Upper Manhattan development prices halved

Prices for development properties in the northern part of Manhattan may have fallen by about 50 percent as demand dries up due to the tight credit market and the loss of state tax incentives, some brokers say.

The prices for development sites have fallen as new condominium and market-rate rental construction has nearly halted, and the limited land sales that are occurring are mostly for affordable rental projects, said Shimon Shkury, a partner at Massey Knakal Realty Services.

“There is really no construction financing. There is very little available for residential or anything, and then the 421-a tax abatement was taken away. That is another reason for the decline. Those two really affected the market,” he said.

He noted that the decline in land values is “about 50 percent, easy,” but since so little has traded it is hard to get an accurate sense of pricing.

According to Massey Knakal’s year-end report for upper Manhattan investment properties, released today, the year-over-year change in value for vacant land declined by just 11 percent to $102 per square foot in 2008 from $115 per square foot in 2007.

In the broader investment market in northern Manhattan, which includes development sites, offices and multi-family buildings, sales volume dropped 50 percent to 210 transactions in 2008 from 416 transactions in 2007; and the total dollar volume fell by 59 percent to $736 million in 2008 from $1.8 billion in 2007, the report shows.

The report’s data included transactions of $500,000 or more north of
110th Street on the West Side and north of 96th Street on the East
Side, and did not include sales in which the City of New York was a
buyer or seller.

Between 2007 and 2008, prices for multi-family assets held up better, he said. Gross rent multiples fell 8 percent to 11.2 and capitalization rates rose .3 points to 5.9 percent, the report said.

“Gross rent multiples are lower but not horribly, not significant enough to say the price for multi-family has collapsed. The rental market is still strong and protected” due to rent-stabilized units that generally achieve a guaranteed rental increase each year, he said.

Shkury said with development prices so depressed, it was a good time to purchase.

“Now is the opportunity for buying relatively inexpensive land and waiting for the market to come back,” he said.