Posted by Leonard Steinberg of URBAN COMPASS on January 18th, 2015

Land is now selling for above $ 1,000/sf on a regular basis in Manhattan, a historic moment in our City’s history. When a developer buys land at these prices, its almost a certainty that he or she will have to sell the apartments built on this land for around $3,000/sf to make a profit. Anyone questioning why AFFORDABLE HOUSING is a scarcity needs to look at these soaring land costs, combined with the soaring costs of labor, combined with the soaring costs of materials. The combination can be deadly. Is the $1,000+/sf cost for land sustainable when this is a figure that has virtually doubled in the past 2 years? Is this a sign of hyper-inflation? A prime piece of land just sold in West Chelsea on the West Side Highway at 17th Street to HFZ Capital who plan to build a Hotel/condo on the site, about 17.5% higher than the price Victor Homes paid for a non-waterfront site located 10th Avenue and 24th Street: everyone was aghast over that price, and that was rather recent. How deep is the market for $3,000+/sf apartments in non-prime settings? Only time will tell.

With the US economy surging, New York continually improving, neighborhoods gentrifying, limited prime sites available, I think there is definitely a place for these high priced buildings……BUT: I do fear for those less-than-stellar sites with excess ambition. We are now in the pick-and-choose phase of the market for the very rich where at last they have some great choices in certain parts of the City. Irrational expectations need to be tempered by those with lesser sites in areas that have vast swaths of inventory in the works. Over the longterm all of this new inventory will be absorbed, but the pace at which this happens will slow.