You could say multifamily housing was the cause of the whole great recession, and you could say it was also the salvation of New York City.
It’s an undoubtedly weird time for multifamily real estate. It has been a hot commodity for a very long time, and the prices of condominiums and land have reached heights they never have before. The spanking new residential towers on the 57th Street corridor look as ambitious as ever. The mayor of New York is behind a push to add to the city’s housing stock not seen in City Hall for a very long time. Lenders have experienced a strong demand to finance both acquisitions and development of residential projects…but all good things come to an end.
Global volatility, from a dip in oil prices to a hurting Chinese economy, are driving prices down in the super-luxury condo world, and lenders are taking notice. That’s not to say that the financing well will dry up entirely, as some foreign banks and nontraditional lenders are still willing to provide funds at a higher cost.
And it’s not only the ultra-luxe market feeling a cool-off. Since the 421a tax abatement expired in January, developers and lenders alike are concerned that the multifamily pipeline will be more or less nonexistent in the next two to three years. Industry experts Commercial Observer spoke with predict that along with the affordable housing crisis in the city, residential development as a whole is facing pandemonium.
But these issues certainly aren’t stopping everyone. Property Markets Group’s Kevin Maloney is still going strong with numerous condo developments in both New York City and Miami, including the ambitious Steinway Tower, which will reach more than 1,400 feet in the sky on West 57th Street.
All in all, lenders are starting to take their foot off the gas. What the New York City multifamily pipeline will look like in the coming years is very much dependent on governing bodies finding a resolution or another way to encourage mixed-income development—and whether or not the demand for high-end condos hits the high it did before.