Consistent with the broader New York City Investment Sales market, there were fewer sales of development sites in the third quarter of 2019. Total sales dropped to 18 transactions, down 47 percent from 34 transactions in the second quarter, according to the Avison Young Third Quarter 2019 Development Sites Sales Report.
This dip in activity is a result of fewer deals going into contract during the second quarter, possibly due to market uncertainty stemming from the June announcement of rent reform laws. Despite the slowdown in activity, pricing metrics for land have only been slightly impacted.
“If the dip in the third quarter was due to market uncertainty from the previous three months, then more deals should close in the fourth quarter as a result of increased activity and a flight of capital from the multi-family sector into the development sector,” notes Daniel Tropp, a Director in Avison Young’s Tri-State Investment Sales Group and author of the report. “Coupled with the flurry of activity that typically takes place around the end of the year, we are optimistic for a resilient close to 2019.”
The report highlights activity within the boroughs:
Land prices in the outer boroughs were consistent with activity seen earlier in the year. In Queens, the average price per buildable square foot (bsf) was $279 in 3Q19, up 13 percent from an average price of $247 per bsf in 2Q19. Those numbers include sales of sites located in Qualified Opportunity Zones which, if isolated, traded at a much lower average of $172 per bsf, effectively bringing down the overall metrics for the borough. Despite the tax incentives associated with QOZ sites, the sites are typically located in less desirable areas that have lower projected rental rates and therefore lower residual values for the land.
In Brooklyn, the average price per bsf was $308 in 3Q19, down 9 percent from an average price of $339 per bsf in 2Q19. Likewise, those numbers include sales of several QOZ sites which, if isolated, traded at an average of $293 per bsf.
Manhattan land values experienced the largest swing of all the boroughs albeit with the smallest sample size in 3Q19; four sales totaling 520,000 buildable square feet with an average price of $618 per bsf, marking a 15 percent slide from an average of $724 per bsf in 2Q19 and a decline of 11 percent from the trailing four quarter average.
There was one development sale in the Bronx in 3Q19, recorded at $154 per buildable square foot.