My grandfather says that he prefersin real estate because “they're not making any more land.” Except in rare circumstances, such as Battery Park City, there is much truth in this statement.
In Manhattan, there are only 14,478 acres (or 22.6 sq. mi.) to start with. Most of that land has already been built upon, especially after the boom of 2005-2007. In 2007 alone, there were 51sites sold for over $1B.
In 2010, there were another 41 development sites that sold in Manhattan for about $802 million dollars. Although an impressive number after 2009's shutdown, this accounted for less than 10% of all the property sales, as most sales are for existing properties. Finally, our company is only handling 36 Manhattan development or conversion opportunities at present.
Now thatfinancing is available again, developers are on the hunt. Unfortunately, there is little for them to choose from. I've received about a dozen requests in the last week for 50,000 – 100,000 SF residential sites. They almost don't exist. Many of the sites which were in distress have already been sold off or recapitalized. In the meantime, long-term owners have chosen to hold on are, for the most part, waiting for the next peak.
One exception was a site that our firm just sold in the Hudson Yards area. The site was buildable to over 250,000 SF and bonusable to more than 550,000 SF. This was a heavy lift for most developers, as this was not only a very large site, but it was also mostly commercial, which can be much more challenging to.
Even so, we were pleased to have over 100 marketing brochures out and ultimately a dozen bids. Many of the buyers were looking to land bank, as the Hudson Yards area will be an entirely different neighborhood within five years. This is due to the following reasons: 1) The Highline will open up to 30th Street next month and should extend to 34th Street in the near future; 2) Related will begin building Hudson Yards within the next few years; and 3) The 7 train will be extended to 11th Avenue and 33rd Street.
Hudson Yards is one of the few areas left in Manhattan which still has large tracts of land. We sold this large scale site at close to $200/BSF on an as-of-right basis. This price point is attractive given that sites elsewhere in Manhattan can trade for double. This also means that rental development is feasible. Parking income can defray this cost.
Within the next five years, there will be a real shortage of new housing, as development came to a halt in 2009-2010. In the first 11 months of 2010, New York City issued just 10 building permits for new residential buildings, which will result in 505 new apartments. Compared to 2008, that's a drop of 95% from the nearly 9,000 apartments. As a result, anyone who can purchase land at a discount today will be well positioned to build as there will be little competition.
Meanwhile, the office development space might be a little more busy. According to Cassidy Turley, Manhattan could see about 28.5 million square feet of new office space in this decade. Only 7.4 million square feet was built in the 1990s, and 18.5 million in the 2000s. With the bulk of our existing office stock being over 50 years old, this new inventory will be a welcome addition.