Map of stalled projects, all five boroughs

Wow, I didn't realize that there were so many in Manhattan too. NY1 just ran a piece this morning about the stalled projects in Williamsburg and how bad off developers there are. One new building actually had a chain and lock on the front door b/c even though it's completed construction, the developers can't find buyers. How anyone can look at facts like these and still claim that the NYC real estate market is 'strong' is beyond me.

Thanks for the post AB

Given that the city is already talking about (and has actually allocated funds) moving lower income families into unsold luxury condos...

yes, it gets funnier and funnier each time a broker speaks.

http://www.nytimes.com/2009/07/19/realestate/19stall.html

wow. worse than I even thought. gonna be an ugly fall season in RE

much of this has to be viewed as long-term shadow inventory. once the properties that already have some significant progress clear through the bankruptcy process, if the developer can't or won't eventually continue development, they'll eventually make it to the market, so it will draw out the inventory overhang.

what ar said about long term shadow inventory. a related point is that the projects that wash through the bankruptcy or foreclosure process and end up under new ownership are going to be able to get to market at a lot lower built cost because the effective price at which the new owner/developer gets the site will be much lower and construction costs will likely also be lower with less competition for building materials, skilled trades, etc. The ability of new owners to deliver product to the market and make money at a lower sale price psf could be a headwind to price recovery on recent vintage condos going out a few years.

On the Times graphic, I don't even think it's complete. For example, there is a site on the corner of 19th (?) and 3rd that is just rusting steel girders up to six or eight floors. I
m surprised to see so few dormant sites in Tribeca. Maybe it's right; I'm just surprised.

Next in line behind the partially built, but stalled, projects are the empty lots where someone paid a prettty penny for the land during the bubble and spent whatever else on demolition and the development/permitting process and now the sites are probably going to sit for quite a while. These are all over. A few examples: the big gap on W57th; the multi-block Solow site by the UN; former Drake Hotel site at 56th & Park; SW corner of 22nd (or 21st?) and 3rd; SE corner of 79th and 3rd; NE corner of 24th and Park.

This article is mostly about "empty lots and bare foundations", not projects near completion.

So this is tens of thousands of units that were planned to hit the market in the 12-18 month but will end up NOT materializing into supply in the foreseeable future.

This is the RE market reducing its supply in a unfavorable pricing environment, and it's net bullish.

Now if all those developers get U.S. bailouts to go ahead with these projects anyway, that would be utterly bearish.

justincase, you're right, but not all of them are bare foundations. they stall first of course. but tons of commercial lenders are kicking the problem down the road, and the next map will include more projects further along, and the next map even more.

also, even if just foundations, some developers are going to get some cleared and prepped locations dirt cheap, enabling them to aim future developments at something less than the over-the-top luxury market. reducing prices, net bearish.

also, recall that the administration changed the 421-A rules to allow additional time. developers do not know how long that will be the case, which could affect the pace of development.

"and it's net bullish"

Hmm. Looming bankruptcy is net bullish.

It is - in 10 years' time.

"recall that the administration changed the 421-A rules to allow additional time"

some actually broke ground (which was the requirement to qualify) earlier than initially planned. i've noticed stalled ones that don't figure in the map. should we called those the "shadow stalled buildings"?

admin, the additional time was for completion of the project. but i can't recall the exact terms. i think if the developer proves it can't get financing, they can have more than the two-three years that was previously allowed.

"justincase, you're right, but not all of them are bare foundations. they stall first of course. but tons of commercial lenders are kicking the problem down the road, and the next map will include more projects further along, and the next map even more."

Let's discuss this when we see the next map. The whole article is about these projects NOT going further along.

"also, even if just foundations, some developers are going to get some cleared and prepped locations dirt cheap, enabling them to aim future developments at something less than the over-the-top luxury market. reducing prices, net bearish."

Supply/demand determine price. Not the producer's manufacturing cost.

"also, recall that the administration changed the 421-A rules to allow additional time. developers do not know how long that will be the case, which could affect the pace of development."

In a bull market, this will drive up construction pace. In a bear market, this is increased risk/uncertainty for developer. Again, show me first some signs that these projects are going further along.

""and it's net bullish"

Hmm. Looming bankruptcy is net bullish."

ha

justincase, that's bull. real estate construction bubbles create massively skyrocketing land and construction costs, which in turn determine which buyer the developer needs to attract to break even and hopefully make a profit, which determines the type of finished product, which in turn again affects construction costs. there was plenty of demand for apartments, still is, but not at these prices. producer's manufacturing costs determine purchase prices which definitely affect demand.

let's not discuss this when we see the next map. let's discuss this now.

