New York state of mind: optimism fuels the property market
New York’s rebirth began in mid-February, after the final dump of snow, while Texas shivered in an unforeseen freeze. Spring came all at once, with blue skies and jostling for the outdoor tables at the coffee shop around the corner. For months, they had lain as empty as a seaside promenade in winter.
The masked dog-walkers now stopped and chatted to each other, instead of circling the park in silent meditation. The vaccines are arriving, lurch by lurch, and New York’s governor, Andrew Cuomo, is getting his comeuppance: for years he prided himself on his alpha-male management style, which culminated in praise for his early handling of the pandemic.
Now it is alleged he understated the effect of the virus on nursing home residents and two of his former female employees have accused him of inappropriate behaviour. The many politicians he stamped on over the years are now clamouring for his removal. After the plague, the purge.
It is a reach to say the city’s property markets are roaring back, but the beast is certainly stirring. The first two months of 2021 have been the strongest opening to a year in Manhattan since 2015, the height of the market. February alone saw more new deals than any single month since May 2013.
People in one-bedroom apartments are trading up. Families are looking for extra rooms and outdoor space. And wealthy opportunists, both American and international, are looking for abandoned trophies and fistfuls of apartments from hollow-eyed developers. High levels of inventory and discriminating buyers mean that prices are still well below their peak, but at least contracts are once again flying.
I moved into a five-storey apartment building in Gramercy last August, a premature bet on the end of the crisis. Until December, every apartment but mine was empty. The Italian couple next door had decided to stay in Italy. The family below had returned to France with no plans to return.
Others had fled west and south in search of space. While the stock markets blazed, all the heat went to Florida, as the wagon train of money managers rumbled out of the city that had made them rich. Others settled for Connecticut and New Jersey.
The Macedonian super and I would chat, sifting through the drifts of mail in the lobby. It felt as if we had been abandoned to a city under siege. If the hordes were arming trebuchets in Astoria before the assault on Manhattan, we would be the last to know.
The local gym stayed open but felt like a meat processing plant, with endless temperature checks and spritzes of disinfectant every time you touched a surface. The muscle freaks sat gloomily on their machines, heaving away, then scrolling through their phones in search of god knows what.
After 9/11, as the ashes fell and firefighters bivouacked along the West Side Highway, the property sharks began circling for deals downtown. You don’t win in New York real estate by being squeamish. Ask Donald Trump. But the pandemic was different. Its slow unfurling kept even the most aggressive off balance for months, not hours.
Last March the property markets crashed and froze. Showings were halted and closings stalled. In April, when Jeff Bezos spent $16m on a fourth apartment to add to the three he already owned at 212 Fifth Avenue, next to Madison Square Park, there was hope that the dead cat of Manhattan real estate might bounce.
It didn’t. Developers were left dusting miles of unwanted marble countertops and commiserating with their creditors.
Raymond Chalmé, the chief executive of Broad Street Development, was hitting the final stages of his latest project, 40 Bleecker Street in NoHo, just as the pandemic struck. “The market stopped completely. We had sold over 50 per cent of the building and now we had to deliver. But you had a city that couldn’t figure out which way to go,” he says.
Summer came and went, with Black Lives Matter protests, midnight drag racing on the West Side Highway and a disturbing rise in homelessness. Brokers figured out how to stage virtual showings and execute closings online. Buyers went to Brooklyn and Queens and the nearby suburbs, in search of space, preferably houses with gardens.
While the Hamptons heaved, tumbleweed blew through the streets of Manhattan.
Nikki Field, who runs a team of 22 sales agents at Sotheby’s International Realty, says the crisis forced everyone in her profession to sit back and take stock. As autumn approached, her team was reaching out to potential clients, including individuals, family offices and wealth advisers, telling them to “come now, come fast for the greatest deals in a generation”.
Developers were getting desperate to sell and willing to do deals, to cut prices and increase the perks — such as covering charges and taxes — especially if you were ready to buy in bulk. There were flickers of life in the market. With the election and the arrival of vaccines, the flickers turned to flames.
Pamela Liebman, chief executive of the Corcoran Group, says the comeback is now exceeding expectations and puts it down to low interest rates, affordability and a combination of significant inventory and pent-up demand.
