Supertall NYC condos are symbols of the greatest luxury, sculpting Manhattan’s skyline and attracting the upper crust from both hemispheres.
But beneath the sheen of a more than $3B building may lie water damage, structural weaknesses, and awkward sounds. At least, that’s what a bombshell New York Times report revealed about 432 Park Avenue, among the city’s most expensive and recognizable new developments.
Beyond the design issues and resident gossip of any one building, the past year has presented tough market conditions for supertall NYC condos. Brooklyn condos outsold Manhattan’s last year as buyers sought cheaper inventory that the priciest borough lacks. In addition, a progressive mansion tax and political headwinds have scared off high-end buyers, especially international investors, for years.
An analysis of Marketproof New Development data on some of the city’s tallest, most expensive condos showed that while 432 Park may have its logistical problems, the building is far outperforming its younger counterparts.
How supertall NYC condos are selling
There appears to be a gap in the performance of supertall NYC condos, with slightly older buildings outperforming newer ones.
Sales began at the 84-floor 432 Park Ave in 2014. The 145-unit building with prices between $1.63–95 million has sold 82% of its units. Most of the units that haven’t sold are studios, suggesting that 432 Park’s ultraluxury brand attracted the target buyer.
Similarly, One57, a 90-floor Midtown giant, has sold 84% of its units. Sales began in 2011. Units go for $3.17–115 million.
By contrast, a number of supertall NYC condos for which sales started between 2016 and 2019 appear to be selling units at a slower clip. The 82-floor 53 West 53rd St, aka 53w53, has sold 39% of its 161 units. They’re selling at a pace of 1.0/month, indicating the project will sell out in 2029.
The mammoth 131-floor Central Park Tower reportedly started sales in October 2018 but hasn’t reported the sale of a single unit. The 178-unit building, where condos go for $1.54–95 million, has only listed a small fraction of its units.
Lastly, consider Steinway Tower, where sales began in September 2018, and The Centrale, which started selling in April 2019. The Steinway’s sales velocity is slow, at less than 1 unit every two months. The Centrale’s is faster at just over one per month, pushing its estimated sellout date to 2026. Steinway won’t sell all its until 2032 at the current pace. Steinway is offering its units for $1.68–58 million. The Centrale is a bargain relative to its supertall peers with condos between $1.64–40m.
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PPSF
In fact, if we drill down a bit deeper into the data, it’s not hard to speculate as to why The Centrale is selling better than other supertall NYC condos for which sales recently started. It turns out it’s not quite in the same class. The PPSF of its units is $2,632.
The Centrale’s prices are by no means affordable, but they are markedly lower than those of its ultraluxury peers. The average PPSF at 53w53 comes in at $3,678. The number rises to $5,578 at Steinway and tops out at $6,519 at 432 Park Avenue.
Thus, the relative success of The Centrale among supertall NYC condos would appear to reflect broader market trends. It’s been a tough sell for developers hoping to cater to the ultraluxury set. COVID dampened enthusiasm that the progressive mansion tax and the 2016 election had already diminished.
Indeed, the contrast between the more recent buildings and their older peers only further solidifies this impression. While 432 Park Ave and One57 sold relatively fast, they are by no means cheap, even among their counterparts. The average PPSF at 432 Park is $6,519. At One57? $5,269. And yet the developers of those behemoths can claim sales in excess of 80%.
Tough market for resales
A look at recent resales in these ultraluxury buildings shows investors selling at a discount or losing money when you take carrying costs (not to mention various transaction taxes) into consideration.
This could also explain why investors are skittish about jumping into the most recent deals available. The carrying costs of these units are enormous, possibly discouraging investors skeptical about the prospects of flipping them in an adverse economy.
For example, consider unit 34C at One57. This 1,985 sf, two-bed, 2.5-bath closed for just over $6 million in 2015. It was listed for $6.5 million in April 2020, just after the pandemic hit, but closed in September for $5,550,000. The unit’s common charges and taxes add up to $4,630/month, or $55,560/year. Add that all up, and you’re looking at a loss of at least $750,000 before closing costs, commissions, and taxes.
A similar story plays out for unit 65A at 432 Park. The unit, first listed in 2015 for nearly $30 million, sold the following year for $27 million. It changed hands twice the following year, closing for $26.4 million in December 2017. The unit was listed in July 2019 for just shy of $30 million. But it sold in December of that year, after the implementation of the progressive mansion tax, for under $24 million. Carrying costs of $15,000/month likely made that a tough loss to tolerate.
The big picture
The New York Times exposé on 432 Park suggests that the building’s structural flaws quietly plague other supertall NYC condos. That could be the source of some of the more recent iterations’ commercial difficulties. Or 432 Park, which saw enormous success on the market anyway, could be a more isolated case.
But what’s clear is that the ultraluxury supertall condos that went up in unprecedented numbers over the last decade are experiencing a tougher market than their developers would have hoped to see. The new mansion tax will cost many of these building’s buyers several hundred thousand dollars. The long-term drop in foreign investment tamped down hopes for flipping ultaluxury units. COVID has only chilled the market further, and it’s unclear whether the rare ultraluxury deal of late signals a return to form for that market.
Supertall NYC condos expanded the city’s skyline. Whether there’s an expanded market appetite to meet them is far less clear.
The photo above is courtesy of 432 Park.
