(post by BT) Lately, I have been seeing a growing number of overpriced land for sale by real estate agents. Just because you have land, and it’s in a prime location, it does not mean people should overpay. There is a logical, true value for everything. Even in hot, up-and-coming areas like Long Island City (LIC), prices need to make sense to the buyers. And now that the tax abatement heaven is over, my friends, no one is in a rush to build condos on overpriced land. Here is a fact: no builder can pay more than $110 per buildable square ft in LIC. I am seeing ignorant commercial and inexperienced residential agents (you know, the ones who have no idea how commercial real estate really operates) listing at these insane prices. How is that they are pricing land at double the value? It’s the asking price that seems to be double because nothing is going to sell at these prices. I wish the brokers stop misleading sellers and stop promising them prices that can’t be gotten.

If you check the prices that prime, blue-chip, A-list developers like Toll Brothers, Simone Development group, Rockrose and Avalon Bay paid for properties in LIC, you will notice that it’s almost never more than $100 per buildable sq ft. Now, these guys charge premium prices and get them. How is an average builder going to pay double that and make money.

Take 5SL or 5th Street Lofts by Toll Brothers, located at 5-26 47th Road and 5-09 48th Avenue in LIC, NY, 11101. Toll Brothers paid $17,000,000 for it in 2005. At 161,000 buildable sq ft, they paid 105 bucks per buildable sq ft. Another example: The Powerhouse, located at 50-01 and 50-09 2nd Street, a few blocks away. Even better deal! CGS Developers, LLC Paid $12 million for 300,600 buildable sq ft. That’s a puny $39 per buildable sq ft!

You get the point. But those ignorant Realtors and sellers don’t.

There is a simple concept of cost approach. You have soft costs and you have hard costs. These are key items in deciding to build anything new. People don’t just make money without doing research and they sure as hell ain’t gonna drop $10 million plus without doing their due diligence. Basically, nobody will buy, the agent will have worked for free because it won’t sell, and the seller loses the most because he/she could have sold for the real market value when times were a bit better for development. There is a buyer for everything, at the right price. But if your land sits overpriced for sale for 2 years, and then the market gets weaker, you may be looking at another 3 years of no action. Unless price of construction goes down, or price of real estate shoots up again, no developer will buy your overpriced land any time soon.

Here are pictures of The Powerhouse and of 5SL: