Those who say there is no real estate bubble probably aren't working in New York, where Manhattan-area developers say land prices are getting out of hand -- and fast.
“You can overpay for an apartment building or for an office building because you have cash flow so you can kind of wait it out,” said Scott Alper, a principal of the Witkoff Group, speaking yesterday at a panel discussion hosted by Haute Living. “As long as you have low leverage, you’ll be alright. With the land market, you have no income so if you overpay and then you can’t get your equity together, you can’t finance it and you can’t get a construction loan, that’s where you have problems. That’s what you saw happen in this past cycle with land.”
Indeed, land prices have reached previously untested heights, according to a recent report by commercial brokerage Avison Young. The average price per buildable square foot averaged around $400 in Manhattan in the first half of this year, the brokerage reported, but prices for land suitable for prime luxury residential development soared to $700 or $800 a foot in some instances.
“Land is back up to stupid levels again,” Alper said.