(Bloomberg) — For both homebuyers and office-seekers, one thing is true about Manhattan’s Financial District: There’s lots of space for the taking.
A boom in luxury-condo construction, aimed at people wanting to live near work, has saddled the area with the most unsold inventory of any neighborhood in New York City. Some of those units haven’t even come to market yet. One project alone — Macklowe Properties’ One Wall Street — is promising 565 apartments when sales start later this year.
Meanwhile, lower Manhattan office life is shrinking, with available space downtown reaching its highest level in data going back to 2000, according to brokerage Savills. Companies such as Conde Nast and Uber Technologies Inc., which made headlines when they moved into new World Trade Center towers, are now trying to sublease chunks of their real estate. Other tenants are also scaling back, an acknowledgment that employees will work at least partly from home in the post-Covid world.
That raises the question of what will happen to all those new condos if buying a place near the office is no longer a priority, according to Kael Goodman, founder of new-development data firm Marketproof Inc.
“That part of Manhattan is very specifically about work,” Goodman said. “And if our relationship to work has changed, then things down there are going to change.”
Once a neighborhood of banks, government workers and quick-serve delis, the Financial District evolved into a more-residential area in the years since the 9/11 attacks, when apartment developers swooped in after office tenants vacated historic buildings.
From 2000 to 2019, the number of lower Manhattan residents nearly tripled to 64,000, including an influx of families with children, according to an estimate by the Downtown Alliance. While Covid-19 sent many fleeing, the area’s population has returned to 85% of its pre-pandemic level, the group said this week.
For anyone seeking a home in the Financial District, there’s plenty to choose from. The neighborhood has 1,433 newly developed, unsold condos, more than half of which haven’t yet been listed for sale, according to Marketproof.
One Wall Street developer Harry Macklowe, who is undertaking the largest condo conversion in New York history at the landmarked Irving Trust Co. Building, is sticking to his pre-pandemic plan for a 565-unit tower, where the starting price for a one-bedroom is $1.93 million, according to legal filings.
Sales at the 50-story project, with a Whole Foods Market at its base, will start in September, said Elizabeth Stribling, vice chairman of New York development at Compass, the brokerage that will market the apartments.
“It’s absolutely going to be a challenge to sell all those units,” said Orest Tomaselli, chief executive officer of National Condo Advisors. For a building to legally qualify as a condo in New York, 15% of its units — about 85, in Macklowe’s case — need to be in contract. And most lenders won’t offer mortgages until sales reach at last 30%, Tomaselli said.
Stribling declined to comment on any potential sales challenges at Macklowe’s tower.
Trinity Place Holdings, the developer of Jolie, at 77 Greenwich St., is emphasizing the link between living and working in the Financial District, offering as much as $175,000 in closing credits to buyers employed at lower Manhattan firms. The 90-unit tower, where two-bedrooms start at just over $2 million, also lowered prices on some apartments.
These days, the project, with a new public school attached, is close to selling 15% of its units and being declared a legal condo. And it’s distinguishing itself from the competition in an even more meaningful way, said Trinity Place CEO Matthew Messinger: It’s nearly complete. The first move-ins could start as early as September.
“The first seven floors of our building — they’re done,” Messinger said. “You can imagine where you’ll hang your bathrobe.”
Some condos in the area — particularly those with units priced below $2 million — have fared well, even during New York’s lockdown. Lightstone’s 130 William St., where move-ins started in December, sold 23 units in the past 30 days, with a market value of $70 million, a spokesman said. Its studios are sold out as are a majority of its one-bedrooms, all at the full asking price, including some deals signed last year after virtual showings. The 242-unit building, where sales began in 2018, has found buyers for an estimated 54% of its units, according to Marketproof.
On the other end of the cost spectrum, the priciest contracts in all of Manhattan these past two weeks were signed at Silverstein Properties’ 30 Park Place, atop a Four Seasons hotel. Both penthouses that sold had millions shaved off their asking price and had been on the market since 2014, according to brokerage Olshan Realty.
For the vast supply of condos that remain, some rethinking of plans is inevitable based on how office culture evolves after the pandemic, said Stephen Kliegerman, president of Brown Harris Stevens Development Marketing.
“You might see developers change pace a little bit,” he said. “You may see more corporate apartments, more pied-a-terre apartments, more Monday-through-Thursday apartments.”
As of late April, just 16% of New York office employees were reporting to their desks, said Ruth Colp-Haber, a partner at Wharton Property Advisors, citing keycard entry data from Kastle Systems. But there are signs of a coming turnaround: Goldman Sachs Group Inc., based in lower Manhattan, announced this week that employees would return to the office as early as next month.
There are plenty of reasons that people going to the office even part-time would want to live near their jobs, and if they do, might be tempted to go in more often, said Leonard Steinberg, a Compass broker who will begin marketing a 30-unit condo at 33 Park Row this month.
“To be able to walk to your office and maybe go in for two or three hours and do a meeting and then walk home is kind of heavenly,” Steinberg said. “Everyone wants to be where the party’s at, and the party is not happening in your little room at home with a Zoom conference.”