The Manhattan luxury real estate is defined as being the top 10% of the market. The price of luxury real estate doubled since 2005. The entry luxury level is now @$4 million. The boom in luxury real estate starting in 2005 until present was due partly to foreign buyers looking at Manhattan as safe haven for their investments.
During the early years of the Manhattan building boom most of the luxury new developments were built on the Upper East Side, Upper West Side and Midtown West. New development grew especially around the borders of Central Park South, Park to Fifth and Central Park West. The recent concentrated growth in luxury new development downtown in areas such as Tribeca, the West Village, and Nolita & SoHo has changed the definition of luxury making it more diverse in location.
While many people, especially younger people desire the new luxury development condominiums and the vibrant downtown lifestyle there are some interesting data about what happens after a new development is no longer “not so new”. New development defined as being built in the last two years typically take up the most space in the luxury market. However research finds that when these luxury top tier buildings age out a bit and are replaced with even newer developments that are larger and have a large suite of amenities the slightly older buildings often lose their top tier ranking, especially when they don’t age well! My November Mann Report column was on the topic of “How to tell if your not so new luxury condominium is not aging well!” These not so new buildings have appreciated significantly in value in ten plus years. However, they do not sell within the top tier segment of the market.
Here is something that may come to you as a bit of surprise! Historic residential buildings those that are deemed landmarked such as the Dakota, San Remo, 740 Park Avenue or 834 Fifth have shown to retain their place in the top tier of luxury sales despite the competition from the ultra-luxury condominiums. According to a recent study conducted almost half of the historic buildings that were in the top tier in 2015 remained in the top tier in 2017. Contrast this with the 23 luxury new developments that were built in 2015 where only 4 remained in the top tier in 2017. I would have not guessed that the number that remained was so low, would you?
The Manhattan luxury new development growth is fueled by ultra -wealthy global buyers who demand the newest, tallest, most architecturally interesting and most amenity rich condominiums. The world’s ultra -high net worth individuals defined as having a net worth of $50 million and over has grown @ 18%. However, the pace of the number of new luxury development condominiums is rising much faster than the increase in the number of ultra- wealthy individuals. This rapid growth in ultra-luxury new development has led to the present large oversupply of ultra -luxury condominiums on the market especially in midtown and certain areas downtown. As a result, prices have fallen significantly on many ultra – luxury condominiums in areas where there is a large surplus. So for the most part ultra-luxury buildings have become more of a bargain for the very wealthy in this new market.
How are the new luxury residential condominiums being built in this new buyers’ market with lower sales prices going to change the definition of luxury living in Manhattan? The market has been shifting downward for the past few years. Developers are now constructing bigger buildings with more units in them in order to make a higher profit. Apartments in many buildings going forward in this new market are likely to have smaller layouts. There will be more one to two bedroom units there are smaller in square footage. In three to four bedroom apartments, bedroom sizes will likely shrink sometimes to 80 square feet, which is the city’s bare minimum size to qualify as a legal bedroom. The rooms may be labeled child’s room, office or nursery to indicate they are below full size. Kitchens may be smaller depending on the building’s targeted demographics. While millennials may be, ok with smaller kitchens an older demographic may desire bigger kitchens. These units will be targeted to a larger pool of buyers that can afford a $2 million apartment rather than a much smaller pool of buyers who can afford a $10 million or more apartment.
A suite of rich amenities was considered part of the package in luxury new developments. While amenities such as golf simulators and video arcades may have played themselves out, an amenity package will still be deemed essential in more upscale buildings. Some of the most desirable amenities will relate to health and wellness. For example, new buildings may take fitness rooms to a new level by offering state of the art equipment such as Peleton bikes and along with virtual training programs. Fancy rooftops will be a hot amenity. Even smaller buildings will offer pools, private cabanas, an outdoor kitchen and a planted green communal space.
High-end finishes will be used however; the durable materials will be less expensive due to improved technology. Manufactured counter tops and faux porcelain are examples of products that can still look amazing but cost less.
The other big change that is taking place in the luxury new development is that buyers no longer want to buy from a floor plan. They want to see the model apartment or a finished apartment before they sign a contract. Not so a few years back!
As you can see, there are multitude of things that influence and define the Manhattan luxury real estate market over time. Evolving luxury lifestyles and the state of the luxury market are the main factors that have a major impact on what characterizes the Manhattan luxury lifestyle.