Predicting the future is a low-probability but fun game. Nonetheless, we have five predictions for the NYC new development market for 2023 and beyond.
Before we get into it, let’s take a quick look back at 2021 and 2022.
The 2021 thru 2022 Manhattan condo market can be summed up with two words: sugar high.
As shown in the chart above, the supercharged market peaked in April 2021 and ran until June 2022.
We won’t see sales volume like this again for a very long time.
So, following this sales burst, where are we?
In Manhattan, as of today, more than 6,500 new development units are available. Of these, just over 1,000 are listed for sale, and 5,500 are shadow (What is shadow inventory?).
6,500 units represent around a $10B market opportunity spread over 6 years, which is how long it will take for 100% sell thru.
For comparison, we were at around 8 years of inventory in 2019.
Digging in a little deeper, there are 122 new developments with more than 30 total units currently selling. Of these:
22 are less than 15% sold,
32 are between 16% and 50% sold,
30 are between 51% and 80% sold,
and 38 are more than 80% sold.
A bit more than half of the projects have passed the halfway point of sellout and are on their way to the finish line. With less inventory coming onto the market going forward, this number should get whittled down in 2023.
Now, the five predictions.
1. Assuming no other market shocks, transaction volume in 2023 will settle back into a normal range by spring or summer and stay there for the foreseeable future. With diminished condo opportunities, developers are already shifting to multi-family, resulting in less new inventory coming to market.
2. Current condo inventory will continue to tighten, but discounts will still increase by spring to move inventory in the face of uncertainty. With borrowing rates up for developers, they will focus on selling more units instead of financing inventory to sell later. That being said, it should continue to be a good market for quality, luxury product.
3. The amenity race will continue. Buildings already built will begin to realize that amenities don’t need to be inside the building. Why not have amenities down the street?
4. The Adams administration will amend Local law 97 (LL97), the recent carbon reduction law, but it will move forward in 2024 as scheduled. Condo boards will have to spend some money, and some developers may have to modify their plans. This is something to watch closely.
5. Within 6 months, the Mayor will announce big incentives for office-to-residential conversions because, without big incentives, projects won’t pencil out. And empty offices and not enough housing are bad for everyone. (Kael Goodman Interview: Arpit Gupta, Co-author ‘Work From Home and the Office Real Estate Apocalypse’)
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Photo courtesy of Rose Hill.