Ah, so developers will pass cost savings to buyers instead of maximizing profits. How nice. Did Nike sneakers drop 50% in price when they start to outsource manufacturing to Asian sweatshops?

Which part is bull? Supply/demand determine price?

If "stalled constructions" means accelerating supply to you, I have no interest in continuing this discussion until there is evidence of accelerating supply. Let's not waste each other's time. Thank you very much.

on the list: 25 broad, 1107 broadway, 225 rector, 15 renwick, 303 e 51.

there are no buyers to absorb the cost. if the cost is lowered there will be buyers. ah yes, the nike bubble market. i recall it well. caused by parents taking out their credit cards without question.

there were never enough buyers for the new developments planned at those prices. a developer can quit developing, or begin producing a product for which there is a market.

any way you slice it, stalled construction is bad for the current and future market. Its just that much more inventory hangin around. At the very least its a cash burn for the developer while the project just sits.

stalled construction = much more inventory

That just about sums it up for this thread. Enjoy the rest of your day guys.

Look back to 1989 for precedents.

Justincase -- Build costs put a floor on new construction pricing because of financing and the way that expected proceeds lock in prices until ownership changes. You are correct when you say that demand sets the price, but only within a small range. Once prices go outside that range, they aren't affected by demand.

Think about it this way. Let's say you have a project that costs $100MM and you put in $10MM, and the bank puts up $90MM. Once the projected proceeds of the building drop below $90MM, you, as the developer, don't really have any incentive to lower prices -- because you're not going to get any of the money anyway. You might as well sit and wait for a recovery rather than close off your option now by lowering prices.

Now, if you go a step back further in the construction process, the land acquisition costs puts a floor under the construction costs. And, how are land costs determined? By determining the estimated proceeds from the project. That is, sellers empirically raise the price of land to match the rising expected proceeds from projects.

This means that price isn't set by demand -- but, rather, the floor in pricing is pre-determined by anticipated demand at the time the land was sold and the project is financed. That floor exists until the property changes hands. The logjam is broken when bankruptcy comes in, forces a change in ownership, and resets the cost basis such that the new owner can lower prices and still make money.

"forces a change in ownership"

Bankruptcy does not necessarily force a change in ownership.

"Ah, so developers will pass cost savings to buyers instead of maximizing profits. How nice. Did Nike sneakers drop 50% in price when they start to outsource manufacturing to Asian sweatshops?"

No, but when demand completely drops for something, so do prices. If costs go down, too, its a double whammy.

Input costs are unrelated to output prices except insofar as it costs more to produce something than can be obtained from selling it, no one will make it.

"Look back to 1989 for precedents."

There were fewer such buildings then. An Astoria waterfront condo was stalled, then changed hands between developers, then was completed, sold at lower prices. A Tribeca-ish condo was completed as 100% rentals, the "City Lights" condo in LIC became a coop, with lower prices and higher maintenance, etc.

But this number of buildings "stalled" is much worse than what I remember from 1989. That graphic doesn't break out the lots where either ground didn't break yet, only the foundations were poured, or buildings finished and were boarded up. I don't remember anything of this magnitude in 1989.

True, I don't remember this much of a glut...

It is interesting, tho, that these stalled projects are the "shadow inventory" alluded to by some. If they never come to market, the inventory doesn't swell by these "stalled" numbers. But this does not bode well for condo/coop prices.

as bad as this map looks, i know of at least three stalled sites that aren't included, and that's just off the top of my head.

"Input costs are unrelated to output prices except insofar as it costs more to produce something than can be obtained from selling it, no one will make it."

I think that is exactly justincase's point. If these projects are not completed, then there is no inventory to speak of. Maybe they will add more parking lots?

Firstly, the projects which are substantially unbuilt (like just empty lots do NOT represent shadow inventory. They probably will not get built on, and if anything may represent more parking. But i feel the need to re-iterate what sidelinesitter stated: that the proces of getting these projects out of the hands of developers who can't handle them and into the hands of people who can finish and sell them at viable prices is what is important.

This is where i feel the current administration has gone horribly wrong: the sentiment that all foreclosure is bad and any extraordinary measures possible should be taken to avoid it does not in the long run end up as a good idea. What needs to be done is to "flush the system" of non-viable ownership situations and get the unrealized losses realized, and put ownership into the hands of long term viable owners. This doesn't happen by gumming up the works with idiotic plans like letting people who should be foreclosed on renting their houses instead of making mortafge payments and the like.

