WEBVTT - Miller Samuels' Miller: Real Estate Market Soft at Top (Audio)

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<v Speaker 1>That's a Bloomberg business flash. You're listening to taking Stock

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<v Speaker 1>with Kathleen Hayes and Pim Fox on Bloomberg Radio. New

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<v Speaker 1>York's condo slowdown is up ending the market for one

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<v Speaker 1>of the most coveted assets in tightly packed Manhattan, and

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<v Speaker 1>that is Land. Sales of parcels for development are plummeting

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<v Speaker 1>as builders seeing signs that a once hot property market

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<v Speaker 1>is cooling, offer prices that sellers won't agree to. A

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<v Speaker 1>triviic story to Day Bar Bloomberg News colleague Sarah Maholland

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<v Speaker 1>and David Levitt. I want to welcome back to the

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<v Speaker 1>show now someone who can talk to us about the

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<v Speaker 1>trend in Manhattan when it comes to land, when it

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<v Speaker 1>comes to luxury condo prices, and what it might portend

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<v Speaker 1>for other hot markets across the country. Jonathan Miller is

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<v Speaker 1>President and CEO of Miller Samuel. Welcome. Great to be here.

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<v Speaker 1>So I think you in your you know the reports

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<v Speaker 1>that you do on Manhattan, say as Rentals, Brooklyn, et cetera,

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<v Speaker 1>You've been kind of foreshadowing and touching on at least

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<v Speaker 1>part of this trend for a while. John, what's going

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<v Speaker 1>on well, I think what's happening. Um Really, the slowdown

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<v Speaker 1>began about a year and a half, two years ago,

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<v Speaker 1>but landowners are really holding out for higher prices. It

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<v Speaker 1>takes when a market transitions, it takes a couple of

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<v Speaker 1>years they for them to uh capitulate to the new condition.

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<v Speaker 1>Back in two thousand and fourteen, we were talking about

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<v Speaker 1>how too much was being built at the high end.

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<v Speaker 1>At that point we started to see, um uh sort

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<v Speaker 1>of this this pullback in future construction. But you have

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<v Speaker 1>to remember that so much is in the pipeline that

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<v Speaker 1>it it doesn't feel like it's slowing down to the landowner,

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<v Speaker 1>um necessarily um uh. You know, they tend to lag

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<v Speaker 1>reality a bit by a couple of years. What kind

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<v Speaker 1>of market are we talking about here? There's some prices

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<v Speaker 1>so that we understand about the condo market. It is

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<v Speaker 1>not a homogeneous industry by any means. No, it isn't,

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<v Speaker 1>uh so the way to think of it. And and

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<v Speaker 1>really the focus of new development and the land uh

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<v Speaker 1>prices that have been were chronicled in the Bloomberg story.

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<v Speaker 1>You're really looking at a market that's averaging right now

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<v Speaker 1>about three thousand dollars a foot for luxury condos the

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<v Speaker 1>low end foot and then you know it's up to

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<v Speaker 1>five six thousand a foot UM, So you're really talking about,

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<v Speaker 1>you know, something in the six really starting at you know,

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<v Speaker 1>five six million dollars and up prem there that market

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<v Speaker 1>is has really been overbuilt UM and is sort of

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<v Speaker 1>night and day with the market to the blow that

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<v Speaker 1>in price. The softness of the Manhattan market is really

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<v Speaker 1>isolated in the top say seven eight percent of the

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<v Speaker 1>market where truly starts at four or five million dollars,

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<v Speaker 1>and that's where this slowdown is coming into play. Units

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<v Speaker 1>um are just not not moving. The volume of contracts

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<v Speaker 1>has fallen sharply, and that backs into land when when

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<v Speaker 1>you know, the the high end market isn't getting the

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<v Speaker 1>activity or volume, it doesn't justify the land price, and

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<v Speaker 1>the land seller takes a couple of years uh to

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<v Speaker 1>get with the program, so to speak. You know. Our

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<v Speaker 1>Bloomer News story points out that a lot of what

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<v Speaker 1>has driven these these gigantic buildings and luxury condo buying

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<v Speaker 1>is overseas investors who want to park their money outside

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<v Speaker 1>their own countries. Right, We're trying to slow down, and

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<v Speaker 1>the oil prices have fallen so much has happened that

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<v Speaker 1>money apparently has has cooled off, and that's that's money

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<v Speaker 1>has been seen again in other parts of the country

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<v Speaker 1>as well. What does this mean if I'm an investor

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<v Speaker 1>in the sense of thinking of buying an apartment in

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<v Speaker 1>New York or San Francisco or Boston, or if I'm

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<v Speaker 1>an investor in commercial real estate or apartment buildings, what's

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<v Speaker 1>the implication. Well, I think the implication is that the

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<v Speaker 1>era of this super luxury sort of no holds barred

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<v Speaker 1>on prising, that era has officially ended. That we we

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<v Speaker 1>we we certainly are having sales in you know, sort

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<v Speaker 1>of north of five seven million dollars a year UM

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<v Speaker 1>in this market and other markets, but it's nowhere near

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<v Speaker 1>the velocity that it was before. And the way that

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<v Speaker 1>I would think of it as is that the period

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<v Speaker 1>we went through was the anomaly, and what we've done

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<v Speaker 1>is returned to um a more historically sustainable level of activity.

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<v Speaker 1>We just got a little bit over excited the market itself.

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<v Speaker 1>UM After you know, three or four years of drought

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<v Speaker 1>of no none of this kind of activity after the

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<v Speaker 1>financial crisis, we had this three or four year boom,

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<v Speaker 1>and that boom has passed um the balance of the market.

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<v Speaker 1>South of five million dollars, we're seeing steady, regular activity

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<v Speaker 1>and when you get into the one to three million

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<v Speaker 1>dollar range, it's pretty pretty uh, there's a fair amount

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<v Speaker 1>of activity. This is something we're seeing across other housing

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<v Speaker 1>markets like Miami, San Francisco, l A. Housing markets in

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<v Speaker 1>the new development space are soft at the top, and

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<v Speaker 1>that is, uh, that is a US phenomenon from the

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<v Speaker 1>lender perspective, Jonathan, what's uh, what are their ground rules

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<v Speaker 1>right now? Well, so lenders, So what's really interesting without

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<v Speaker 1>this whole process is commercial lenders for construction loans to

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<v Speaker 1>build these buildings were largely on the sidelines this in

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<v Speaker 1>this cycle sort of grappling with the legacy of bad

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<v Speaker 1>lighting decisions in the last cycle. And really the player

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<v Speaker 1>has been financial services institutions, Wall Street, sovereign wealth funds,

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<v Speaker 1>private capital And in my anecdotal view January one, I

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<v Speaker 1>think everybody woke up in that realm and looked out

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<v Speaker 1>the window and saw seven or eight bill things being

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<v Speaker 1>built around them and really grew concerned. And so right now,

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<v Speaker 1>financing availability for this is really been curtailed. And you know,

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<v Speaker 1>it's just a market that you know is overbuilt. That

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<v Speaker 1>you know, the supply and demand is causing the supply

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<v Speaker 1>to slow down in terms of what's coming into the market.

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<v Speaker 1>Thank you very much. Jonathan Miller is the president and

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<v Speaker 1>the chief executive of Miller Samuel based in New York.

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<v Speaker 1>He's explaining the New York City condo slowdown is up

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<v Speaker 1>ending the market for one of the most coveted assets

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<v Speaker 1>in real estate, and that's land. This is taking stock

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<v Speaker 1>and this is Bloomberg. Sports teams watch films of their

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<v Speaker 1>Why not businesses? Small Business in Focus with the founder

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