What’s the difference between a luxury condo and luxury rental in Manhattan? These days, barely anything. The average size of a 1-bedroom luxury rental in Manhattan is 600-675 square feet, while the average size of a 1-bedroom luxury condo in Manhattan is 700-800 square feet. The units in 8 Spruce Street in FiDi and Silver Towers in Midtown West are newly constructed luxury rentals that are indistinguishable from newly constructed luxury condos and subsequently attract wealthy buyers who would’ve only considered condos before; Silver Towers in particular was originally going to be a luxury condominium. This trend is no accident; the uncertain economy has made developers antsy about the future, leading them to adopt the strategy of designing luxury buildings in Manhattan that could convert easily from rentals to condos or vice versa. Consequently, these newly constructed luxury buildings have made the distinction between the two thinner than ever.
This strategy is a reaction to the ongoing fluctuations in the Manhattan luxury real estate market, because sometimes condos just don’t sell (like now), and sometimes rentals just aren’t lucrative, but it also highlights the uncertainty that permeates real estate activity in Manhattan. At New Construction Manhattan, we’ve thoroughly documented market trends in Manhattan luxury real estate, but it’s still worth reiterating the basics. The average price for a luxury rental in Manhattan is a mere $50 off the all-time peak established in 2007, so it’s unsurprising that many condos are now becoming rentals, especially since prices for condos have fallen 20-25 percent since 2007-2008, and even those are having trouble selling. And with the Euro debt crisis looming over the world economy, this trend in luxury Manhattan real estate sales is unlikely to change. One-third of Manhattan buyers are international, and now many of them are hesitating to pull the trigger.
The tricks of the trade in the Manhattan luxury real estate world are growing constantly, but here are a few that facilitate rental to condo conversion. Developers often make large closets that can easily be converted to a second bathroom, or they build hybrid buildings with larger bases. The bases house a high concentration of rental units, while the towers above predominantly house condos. It’s hard to blame developers for this strategy, in fact, it appears that it may save them from a lot of hardship that other professions have fallen victim to. Most notably, developers have had an immense amount of trouble obtaining financing for new construction, but this hasn’t hurt them nearly as much as architects: In 2008, the number of employed architects in the U.S. peaked at 220,500 jobs. Since then, a quarter of them have lost their job. The rest of us should feel lucky, especially those renting a condo-quality luxury apartment in Manhattan.