-changer. Contracts, indicating new sales that have not closed yet, hit five-year highs in Manhattan in April. This year looks like it could put a serious dent in available inventory.

How much time will current inventory take to sell?

If we assume sales continue at 2019’s rate (to take the last full non-pandemic year as a benchmark), it would take about five years to sell out the current inventory.

But if current levels were to continue — Manhattan reported a record-shattering 235 contracts last month — it would take just three years to exhaust the inventory already available.

In reality, of course, developers will add new inventory in the meantime, and the market is unlikely to keep up precisely the current pace. So, this does not mean inventory will run out completely in the next three to five years. But it does mean that if additional inventory remains relatively low and sales remain anywhere near current levels, market dynamics will shift significantly. New supply far outstripping demand may cease to be the status quo.

The ultra-luxury market

Developers have flooded the market with ultra-luxury options. There are about 7,700 total sponsor units available in Manhattan. Nearly 2,000 of them, or more than 25%, are asking for $5m or more.

If we step down a tier, we see that about 1,600 available Manhattan units are asking for $3m or more. That’s a little more than 20% of the available units in the borough. In other words, nearly half of Manhattan’s brand-new condo inventory costs $3m or more.

The upshot

Ultra-luxury condos have been selling at years-long highs, boosted by developers’ willingness to offer hefty discounts. For the ultra-luxury segment as for the rest of the market, developers have the opportunity to keep driving sales and shifting market dynamics if they adjust prices to meet buyers where they are. In addition, if today’s low mortgage rates increase, greater discounts may need to follow.

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Photo above courtesy of 101 West 14th St.

Joe Zappa