No one knows the giddy highs of New York’s property market — and today’s groaning lows — better than hot dog vendor Pasang Sherpa.
In the middle of last year, he paid the city a staggering US$642,000 for two sidewalk spots outside the Metropolitan Museum of Art, expecting sole control over the best vending turf in New York.
But when he set up his carts last week he discovered one location blocked for construction and the other unexpectedly invaded by rival hot dog sellers — military veterans who don’t have to pay a cent in rent.
Sherpa’s huge investment suddenly looked less bright.
“I paid crazy money,” the Nepalese immigrant, aged 50, said in halting English. “The economy is down, there are more vendors and the other [location] is closed. My mind is not working now. I’m going crazy too.”
For everyone, from hot dog men to millionaires, these are days of scary sobering up on the New York real estate market.
Gone is the time when no price seemed too silly, when buyers came begging, and developers made Manhattan’s spiky skyline their plaything.
Luxury apartments now sit unsold, empty storefronts are appearing in prime zones, and the Wall Street collapse has flooded the commercial market with inventory.
“We have a crisis of hope, because people don’t necessarily see their way out of it,” said Joseph Harbert, chief operating officer at commercial real estate giant Cushman and Wakefield in the New York region.
Manhattan has traditionally been a real estate fortress, protected from wider trends simply by the facts that so many people want to be here and space on the island is finite.
Not any longer.
Cushman this week reported that office leasing in Manhattan is at its lowest level since just after the Sept. 11, 2001, terrorist attacks.
Available space in Manhattan totals 2.9 million square meters, which is 43 percent up on the end of 2007 and the highest level since May 2006, Cushman said.
That’s partly because the entire US economy is in recession, but also because September’s Wall Street crisis freed vast amounts of office space almost overnight.
“With lightening speed we had people go out of business,” Harbert said. “Those things shook our confidence.”
Construction, one of the great New York industries, is also stuttering.
Reports suggest that at least US$4 billion worth of construction projects have been cancelled or delayed, among them a 16-storey tower and basketball arena project in the Atlantic Yards neighborhood.
“No one wants to take the risk of putting up a new building,” Harbert said.
The picture is similar in the residential market.
This was long a seller’s dream, with bonus-wielding Wall Street types helping drive prices to absurd levels for the tiniest properties.
Today, inventory is soaring, banks are loathe to make loans, and the recession has put a huge hole in the annual bonus bonanza.
Investment bank Goldman Sachs reports that sales dropped 25 percent to 30 percent in the fourth quarter of last year compared to 2007. Residential construction output is set to drop from 35,000 units a year to 18,000 by 2010, by some estimates.
Battling this financial gale is Paula Del Nunzio, a broker specializing in multi-million dollar sales.
Top of her current list is the Henry T. Sloane mansion, a limestone townhouse within spitting distance of Central Park, with 11 fireplaces, an elevator, 15 bedrooms, 17 baths and a marble stair case.