Developers used the 2010s to reshape the New York skyline with soaring condo towers — many of which will struggle to sell units well into the next decade.
But what began as a period of exuberance for investors ended with a dwindling pool of high-end buyers willing to pay record prices. Apartments are still selling, especially in the resale market, but often at marked down prices.
“We think of this decade as this boom of new product never seen before, but that’s a distant memory,” said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants. “The second half was a reckoning with reality.”
It was also a decade of tremendous change and gentrification for the boroughs beyond Manhattan, where rezoning and the pursuit of cheaper land near public transit spurred new building, much of it too expensive for local residents. At the same time, a dire need for affordable housing continues in the city, where about 79,000 people live in shelters or on the streets.
To better understand what awaits in 2020, we explored some of the biggest changes of the last decade in the sales, rental and new development markets. Which neighborhoods received the most new development, experienced the highest rent increases, the highest sales price increases?
The building boom made Brooklyn ascendant, with Queens not far behind, and some major residential mixed-use projects are now also underway in the South Bronx. There are already signs of the market and neighborhoods pushing back against the glut of new development and subsequent gentrification. In Manhattan, where the surplus of new luxury condos could take more than six years to sell, there is already a shift toward smaller, relatively less expensive units. Sweeping rent reforms in 2019 could also shape what gets built, and for whom, in the years to come.
The Rise and Fall of Ultra Luxury
Nearly half of new condo units in Manhattan that came to market after 2015, or 3,695 of 7,727 apartments, remain unsold, according to a December analysis of both closed sales and contracts by Nancy Packes Data Services, a real estate consultancy and database provider. The report looked at buildings with about 30 or more units.
That is a staggering estimate and a humbling reversal from the start of the decade.
Investors, many of them from overseas, in search of higher returns after the 2008 recession looked to hard assets like real estate, and bet big on residential projects. Because credit remained tight for most New Yorkers, the most lucrative demographic was the affluent all-cash buyer, and thousands of new units — larger apartments, with better finishes and more amenities — were built to suit the demand.
Thus arose a number of skyscrapers on and around Central Park and exclusive pockets of Manhattan that set eye-watering sale records (currently: $240 million for a 24,000-square-foot pied-à-terre on Billionaire’s Row in Midtown). Since 2009, 22,304 condo units were built in Manhattan, the most in any borough.
But a confluence of global economic headwinds starting around 2015, as well as unfavorable changes to property and transfer taxes, cooled interest among well-heeled buyers.
Luxury real estate is a sentiment-driven market, said Nancy Packes, the principal of Nancy Packes Data Services. “Someone who has $30 million has four to five homes — they don’t need to buy,” she said.
The ambitious pricing created a divide between buyers who intended to live in their apartments and investors seeking a certain return. In 2011, the average sale price of a new condo was $1.15 million, just a 9 percent premium over resales. By 2019, the average price of a new condo was $3.77 million, a 118 percent premium over resales, Ms. Packes said.
That disconnect has led to a glut of unsold luxury condos. Including shadow inventory — the units held off the market until conditions improve — there were 7,050 new condo units available for sale in Manhattan in January, according to a Halstead Development Marketing report. That is the equivalent of more than six years of inventory at the current pace of sales, when a balanced market typically sells out in two to three years.
“You never had this kind of supply in these price ranges,” said Gary Barnett, the president and founder of Extell Development, which has built some of the priciest condos of the decade.
“The $5 million to $10 million market is hammered — there’s way too much of it,” he said, leading most developers to pump the brakes on new residential plans, until the current supply is sold.
The competition has meant deep concessions to buyers, including developers’ offers to cover closing costs, several years of common charges and other sweeteners. At One Manhattan Square, Extell’s massive 815-unit condo tower in Two Bridges, where prices range from $1.2 million for a one-bedroom to $12.1 million for a penthouse, several units are being offered with “rent-to-own” plans — an unusual option that underscores the volume of supply. Only about a quarter of the units had been sold in October, according to a StreetEasy analysis, though marketing began in 2015. A spokeswoman said, however, that there are “hundreds of more units” that are in contract.
In the pipeline of new residential projects, there could be a renewed focus on full-time residents, with a mix of smaller, comparatively affordable units.
At Essex Crossing, a six-acre mixed-use project on the Lower East Side expected to be completed in 2024, the nine building complex will incorporate retail, community space, and a total of 1,079 new apartments, more than half of which will be reserved for low- and middle-income tenants. Seven of the nine buildings are open or under construction.
Led by a consortium of developers called Delancey Street Associates, the project began in 2013, but only after decades of false starts under different city administrations and input from local residents, who pushed for more affordable units and other considerations.
To be sure, the project is supported in large part by luxury apartments. One of the nine buildings within the complex, 242 Broome Street, a 55-unit condo designed by SHoP Architects, had prices that ranged from $1.275 million for a one-bedroom to over $7 million for a three-bedroom penthouse — certainly expensive, but far from the prices sought for more extravagant spreads earlier in the decade. All but three units there have sold, a spokesman said.
“There needs to be a balance of buildings that’s consistent with the demographics of the community,” said Charles Bendit, the co-chief executive officer of Taconic Investment Partners, one of the developers.
Essex Crossing will also include 92 affordable units for seniors, parkland, office and retail space and the new Essex Market, which is already open.
As for the overall real estate market, well-priced apartments, especially resales, continue to sell, said Ms. Packes. “It’s just not healthy for overpriced new construction.”
Brooklyn’s Development Boom
The search for affordable housing pushed both builders and new residents beyond Manhattan, and Brooklyn was by far the most changed borough of the decade.
