Developers, faced with stratospheric land prices, forced to leave renters high and dry

New York /
Feb.February 22, 2013 09:00 AM

New York City developers made a madcap dash to secure property sites in 2012, and with prices continually inching upwards, had little option but to build luxury condos, thus leaving renters and those needing affordable housing out in the cold, the New York Times reported. 

Property owners sold 158 development sites in Manhattan in 2012, an increase of 51 percent from the previous year, according to brokerage Massey Knakal. The total sales volume of those sites was $3.12 billion, representing a 128 percent increase from the previous year. Moreover, 69 sites worth $1.73 billion sold in the fourth quarter alone. Competition for these sites was cutthroat, with as many as 40 developers battling for the right to purchase a single site, Bob Knakal, Massey Knakal’s chairman, told the Times.

To mitigate the risk of buying at such high prices, brokers told the Times that developers were pushed to build high-end condos, or convert existing properties into them. “The fact is, the way the free market is working today, land is just too valuable, so developers can’t afford to do anything but build super luxury product,” Knakal said.

For example, Macklowe Properties is in the process of converting two Upper East Side prewar rental buildings, 150 East 72nd Street and 737 Park Avenue, into luxury condos. “There are very few remaining rental prewar buildings on Park Avenue,” Richard Wallgren, executive vice president for sales and marketing of Macklowe Properties, told the Times in reference to 737 Park Avenue. “So this opportunity to purchase one of those lone buildings was extremely competitive, and we are delighted to be successful in purchasing it.”

Some real estate insiders worry that this trend will lead to a lopsided housing market recovery. “I worry that if this is all we can develop, how deep is that market?” Jonathan Miller, president of appraisal firm Miller Samuel, told the Times. He added that the proposal to rezone Midtown East would be essential to alleviate the tightness in the property market.

Knakal said that the push to build high-end wouldn’t solve the problem of providing affordable housing to the large percentage of New Yorkers that need it. “There are so many millions of people that keep the city functioning,” he said. “If you earn $40,000 a year, where do you live?” [NYT] —Hiten Samtani


Related Articles

arrow_forward_ios
Carmel Partners picks up UES dev site
Carmel Partners picks up UES dev site
Carmel Partners picks up UES dev site
CIM hits back at board’s allegations in 432 Park lawsuit
CIM hits back at board’s allegations in 432 Park lawsuit
CIM hits back at board’s allegations in 432 Park lawsuit
The New School’s Eugene Lang College at 118 West 13th Street and Martin Nussbaum and David Schwartz of Slate Property Group (TNS, Slate)
Slate snaps up New School dorm in Greenwich Village for $23M
Slate snaps up New School dorm in Greenwich Village for $23M
Vornado's Steve Roth and a rendering of 93-30 93rd Street (Getty, JLL)
Vornado looks to sell Rego Park development site for $85M
Vornado looks to sell Rego Park development site for $85M
Vishaan Chakrabarti of Practice for Architecture and Urbanism and Hiten Samtani of The Real Deal (Getty)
The REInterview: What if Manhattan had four Central Parks’ worth of land to play with?
The REInterview: What if Manhattan had four Central Parks’ worth of land to play with?
150 East 45th Street and Children’s Aid president Phoebe Boyer (Credit: Google Maps)
Children’s Aid Society sells Midtown HQ
Children’s Aid Society sells Midtown HQ
Rockrose Development Justin Elghanayan and 98 DeKalb Avenue in Brooklyn (Credit: Google Maps)
Rockrose closes $81M all-cash Brooklyn buy
Rockrose closes $81M all-cash Brooklyn buy
David Schechtman, Bob Knakal, Peter Von der Ahe
Top I-sales brokers on what to do when there are no deals
Top I-sales brokers on what to do when there are no deals
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...