Despite the unquenchable demand for rental units in Manhattan, stratospheric land prices are blocking the development pipeline for multifamily projects, industry experts say.
Prime residential land in Manhattan can sell for as much as $1,000 per buildable square foot, Massey Knakal’s James Nelson told the New York Observer, compared to $100 to $200 per buildable square foot in Queens. Such high prices turn lender interest toward luxury condominiums, hotels, offices and retail in Manhattan, at the expense of multifamily rentals, according to the Observer.
“You just can’t build a rental at those numbers,” Peter D’Arcy, regional president of New York City and Long Island at M&T Bank, said of the $1,000 figure in Manhattan. “It is challenging to create new capacity at a price point that is affordable.”
Residential rental property sales raked in roughly $900 million in Manhattan last year, compared to more than $3 billion for commercial and a record-breaking $4.5 billion for residential condominiums, according to Real Capital Analytics data cited by the Observer.
For multifamily rental project costs in Manhattan to equalize, land prices would have to drop by about half, Richard Bassuk, co-chairman and CEO of Greystone Bassuk, told the Observer. And because rental rates are rising faster than wages, even higher-end rentals may not make financial sense for long, industry insiders told the paper. [NYO] — Julie Strickland