The way it gets done is to get these properties out of situations where they are deteriorating ASAP, into the hands of people who can sell them at much more reasonable prices to people who can afford to buy and live in them, and move forward.

lowery, it's just a portion of the shadow inventory. and they will come to market at some point in some form, most likely. really cheap land encourages building of rentals, so with construction and materials plummeting in cost, eventually we may have some decent rental stock added. if and when lending ever revives, and unemployment declines.

JuiceMan, what does what I said have to do with the conclusion that you draw from it? All I said is that the price of a good is not determined by what goes into it; it's determined by its usefulness. I won't go into the fact that the usefulness of owner-occupied residential real estate is as long-term substitute for a stream of future rent payments, but I will repeat that what a developer paid for a property is immaterial to what it is worth on the market. Rent is material.

The reason why banks foreclose is because they are just one (albeit usually the first) creditor in a line of creditors, and they will not accept reducing what they get back for the property unless all the other creditors do, as well. The minimum prices acceptable to the bank are usually set as covenants in the mortgage. If the lender forecloses, it will have priority over the debtor's assets, but under bankruptcy law the different creditors (not purchasers with deposits, who are "parties-in-interest," unsecured) will be classified into groups and bankruptcy law specifies how many creditors from each group must accept the bankruptcy plan before the court approves it.

"There were fewer such buildings then."

Wrong. There were fewer new development condominiums, but the number of co-op conversions was astronomical, and many of them went bankrupt.

"Wrong. There were fewer new development condominiums, but the number of co-op conversions was astronomical, and many of them went bankrupt."

How is that wrong? Co-op conversions were not stalled construction projects. A nicer way to make your point might have been, "the collapse of real estate prices was just as bad then, and instead of having empty shells, foundations poured, empty lots, one had lots of crummy already-existing apartment buildings with 'co-op plans for sale' signs plastered all over them, with failing conversions, bankrupt cooperative corporations."

But if it's important for you to say that you disagree with someone, even when you don't, go for it.

aboutready - "it's just a portion of the shadow inventory." I realize that. But empty hulks, unfinished buildings, lots with nothing but poured foundations, fenced-in weeded-over lots, these are much worse symptoms of a collapsed market than shadow inventory. They are proof that there is no market for the planned construction at the projected prices. What we have now is very, very bad.

"If they never come to market, the inventory doesn't swell by these "stalled" numbers."

But they may. Remember that Jonathan Miller counted all those converted co-ops in his inventory even though, while salable, they were not necessarily purchasable.

"really cheap land encourages building of rentals"

While as a generic statement this is true, I don't think it's an argument that all or even most foreclosed empty lots will get built on. Think about how many vacant (parking) lots remained such thru SEVERAL RE boom cycles. highest and best use is sometimes "unimproved".

lowery, your point is well taken, particularly for certain neighborhoods. what is odd, though, is that i don't really even notice the undeveloped lots that much. we've been living for years with scaffolding, blue boarded lots, empty chained lots, during this process that it almost seems like the new normal. i'm sure it doesn't if you live next to a particularly gruesome site. but you are correct in that they represent the ills of the market quite eloquently.

30yrs, i'm certainly not saying it will happen. it can happen. if demographics shift NYC may have plenty of housing, and not need a single additional rental for a decade. we may lose a great number of families, or not attract a great number, if those ominous signs in the public education arena come to fruition. few young grads will be able to move here without having secured definite employment, not the time to take a stab at survival in the city. still too expensive for that, and not enough opportunity. often developers keep land cheaply obtained for ages and wait for an upturn to build, which given the community boards and other delays can be a risky way of doing business, but leads to the boom and bust cycles. but the land being so cheap gives the developers more room to develop rentals in the event that it seems advantageous.

not all of these sites are undeveloped, however.

"aboutready - "it's just a portion of the shadow inventory." I realize that. But empty hulks, unfinished buildings, lots with nothing but poured foundations, fenced-in weeded-over lots, these are much worse symptoms of a collapsed market than shadow inventory. They are proof that there is no market for the planned construction at the projected prices. What we have now is very, very bad."

Personally, I think it will be a lot easier to "fix" some of this (the stuff which hasn't had su8bstantial building done yet): once any of these lots is sold, it's amazingly simple to do whatever alternate use (i.e. parking lot) construction wise. What I think will be MUCH more difficult to untangle is things like vacated bank branches.

