New luxury developments are defined as being in the top 10 percent of the Manhattan real estate market. The price of luxury real estate has doubled since 2005—the entry luxury level is now $4 million. The boom in luxury real estate, starting in 2005 until present, was partly due to foreign buyers looking at Manhattan as safe haven for their investments.
During the early years of the Manhattan building boom, most of the new luxury developments were built on the Upper East Side, Upper West Side, and Midtown West. New developments grew especially around the borders of Central Park South, Park to Fifth, and Central Park West. The recent concentrated growth in new luxury development downtown, in areas such as Tribeca, the West Village, Nolita, and 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 is some interesting data about what happens after a new development is no longer new. Developments 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 suite of amenities, the older buildings often lose their top tier ranking, especially when they don’t age well. These not-so-new buildings have increased 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 as a bit of a surprise: historic residential buildings that are deemed landmarks—such as the Dakota, San Remo, 740 Park Avenue, or 834 Fifth—are 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, 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 new developments that were built in 2015, where only four remained in the top tier in 2017. I wouldn’t have guessed that the number remaining was so low, would you?
The Manhattan luxury development growth is fueled by ultra-wealthy global buyers who demand the newest, tallest, most architecturally interesting, and most amenity-rich condominiums. This rapid growth in luxury new development has led to the large oversupply of ultra-luxury condominiums on the market, especially in Midtown and certain areas downtown. As a result, prices have fallen significantly in these areas. So for the most part, 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 that 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 a 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 alright 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 apartment.
A suite of rich amenities was considered part of the package in luxury 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 virtual training programs.
Fancy rooftops are also a hot amenity. Even smaller buildings will offer pools, private cabanas, outdoor kitchens, 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 luxury 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. This was not the case a few years ago.
As you can see, there are a multitude of things that influence and define the Manhattan luxury real estate market over time. Evolving luxury lifestyles and the state of the market are the main factors that have a major impact on what characterizes the Manhattan luxury lifestyle.
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