Manhattan is one of the most dense markets in the world. Over the past 7 years there have been more than 16,200 units completed in New York in 682 new buildings. But today, roughly one in four of these remains unsold. This is astounding when you consider that the traditional model for condo development is to have a high percentage of units pre-sold prior to breaking ground on the project. Some lenders require 80% of the units must be pre-sold. Clearly that hasn’t happened.

Prices in some of the newest towers are being reduced.

At the same time we hear continually that there is a lack of affordable housing in the New York area. It’s true, housing in NY is hard to come by. Many people who have a six figure income will rent, others will have a room-mate in order to make ends meet.

Much of the vacancy is in the luxury and ultra-luxury segment. Manhattan, like some other gateway city markets, notably Miami and San Francisco have seen a boom of investment from outside the US. Much of this has come from mainland China and Hong Kong. Today, there is a significant slowdown in money coming from abroad. While the US remains one of the most desirable places for global investors to park cash, various headwinds have made the flow of money slow to a trickle.

According to a report in the New York Times this week, there is also a shadow inventory of units for sale. This inventory is held by the developer and doesn’t appear on the market. If you include these units, local experts estimate that there are as many as 9,000 unsold units.

Across New York City, the rental vacancy rate was most recently recorded at 3.63 percent, which translates to about 79,000 units. That is much lower than the national vacancy rate, which was last recorded at an average of 6.9 percent.

The vacancy rate is the highest in Manhattan at 4.73 percent and the lowest in the Bronx at 2.71 percent.

The NYC vacancy rate varies greatly by price with higher vacancy rates among more expensive apartments and lower vacancy rates among less expensive apartments. The vacancy rate for apartments over $2,500, for example, is 8.74 percent.

New York continues to add a lot of high quality jobs. Despite Amazon’s announcement to pull out of its planned expansion into the Long Island City location, several other tech businesses are expanding their presence in NYC including Google, Facebook, Twitter and

So what does this have to do with supply and demand? We are seeing the top end of the market as being over-supplied and the middle of the market and below as dramatically under-supplied. There’s no really good reason for New York to be that much more expensive than the rest of the country. Building materials cost the same pretty much regardless where you put them. But the underlying land is incredibly expensive and the cost of labour doing construction in New York is much higher than the rest of the country.

I’m definitely in favour of development. Probably 90% of our business consists of new construction. But I’m not in favour of building in areas where the delay between concept and completion is so large. There’s simply too much risk that the economic conditions, specifically the balance of supply and demand can change dramatically over that time period. Make sure you segment your market to understand the balance of supply and demand within a market segment. The averages don’t really exist.