"

30yrs, i'm certainly not saying it will happen. it can happen. if demographics shift NYC may have plenty of housing, and not need a single additional rental for a decade. we may lose a great number of families, or not attract a great number, if those ominous signs in the public education arena come to fruition. few young grads will be able to move here without having secured definite employment, not the time to take a stab at survival in the city. still too expensive for that, and not enough opportunity. often developers keep land cheaply obtained for ages and wait for an upturn to build, which given the community boards and other delays can be a risky way of doing business, but leads to the boom and bust cycles. but the land being so cheap gives the developers more room to develop rentals in the event that it seems advantageous.

not all of these sites are undeveloped, however."

Sorry for the cross talk...... historically, "cheap land" has almost NEVER led to cheap rentals in any "good" neighborhood, certainly not in Manhattan. As you said "often developers keep land cheaply obtained for ages and wait for an upturn to build". As ironic as it seems, developers are much more likely to build, rentals or condos, on expensive land than cheap land. Part of this is simply because people tend to make RE decisions and never look back: for example, there are lots of times when people decide to let their homes go into foreclosure because prices are too low. But in the drawn out process, things turn around one way or another and they could do better saving the piece. But they already decided to let it go and the never look back. Same thing happens with guys who buy lots: they often have one thing in mind when they buy them, and even if the market changes, they don't re-examine the reason they bought it - it's more often they sell it to someone else who has the idea to do "that thing with it" than they change their mind.

I can tell you right now there's a bunch of parking operators who are already lining up financing to buy lots when prices reach their "hit it" level. And most of these guys will hang onto them and operate them as parking lots WAY past the point at which they could make more money developing the lots. But they are parking guys, so they don't do that. That is, until some developer comes along and drops some ludicrously high number on them to purchase as a development site. Perhaps it's comforting to know that most of the RE "pros" act just as emotionally towards their RE as the "average Joe" when they should be making objective business decisions.

wellheythere, "as bad as this map looks, i know of at least three stalled sites that aren't included, and that's just off the top of my head."

wellsamehere!!!

I too have seen lots of stalled sites that aren't that map. They were going to be one and two-family homes in The Bronx. Some have foundations laid. Those look worst. They are becoming dumping grounds. Others have boarded up windows and doors. I think "shooting gallery."

The dramatic thing about the linked article/map is, as many as omitted, the total number is huge. Alternative uses depend on the degree of non/completion. Manhattan Plaza on 42nd/43rd Sts was envisioned as luxury housing, I heard years ago, and only became the subsidized "artists' housing" when its target market failed to materialize.

This bust has a different look to it than the last one because, as steve says, the biggest factor was the mass-scale coop conversion of already-existing apartments. That was a complex mess with its own problems.. the reason there was so much demand for the coops was that rentals were behind warehoused. Some people were led to consider buying coops precisely because finding a RS apt had become impossible. It was impossible because they were being warehoused. Then the glut. Some have argued with him that not all units in those conversions should be counted as inventory. That's not a simple calculation. If the majority of RS tenants kept their RS apts, depending on the building's finances, that could spell ruin.

This boom was all about condos, and not just the big ones in Manhattan. The outer boros have them in all shapes and sizes, thrown up on whatever empty lot(s) could be found. In the peak of the market, an entire bldg could sell out on the plans, before any was finished. I have to think the dried up financing for these stalled projects was as much a function of those immediate sell-outs not happening as it was "the credit crunch." No matter how these stalled projects end up, it's hard for me to see prices going up for completed projects. And the coop market will follow the condo market.

"This bust has a different look to it than the last one because, as steve says, the biggest factor was the mass-scale coop conversion of already-existing apartments. That was a complex mess with its own problems.. the reason there was so much demand for the coops was that rentals were behind warehoused."

Lets also not forget that many of those conversions didn't really change much outside of ownership. The same people who lived in 'em before lived in 'em after. If you sell a renter his apartment, that increase in "inventory" is meaningless.

"Lets also not forget that many of those conversions didn't really change much outside of ownership. The same people who lived in 'em before lived in 'em after. If you sell a renter his apartment, that increase in "inventory" is meaningless."

but it did remove demand from the mkt if that renter ever thought about buying eventually.

lowery, what do you mean by "warehousing"?

> but it did remove demand from the mkt if that renter ever thought about buying eventually.

Which nets out with the increased supply. Net effect is zero.

That's the term that was used to describe:
Corp A purchases Building B. Corp A has no
interest in operating Building B as a rental,
with or without RS. Corp A's agenda is to
convert Building to a coop. Transfer of
ownership from Corp A to Corp B (eventual
cooperative corporation) is the payoff
expected for investment.

