The price of land for residential and commercial development in New York City is declining in a similar manner to the stock market, but land prices are only going in one direction — down, down and down.
Due to the inability to secure financing from commercial and savings banks, prices of land for development of residential apartment buildings and hotels have declined in some cases by as much as 75 percent from previous record highs.
Just listen to the experts on their views on land prices.
Alan Miller, the senior director and principal at Eastern Consolidated, said: “Today, the same land that might have sold in 2006 for $450 a developable square foot would be challenging to achieve a sales price of $250 to $300 per foot, due to the lack of construction financing. It is irrelevant to the price, since basically there are no lenders in the market offering any form of financing.”
A principal at the Hudson Companies, David Kramer, said, “There aren’t a lot of new deals or comparables in the marketplace, but it’s not hard to imagine that Brooklyn land values have probably fallen from $175 per square foot at their peak, to $50 per square foot today, although there probably aren’t a lot of sellers out there who would acknowledge such a reality. With the loss of the 421-a property tax exemption, a paucity of financing, construction costs unabated, and a softer condo market, these all impact the only variable left — land costs.”
Sellers of land are in denial and in many cases are wearing blinders when it comes to the value of raw land for development.
Nevertheless, some sellers of land in the Willets Point neighborhood in Flushing, Queens will be reaping a windfall if the City Council approves the sale of a half of an acre of land in the so-called “Iron Triangle,” for a proposed $161 per square foot, nearly 10 times its assessed value and possibly the highest price ever paid for land in this area. In my humble opinion, the city is paying far too much for land based on the current state of the real estate market, and the purchase would set a precedent with owners in the neighborhood expecting similar prices.
It is curious that in these times, the City Council could purchase this property at such a high price, especially since little or no financing is available today or in the foreseeable future.
Overall, between financing basically coming to a halt and the miserable state of the stock and capital markets, expect land prices to continue a downward trend.
Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” on CUNY TV and “Building New York” on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is also an adjunct professor at NYU Real Estate Institute and a former columnist for the New York Sun.