“When the pandemic started, it caused a lot of New Yorkers to reconsider their living situations. If they were thinking of leaving for the suburbs or a lower-tax state, this accelerated their decision. Those who stayed took a microscope to their apartments — do I need a home office, do I need another bedroom, do I need outdoor space? What’s wrong with my place, how can I make it better?”
During the darkest months, Liebman says, looking at real estate websites was like looking at Netflix. A source of entertainment. But now buyers are serious and the company had its busiest January since 2015. “It’s people who need multiple bedrooms trading up. People who live in the suburbs who could never afford a pied-à-terre [before] are a huge part of the buying population. [As are] people helping their kids buy versus rent. People who want outdoor space.”
According to Garrett Derderian of the Serhant brokerage, prices across the board are down about 10 per cent from the pandemic, but the discounts go higher the more expensive the property, particularly over $20m.
Alexa Lambert at Compass, another of the city’s top brokers, says the past year has been a “complete rollercoaster”. In the midst of the pandemic, people were asking for a “Covid discount” of 20-30 per cent. But by mid-to-late fall, the mindset shifted. Since then, Lambert has sold all but two of the 15 apartments at the Benson, a new development on the Upper East Side. The least expensive was just under $13m.
“I feel this vibe now that people who have left New York are bored where they are,” says Lambert. “They want to come back, eat in restaurants, go to museums, go to the ballet. They’re thinking, we’ve walked down this country lane one too many times.”
She and her husband, a commissioner with the New York Police Department, never left and saw the city adapt rather than die. Lambert wore a ski jacket and fingerless mittens to make the most of sub-zero outdoor dining, and regularly booked tickets to visit an empty Metropolitan Museum of Art. “It was the most amazing museum experience I’ve had in my life.”
In January, I went to see the Donald Judd show at the Museum of Modern Art three times in a week, to try to figure what if anything I thought of his minimalist monoliths. The usually crowded museum was quiet. And more enticing than Judd’s sterile work were the photographs of his home and working spaces in Marfa, Texas, which seemed boundless compared with bunched-up New York.
For Chalmé and 40 Bleecker Street, the interminable wait of last year is now just an unpleasant memory. In July, he was able to restart construction. “Thank God, our buyers held firm. They understood the neighbourhood and that this would get resolved.”
Now, he says, buyers are returning to good buildings in good neighbourhoods where there is scarcity of supply. “We may never have YOLO [You Only Live Once],” he says, referring to the recklessness that once might have caused super-wealthy buyers to risk overpaying for luxury homes, “but there’s FOMO [Fear of Missing Out] now in established areas.”
Chalmé believes that eventually, New York real estate will follow the financial markets, as investors look beyond the current crisis to price assets according to their post-pandemic prospects. Deep-pocketed investors have been piling in for the past couple of months.
But the better news for a sustainable recovery is that New Yorkers who live and work and raise their families in the city, the “regular rich”, are once again on the march, putting in multiple bids on homes in the most liveable neighbourhoods, such as the Upper East Side and the West Village. The market for homes around $4m is as busy as it has ever been.
In his own development, Chalmé says buyers “aren’t the typical investors looking for the best value or to move money around, but people who want to live here. That’s a very promising thing for New York City.”
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Field says that there has not been the massive dump of inventory she feared. Many of those who left New York were hesitant to sever their relationship entirely. Families “were handcuffed with pleasure to their schools. They loved the advantages their children were getting, the networks. The schools [have been] the anchor keeping them in the city and they were hesitant to sell.” There was never the desperate fire sale some had anticipated.
As the market returns to normal, foreclosures will restart on the developers who didn’t make it through and the bargain hunters will have another feast. International buyers will come back to give prices another goose.
The other day, for the first time in nearly a year, there wasn’t a Citi Bike to be had at the stand at the end of my street. For months, I had my pick of 25. Restaurants are back at 35 per cent indoor capacity. Subways are filling up. The museums are still quiet but no longer silent.
The gangs of teenagers on fat-tyred bikes who used to cruise an empty Park Avenue every afternoon have vanished. I wouldn’t quite say I was nostalgic, but in a strange way I’m glad I didn’t miss out.