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Speaker 1: That's a Bloomberg business flash. You're listening to taking Stock
Speaker 1: with Kathleen Hayes and Pim Fox on Bloomberg Radio. New
Speaker 1: York's condo slowdown is up ending the market for one
Speaker 1: of the most coveted assets in tightly packed Manhattan, and
Speaker 1: that is Land. Sales of parcels for development are plummeting
Speaker 1: as builders seeing signs that a once hot property market
Speaker 1: is cooling, offer prices that sellers won't agree to. A
Speaker 1: triviic story to Day Bar Bloomberg News colleague Sarah Maholland
Speaker 1: and David Levitt. I want to welcome back to the
Speaker 1: show now someone who can talk to us about the
Speaker 1: trend in Manhattan when it comes to land, when it
Speaker 1: comes to luxury condo prices, and what it might portend
Speaker 1: for other hot markets across the country. Jonathan Miller is
Speaker 1: President and CEO of Miller Samuel. Welcome. Great to be here.
Speaker 1: So I think you in your you know the reports
Speaker 1: that you do on Manhattan, say as Rentals, Brooklyn, et cetera,
Speaker 1: You've been kind of foreshadowing and touching on at least
Speaker 1: part of this trend for a while. John, what's going
Speaker 1: on well, I think what's happening. Um Really, the slowdown
Speaker 1: began about a year and a half, two years ago,
Speaker 1: but landowners are really holding out for higher prices. It
Speaker 1: takes when a market transitions, it takes a couple of
Speaker 1: years they for them to uh capitulate to the new condition.
Speaker 1: Back in two thousand and fourteen, we were talking about
Speaker 1: how too much was being built at the high end.
Speaker 1: At that point we started to see, um uh sort
Speaker 1: of this this pullback in future construction. But you have
Speaker 1: to remember that so much is in the pipeline that
Speaker 1: it it doesn't feel like it's slowing down to the landowner,
Speaker 1: um necessarily um uh. You know, they tend to lag
Speaker 1: reality a bit by a couple of years. What kind
Speaker 1: of market are we talking about here? There's some prices
Speaker 1: so that we understand about the condo market. It is
Speaker 1: not a homogeneous industry by any means. No, it isn't,
Speaker 1: uh so the way to think of it. And and
Speaker 1: really the focus of new development and the land uh
Speaker 1: prices that have been were chronicled in the Bloomberg story.
Speaker 1: You're really looking at a market that's averaging right now
Speaker 1: about three thousand dollars a foot for luxury condos the
Speaker 1: low end foot and then you know it's up to
Speaker 1: five six thousand a foot UM, So you're really talking about,
Speaker 1: you know, something in the six really starting at you know,
Speaker 1: five six million dollars and up prem there that market
Speaker 1: is has really been overbuilt UM and is sort of
Speaker 1: night and day with the market to the blow that
Speaker 1: in price. The softness of the Manhattan market is really
Speaker 1: isolated in the top say seven eight percent of the
Speaker 1: market where truly starts at four or five million dollars,
Speaker 1: and that's where this slowdown is coming into play. Units
Speaker 1: um are just not not moving. The volume of contracts
Speaker 1: has fallen sharply, and that backs into land when when
Speaker 1: you know, the the high end market isn't getting the
Speaker 1: activity or volume, it doesn't justify the land price, and
Speaker 1: the land seller takes a couple of years uh to
Speaker 1: get with the program, so to speak. You know. Our
Speaker 1: Bloomer News story points out that a lot of what
Speaker 1: has driven these these gigantic buildings and luxury condo buying
Speaker 1: is overseas investors who want to park their money outside
Speaker 1: their own countries. Right, We're trying to slow down, and
Speaker 1: the oil prices have fallen so much has happened that
Speaker 1: money apparently has has cooled off, and that's that's money
Speaker 1: has been seen again in other parts of the country
Speaker 1: as well. What does this mean if I'm an investor
Speaker 1: in the sense of thinking of buying an apartment in
Speaker 1: New York or San Francisco or Boston, or if I'm
Speaker 1: an investor in commercial real estate or apartment buildings, what's
Speaker 1: the implication. Well, I think the implication is that the
Speaker 1: era of this super luxury sort of no holds barred
Speaker 1: on prising, that era has officially ended. That we we
Speaker 1: we we certainly are having sales in you know, sort
Speaker 1: of north of five seven million dollars a year UM
Speaker 1: in this market and other markets, but it's nowhere near
Speaker 1: the velocity that it was before. And the way that
Speaker 1: I would think of it as is that the period
Speaker 1: we went through was the anomaly, and what we've done
Speaker 1: is returned to um a more historically sustainable level of activity.
Speaker 1: We just got a little bit over excited the market itself.
Speaker 1: UM After you know, three or four years of drought
Speaker 1: of no none of this kind of activity after the
Speaker 1: financial crisis, we had this three or four year boom,
Speaker 1: and that boom has passed um the balance of the market.
Speaker 1: South of five million dollars, we're seeing steady, regular activity
Speaker 1: and when you get into the one to three million
Speaker 1: dollar range, it's pretty pretty uh, there's a fair amount
Speaker 1: of activity. This is something we're seeing across other housing
Speaker 1: markets like Miami, San Francisco, l A. Housing markets in
Speaker 1: the new development space are soft at the top, and
Speaker 1: that is, uh, that is a US phenomenon from the
Speaker 1: lender perspective, Jonathan, what's uh, what are their ground rules
Speaker 1: right now? Well, so lenders, So what's really interesting without
Speaker 1: this whole process is commercial lenders for construction loans to
Speaker 1: build these buildings were largely on the sidelines this in
Speaker 1: this cycle sort of grappling with the legacy of bad
Speaker 1: lighting decisions in the last cycle. And really the player
Speaker 1: has been financial services institutions, Wall Street, sovereign wealth funds,
Speaker 1: private capital And in my anecdotal view January one, I
Speaker 1: think everybody woke up in that realm and looked out
Speaker 1: the window and saw seven or eight bill things being
Speaker 1: built around them and really grew concerned. And so right now,
Speaker 1: financing availability for this is really been curtailed. And you know,
Speaker 1: it's just a market that you know is overbuilt. That
Speaker 1: you know, the supply and demand is causing the supply
Speaker 1: to slow down in terms of what's coming into the market.
Speaker 1: Thank you very much. Jonathan Miller is the president and
Speaker 1: the chief executive of Miller Samuel based in New York.
Speaker 1: He's explaining the New York City condo slowdown is up
Speaker 1: ending the market for one of the most coveted assets
Speaker 1: in real estate, and that's land. This is taking stock
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