Reviewing the areas that experienced the biggest rent increases in the 2010s found that seven of the top 10 neighborhoods were in Brooklyn, according to census data collected by the New York University Furman Center. At the top of the list were the neighborhoods of Williamsburg and Greenpoint in northern Brooklyn, where the median monthly rent was $1,854 in 2018, up 54 percent since 2010.
Closer to Downtown Brooklyn, Pacific Park, formerly known as Atlantic Yards and anchored by the Barclays Center stadium, attracted major residential development nearby. A number of new mixed-use residential towers begun in the 2010s will soon dwarf the 512-foot clock tower at One Hanson Place, which was the borough’s tallest building for decades. Nearby, when it is completed in late 2021, the 1,066-foot skyscraper at 9 DeKalb Avenue, next to Junior’s cheesecake, will be the borough’s first supertall skyscraper, and new recordholder.
“Brooklyn became a brand unto its own,” said Brendan Aguayo, a managing director of Halstead Development Marketing, who oversees several luxury rental and condo projects in the borough.
The seeds were sown in the mid-2000s, when parts of the mostly industrial waterfront were rezoned to allow for denser building, and developers sought out less expensive land near mass transit. Tax abatements given to certain developments encouraged more building, and residents priced out of more central neighborhoods fanned outward. “It’s taken a number of years for all these dynamics to converge,” he said.
Critics argue that much of the new development, even when a portion of units are reserved for low- and middle-income renters, have made housing unaffordable for longtime residents, the majority of whom are black and Hispanic.
Greenpoint and Williamsburg lost about 15,000 Hispanic residents between 2000 and 2015, while the overall population rose 20,000 in that same period, according to a census analysis in December by Churches United for Fair Housing, a nonprofit community services group.
‘There’s this promise of affordable units, but by the time those units manifest, the people who needed them, they’re long gone — they’ve already been pushed out,” said Alexandra Fennell, the group’s network director.
Many neighborhood groups in Bushwick, where the median rent was $1,592 in 2018, up 27 percent since 2010, are unhappy with the current rezoning plan proposed by the city, which Ms. Fennell said dismissed years of community feedback on affordability requirements and other considerations designed to reduce displacement.
The question of what gets built, and for whom, is at the center of a number of ongoing zoning disputes in the city. In December, a New York State judge sided with opponents of a rezoning plan for Inwood in Upper Manhattan, the borough’s most affordable rental market, in part because the review process did not adequately consider the racial impact of the proposed changes.
A changing tide in the state legislature, with Democrats taking control of state government in 2019, could also be a boon for the roughly 2.4 million residents of rent-regulated apartments in New York. In June, a raft of new rent laws passed, including stronger eviction protections for tenants and rules that make it harder for landlords to sharply raise the rent.
Changes in Queens
The forces that transformed Brooklyn in the 2010s are well underway in Queens.
Even without the addition of Amazon’s second headquarters in Long Island City, the western Queens neighborhood, including the Hunters Point area, added 12,367 market-rate rental apartments from 2009 to 2019, according to Nancy Packes Data Services. That accounts for more than three-fourths of all market-rate rental apartments built in Queens in the decade.
“Those numbers don’t surprise me,” said Patrick W. Smith, an agent with Corcoran who specializes in the area. After rezoning in the early 2000s, the largely industrial area has seen a surge of new residential development, aided by the opening of new schools and several acres of waterfront parkland.
There are still several large development sites along the Anable Basin, near the proposed Amazon campus, that could yield thousands of additional market rate and affordable units. And the Sunnyside Yard, a 180-acre potential development site in western Queens that has been eyed for decades, could soon move forward, though community fears of gentrification and displacement have intensified in recent years.
The change is not limited to the neighborhoods closest to Manhattan. In downtown Flushing, the last stop on the 7 subway line, rows of glassy condo towers have redefined the largely Chinese and Korean immigrant enclave.
Since 2009, developers have built 3,075 new condo units in Flushing, second only to Williamsburg, Brooklyn, in terms of condo construction citywide, according to Nancy Packes Data Services.
“I remember a decade ago when people were embarrassed about living in Flushing,” said Helen Lee, an executive vice president with F & T Group, one of the developers of Tangram, a 1.2 million-square-foot, mixed-use complex named after the Chinese puzzle.
The complex will have two condo towers with 324 apartments, a hotel and amenities that include a teahouse-inspired pavilion, an indoor pool, outdoor tennis court, and a porte-cochere. The first condo tower began closings in 2019, and upcoming retail space anticipated in late 2020 will include a new movie theater, food hall and beer garden in a crowded section of Flushing long known for mom-and-pop restaurants and stores.
The first tower, where prices ranged from $690,000 to over $2.8 million, is nearly sold out, Ms. Lee said, and residents will pay reduced property taxes for the first 15 years, thanks to a tax-abatement program.
“This town is upgrading,” said Allen Chiu, 74, a semiretired attorney who bought a one-bedroom apartment with his son in the south tower for close to $900,000. The median sale price in Flushing was $650,000 in 2019, up from $350,000 in 2009, a nearly 86 percent jump, according to StreetEasy.
Mr. Chiu, who grew up in Taiwan but has lived for decades on Long Island, said he bought the apartment in large part because of the nearby conveniences: dozens of nearby banks, doctors, and markets that cater to Chinese speakers, as well as a large South Asian community.
He said he recognizes the absurdity of condo prices approaching $1 million in this part of Queens, but that the quality of design — French oak floors, Italian cabinetry, rooms oriented to balance feng shui — exceeds what was built even a few years ago. The second tower at Tangram, which will have larger, more lavish apartments, will be even more ambitious.
“A three-bed there costs more than $3 million,” he said. “It’s crazy, but what can you do? There are still people buying.”