​​​​​​​The Impact of the Latest Bank Runs on NYC Luxury Real Estate

​​​​​​​The Impact of the Latest Bank Runs on NYC Luxury Real Estate

We hope this weekend has provided some respite from a tumultuous week in the markets. It's probably a little surprise to you that we’ve been fielding calls of real estate jitters in recent days. Ever since last week's stunning turn of events, which started with a bank run and culminated, so far, with the sudden closure of two large institutions and others, both regional and international, now wobbly – everyone is looking for answers. For what it's worth at this still very early stage, here are our two cents from the real estate field of Manhattan.
First, let's state the obvious: any market movement in the hundreds of billions will have ripple effects in NYC real estate. Whether it’s your view that the shareholders and bondholders, retail or mom-and-pop depositors, landlords or other impacted tertiary industries, or even just the taxpayers taking the hit – many, if not most, of these stakeholders will have some meaningful foothold in NYC. Fortunes will be lost and others made, but without a doubt, it’s a safe assumption those impacted will have a business, social and economic ties back to Manhattan.
This impact is all the more potent when it involves the banking and financial services sector, which remains the #1 business driver for New York City. For this reason alone, we – like many of you – are on standby waiting to see what happens next.
As we’ve all been reminded, a crisis of contagion is a crisis of confidence. While the larger market worries if Signature’s closing is the harbinger of Credit Suisse, and other banks – as a global property advisor, we already sense buyer confidence in transacting in real estate is shaken. With uncertainty comes questions: where are rates headed, will the market drop further, etc – which ultimately keeps most people squarely on the sidelines, waiting for clarity, or the stampede to run back.
Which comes back to what we're seeing so far:
  1. Many buyers are feeling anxious, preferring to decelerate their search and wait it out for more clarity.
  2. Some potential sellers, too, are debating listing later – once there is more clarity for buyers to have full confidence.
  3. Existing sellers are showing signs of negotiability. It's been a few years of debating whether to list, amidst so much market upheaval, booms, and lulls.
  4. Some buyers, with accepted offers or in contract negotiation, are using the turn of events to opportunistically massage terms or even pricing in their favor.
  5. Savvy investors are readying their cash and scouring for the right property to pounce on.

As we chronicled repeatedly over the last three years of market ebbs and flows, it's these precise moments when the best deals are made. It's our unwavering belief that the most lucrative investments are often made when others are too afraid to make the first move, as we witnessed first-hand over many cycles, and especially over the last 3 rocky years.
While market experts are pointing to "continued” promising signs in the labor market and that rate increases might be beginning to taper off, they are equally hedging that the worst may still to come. Amidst all this noise and turbulence, we’re noticing the following in our segment of the economy:

  1. Inventory as of mid-March remains at historic lows, some 40% undersupplied to pre-covid levels
  2. Last week’s luxury market saw the most contracts signed this year, the largest since May 2022 just as the market began to soften.
  3. The pace of contracts signed for new developments is now higher than the pre-pandemic 2015-2019 average for the 7th consecutive week.
  4. Negotiability on contracts signed is hovering around 15%.
  5. Pricing today – after an 18 month spike – is on average pari-passu to 2015 levels, nearly a decade ago. 
  6. Said different, many sellers who purchased in the 2015-2018 wave, are today, fortunate to accept a number that breaks even.

Putting aside the larger, global and macroeconomic questions about what happens next, one thing for sure is that: the time couldn’t be more ripe for scooping up deals in the NYC luxury market.

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