All of us are beginning to hear the hints and whispers… The press is peppering us with lots of pointed questions… Friends who are not in the business of real estate are asking: Is this real estate boom slowing down? Have we reached the top of the market? Is the market getting ready to tank?
I am here to say that we need to continue to work and need to stop the guessing, the gossip and the prognostication. We are all very fortunate to be here in New York City right now. The city is brimming with confidence, and we should be, too.
Take a look at what has happened Downtown: A virtual 24/7 live/work/play atmosphere has risen from 9/11 like a phoenix. At last look, there were more than 60,000 residents living Downtown and nearly 270,000 people work here. Public transportation is newer and more modern than Midtown transportation. In late March, subway passengers will have unobstructed access from Brookfield Place to the recently expanded Fulton Transit Hub connecting the New Jersey PATH train system to 11 subway lines. Downtown is much more sophisticated and so much of it in just the last 15 years.
Look to the Far West Side, the Hudson Yards and north. The 7 train stops at West 34th Street and 11th Avenue and then zips you right to West 42nd Street and 8th Avenue on its way to Grand Central Terminal and beyond. Buildings are going up everywhere and tourists are walking the streets. Parks, schools, residential and office buildings are all planned and it is expected that more than 20 million people will be living, working and playing here by 2023. It’s happening right before our eyes.
Certainly the pricing of the top 500 condo apartments in town is astronomical. We’ve all heard that the sales of the super-luxury condo market are slowing down as is the construction of new towers. Folks, it might make for really exciting headlines but it’s just a tiny part of the New York City residential market. How many of you have a good friend who owns a $25 million condo? In 2015, the city averaged more than 110 contracts a month at prices north of $4 million. That’s a fat price point in every market in America and nearly four times the average price here in New York City.
Commercial rents are reaching where we were eight years ago. The hottest markets remain the Flatiron district, where there are just 16 office spaces from 2,000 to 10,000 square feet available direct from a landlord on Fifth Avenue from 14th Street to 23rd Street. Similarly, on Park Avenue South, there are just 29 spaces available direct from a landlord between 17th and 32nd Streets from 2,000 to 10,000 square feet. That’s 15 blocks, 29 spaces.
Pricing of commercial office buildings has soared because there is a lack of product and lots of foreign competition. Land costs and the pricing of air rights have soared as well. We live and work on an island; there is limited supply. With a limited supply the cost of labor moves up, too. Construction of a new building can now easily reach $1,200 to $1,500 per square foot.
There are many office leasing submarkets where there is virtually no space and prices continue to climb. Is that something to worry about? We should be celebrating this, not wondering if it will end. Crime is low, the economy remains healthy and strong in New York City. There’s a reason why we had more than 56.5 million tourists in 2015. Pretend you are a tourist in your own town. Be happy you are living and working in the most exciting, prosperous city in America.