The Real Deal - NYC
Aug. 1, 2023
Here lies the sales gallery. Once a prerequisite in the development process, it’s now deemed by some to be an optional and costly feature.
“The day of the sales gallery is dead,” Douglas Elliman’s John Gomes said. “Really, it feels like yesteryear.”
The co-founder of the Eklund-Gomes team pronounced its demise on a June afternoon in the downstairs lounge of 250 East 21st Street, a 54-unit new development where the team is heading sales.
The Gramercy development is the latest of Eklund-Gomes’ properties to skip the sales gallery and hold listings until model units are complete — part of a growing trend among developers who aren’t able to lock down buyers as early in the development process as they used to.
Gone are the days of selling condos from floor plans and renderings years before the move-in date. With pandemic construction delays top of mind and a market plagued by high mortgage rates, developers are waiting to list units until their buildings are closer to completion, prompting brokers to shift their sales strategies.
“It was nothing to sell a building that was two years out from completion and, in some cases, more than two years,” Gomes said.
Condo supply in Manhattan reached unprecedented heights ahead of the 2008 financial crisis, according to a previous analysis by The Real Deal. After dipping in the following years, the new development pipeline peaked again in the fourth quarter of 2015, with close to 16,500 units planned.
As new development skyrocketed in the city, sales galleries, which proliferated in Manhattan in the 1990s, also became increasingly more expensive.
During a hot market, developers spent millions of dollars to secure an off-site location and furnish it with all the fixtures and finishes slated for the new building — plus the accompanying videos, photos and renderings. Such was the Baccarat Hotel and Residences’ 2013 sales launch, when developers adorned its Fifth Avenue sales gallery with the French crystal, including champagne flutes, tumblers, lamps, chandeliers and a model of the building made of vases.
All in good timing
The willingness to indulge in a sales gallery may be down across the board, but some still rely on the feature — just not quite as far out from the completion date.
At The Harper, a 63-unit building on the Upper East Side, developer IGI-USA spent close to $1.5 million on the sales gallery, but the CORE team heading sales at the building waited to launch listings until June, with closings expected to start by the end of the year.
For brokers devising a sales strategy, the size and location of the new development often determine whether they advise the developer to invest in a sales gallery or wait until model units are finished.
Douglas Elliman’s Jessica Peters, whose team placed 32nd in TRD’s ranking of the top new development brokers in the city, said she typically forgoes a sales gallery for buildings with fewer than 75 units.
“The smaller the building, the closer you have to be to your sellout [to launch sales],” Peters said. “The larger the building, I’d say you probably want to be within a year because if not, then people get very antsy.”
“We’re in a new era. People just don’t have an appetite for so far out.”
JOHN GOMES, DOUGLAS ELLIMAN
At 250 East 21st Street, the Eklund-Gomes team, working with developers Urban Development Partners and SD Second Avenue Property, opted to delay the sales launch until model units were completed. The models included the entire fifth floor and elevators to bring prospective buyers to and from the units.
“We’re in a new era,” Gomes said. “People just don’t have an appetite for so far out.”
The construction of the model units was delayed, and although Gomes said he was confident he wanted to wait to officially launch sales until they were complete, he didn’t want to hold back the hype during the spring selling season.
Instead, the team put together a soft launch event to offer brokers a first look into the property. To maintain a sense of exclusivity, the team didn’t distribute any of the floor plans or renderings, but instead allowed attendees to take photos of the materials to show potential buyers.
After the event, the team distributed a sign-up list for brokers to begin scheduling tours with their clients once the model units were complete. The waiting list was chock-full by the time the team was ready to show the models.
Keeping up appearances
“People just want to feel confidence, and a finished building portrays confidence,” Nest Seekers’ Bianca D’Alessio said, adding that variable interest rates and a history of delays are contributing to the hesitance among buyers to purchase in the early days of construction.
But not all buyers are dissuaded from incomplete buildings, especially if the new development is well priced and in a high-demand location or backed by a brand-name developer, according to D’Alessio. The broker, who ranked 17th among TRD’s top new development brokers in the city, is co-spearheading sales with Tamir Shemesh at Williamsburg’s 110 North 1st Street.
The 38-unit new development launched sales in May, with construction expected to complete by the end of the year. Instead of showing model units in the building, the team ran sales from an office on Driggs Avenue. The decision to put listings on the market ahead of model units was, in part, determined by the desirability of the prime Williamsburg location.
It was a different story for 350 Butler in Park Slope, where developer Brooklyn Home Company originally launched sales at the boutique condo when construction was just underway to coincide with a neighboring development that was already complete.
Co-founder Bill Caleo packaged the two buildings under the moniker “The Butler Collection.” Soon after launching, he noted that the completed units at the neighboring development sold quickly, but listings at 350 Butler languished on the market.
Caleo then pulled the condos from the market and waited to relaunch sales once the building, and its model units, were closer to completion. Three months after the listings returned to the market, the building reported over 50 percent of units with signed contracts in June.
“The days where you could sell something 15 months before completion weren’t happening,” Caleo said. “In the new market, where interest rates are kicked up, people don’t know where they’re going.”