Here's the pattern of how these things worked
out: RS Tenant #1 moves out or dies. Apartment
remains vacant. Corp A simply does not offer
it for rent, not at any price. Corp A makes
improvements to building to get maximum RS
% rent incresess, in order that RS Tenants
#2, #3, #4 move out. Other ways to get out
RS tenants include paying them cash to leave
voluntarily, or, in some cases, withhold services
to building to encourage RS tenants to leave
(no rent increases in this scenario).

"Warehousing" means that leaving vacancies vacant
and off the (rental) market in expectation that
the 15% number, or close to it will be hit. Then,
the "warehoused" units are renovated and offered
for sale as non-evict coops. With a strong market,
those vacant apartments can be snapped up in only
a couple of weeks, as was the case in my first
apartment. The 15% or whatever number is reached,
so the offering plan is declared effective for a
"noneviction" plan.

Now the offering prices are higher, as there is no
risk for a purchaser. More RS tenants move out as
their rents escalate, or they die. Some of them
"sell their insider's rights."

It worked very well until, like todays' condo market,
it all turned south.

I'm not sure I understand or agree some people's position
on those coop conversion and effect on inventory. I'm
still thinking it over. I was in my 20s in those days,
and everyone I knew felt a squeeze. A coworker of mine
in 1984 said to me, "Right now you can' f___ for a lease,
much less pay for one."

That was because of warehousing. By the end of the
coop conversion craze, my feeling was that "insiders"
were not buying into the conversions, especially in
lower-rent neighboroods in Queens and Brooklyn. They
usually had rents lower than their maintenance charges,
without mortgage, would have been. Not sure if this
ratcheting up of the prices and therefore maintenance
charges (which included mortgage payments from New
Cooperative Corporation to Corporation A) is what killed
it all, or the 1987 stock market crash and subsequent
unemployment, or higher mortgage rates and/or resets,
or a combination.

End result was a fiasco, but you did not see it in the
form of stalled construction projects, so draw your
conclusions.

there is another question...
how many more will be on the map next time we visit it?
This weekend I, once again, explored the EV and Alphabet City .
On a single block, 2nd street btwn. Ave B & C. On that block, I counted 5 new projects that are all or partially build. None of the sites appear to be active for the moment. By active I mean it does not appear that any work is currently going on or has recently occured. None of those buildings have made the map. That's just one block!!!

Which is worse though... a stalled project... or an empty one you just finished.

The only stalled project I care about is 56 Leonard and maybe 30 Park Place.

Rem is "stalled" but will be built.

Oh and Five Franklin Place.

I think the stalled, unfinished buildings are worse.
Think "crack house." Think "shooting gallery."
Think "squatters." Those hit property values
harder than excess inventory.

wonderboy, nobody cares. *puke*

"I think the stalled, unfinished buildings are worse.
Think "crack house." Think "shooting gallery."
Think "squatters." Those hit property values
harder than excess inventory."

Ah, the East Village will be fun again!!!!!! No more yuppies!!!!!! Die yuppie scum!!!!!!!!!! lol

"Ah, the East Village will be fun again"

I think those squatters moved to more fashionable neighborhoods
across the East River...............

Think "crack house." Think "shooting gallery."
Think "squatters."

How 1970's. Charles Bronson in...'Death Wish'.
Hey, it could happen.......................................in Williamsburg.
The projections on social decay as a factor in unfinished RE projects seems like an easy call. I'm not so sure that that will be the resultant. On a recent expidition to WB I did see persons of an unsavory nature illegally stripping new construction of wireing and fixtures. No doubt, whom ever becomes the recipient of these properterties will have massive 'reconstrutive' work on their hands.

Anyone around long enuf to remember the squatter buildings on the UWS? Corner of 87th and Columbus???
A good crime was had by all!

"On a recent expidition to WB I did see persons of an unsavory nature illegally stripping new construction of wireing and fixtures. No doubt, whom ever becomes the recipient of these properterties will have massive 'reconstrutive' work on their hands."

The Murphy's of "helping forestall foreclosures".

"On a recent expidition to WB I did see persons of an unsavory nature illegally stripping new construction of wireing and fixtures."

New York magazine in the '80s had a good article describing how a nice apartment building in the Bronx turned into an empty shell in a matter of months. What you described is one phase of the process.

I'm not predicting all these buildings will go there, but it's a possibility.

thanks a lot lowery for the warehousing explanation! so neat and clear :-)

today the "picture the homeless" nonprofit tried to occupy a lot in 115th between park and madison. their sign said "they say gentrify, we say occupy". they also ask "do not talk about us, talk with us" so that's all i can say about them, here's their website:

http://www.picturethehomeless.org/