In 1842, the residents of Manhattan established the Trinity Cemetery and Mausoleum on Riverside Drive. The son of Charles Dickens is buried there, as well as the great naturalist John James Audubon. Over the centuries, other cemeteries have come and gone, but this quiet and respectful place has always been one of the most preferred spots for people to enshrine their loved ones for eternity.
In the early part of the 2000s, there was a run on Manhattan land that helped to develop the island further and push land prices even higher. At first, the land became so expensive simply because it was located on Manhattan island. After a while, developers started to realize that Manhattan is not making any new plots of land for development and really good land started to get scarce. It was not long before Manhattan land was getting so hard to find that it was supply and demand that was raising prices and not prestige.
Fast-forward to 2016 when the only cemetery on Manhattan that offers any new space for burial is Trinity Cemetery and Mausoleum. All of the other cemeteries in Manhattan were unable to buy land to expand because it is so expensive, and some cemeteries are considering moving grave sites into mausoleums and selling the land they have. But Trinity Cemetery can no longer sell an in-ground plot. Even though this is the only cemetery selling space in Manhattan, it has no more room to expand and only offers space in its mausoleums. The land issue in Manhattan is very real.
Early Signs Of The Land Shortage
In 2007, a New York City online real estate magazine called The Real Deal started to ask whether or not Manhattan had already run out of room to grow. By 2007, development of new properties in Manhattan had been going at a feverish pace and The Real Deal wondered if all Manhattan had left were scraps of land and possibly some waterfront development.
One of the positive aspects The Real Deal pointed out is that Manhattan is a relatively old island when it comes to developed properties. There are entire sections of warehouses and industrial plots that are either abandoned or ready to sell right now. But this article is almost 10 years old and it should be expected that many of those plots ripe for re-development have already been sold and redeveloped.
Once Manhattan has exhausted all of its prime empty land and all of its prime abandoned properties, that just leaves the small parcels of land throughout the island to be developed. As the land disappears, the prices continue to go up and Manhattan’s real estate development is soon faced with the stark reality that it may not be practical to build commercial and industrial facilities because of the cost of land. That begs the logical question of – now what?
Facing A Reduction In Scope And Size
Due to the fact that Manhattan has almost no available space that could be classified as sprawling, it is starting to become necessary to build skyscrapers instead of office complexes. Once the Manhattan developer crowd decided that it was good with the idea that it would have to build up and not out, the next issue was determining ways to create skyscrapers that people could afford. Developers had to identify their markets, and then they had to use the right vehicle to encourage new buildings to fill up.
In an environment where the cost of building is so high because of land costs, it becomes impractical to build rental units. Rents in Manhattan are already the highest in the city, so to escalate those rents even higher would create nothing but problems for developers. Faced with the reality that they could only build units for purchase, developers next had to resign themselves to the fact that only residential customers would buy units and that narrowed the target audience to residential high-income property buyers only.
Overwhelming A Very High-End Market
The lack of available land in Manhattan has forced new construction to deal only in residential properties. What development space was left could only be used for high-rise luxury skyscrapers because businesses would not pay the rents that would be required thanks to the high cost of Manhattan land. All of this led developers to consider another issue they had never thought of before; what if they run out of buyers?
The idea of running out of luxury residential unit buyers had not occurred to Manhattan developers until recently when they were forced to address the issue of disappearing Manhattan land. While developers could redevelop an abandoned property or turn and old apartment building into something new, their ability to market their building as the newest thing on the island is disappearing.
It almost seems better to remodel or redevelop and existing property and try to take advantage of the dramatic price increases throughout the island than to lose out in an over-inflated bid for a new Manhattan property and then have to start over again. With the land running out in Manhattan, developers are having to make some decisions they have never been faced with before.
The Wild Card: Land Leasing
There are approximately 100 Manhattan office and residential buildings that have what are called land leases. Land leases are situations where the building is built on land the building owner does not own. For example, Madison Square Garden is built on land the building owner does not own and there has been talk of possibly moving the Gardens in the future.
A possible scenario for ambitious developers is to buy out the land leases for desirable properties and then put their own buildings on those properties. Of course, this would require the demolition of the existing property and possibly issues with tenants who do not want to relocate. But if it comes down to choosing between rehabilitating a warehouse in a part of Manhattan that is not as desirable as a plot of land where there is a land lease situation, developers may have to choose the land lease.
The deal that allowed American settlers to buy Manhattan Island from the Native Americans is sometimes referred to, in both positive and negative connotations, as one of the best real estate deals in history. However, as time goes by, Manhattan’s property value, which we wrote about here, could wind up reaching levels that most people would have never expected before.
It is getting close to the time when there will be no available open plots of land for development in Manhattan. The cemeteries are full, and many of the formerly abandoned properties have been redeveloped. The problem is that the only kind of new construction Manhattan developers can do anymore is building high-income luxury apartments. As more stockbrokers, food service workers, and maintenance personnel start working in Manhattan, there will be a growing need for new residential housing that the average resident can afford.
The problems will only grow as Manhattan developers must keep building luxury apartments to show a profit, but the population of the island itself needs more housing priced in the range of the average working American. Something is going to have to give somewhere in the Manhattan land wars, and many experts are predicting that we won’t have to wait much longer to see what happens. While North Manhattan gets rezoned for affordable housing, the rest of the city residents are wondering if there is more rezoning in Manhattan’s future.