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What Sold?
This past week, a small single-story retail building situated on a 25’ x 100’ lot sold for $10MM. Typically, pricing at this level for retail assets is reserved for markets like SoHo or the Upper East Side. In this case, however, a developer took a long-term approach to assembling a larger development site.
What Is the Zoning?
The site falls within the newly created MSMX zoning district, which allows for a 15.0 FAR as-of-right and up to an 18.0 FAR with MIH compliance. In theory, a developer could construct approximately 45,000 buildable square feet on this lot independently, although that would likely result in a very tall, inefficient, and expensive building.
The more likely strategy is what occurred here: pairing the property with the neighboring building that the developer acquired roughly 18 months ago, prior to the rezoning.
What Does This Mean for Land Values?
Across both acquisitions, the developer spent approximately $15.2MM to assemble a site with a footprint of roughly 52’ x 100’. Under the current zoning, the combined site allows for approximately 93,384 buildable square feet, resulting in a land basis of roughly $162 per buildable square foot.
While this pricing is likely still below current post-rezoning land values, the developer benefited from taking an early position before the rezoning was approved, acquiring the first component of the assemblage for just $5.2MM, or approximately $106/BSF.
Who Won — and Who Lost?
The clear winner is the owner who waited out the rezoning and was able to sell for $10MM, as well as the developer, who successfully assembled a large-scale development site at a basis estimated to be roughly 25% below current market pricing.
The loser, however, was the owner whose property sold out of bankruptcy for $5.2MM prior to the rezoning, before the market fully understood the value implications of the MSMX district.
What Does This Mean for Other Property Owners in the Area?
This transaction demonstrates that owners of narrow redevelopment sites or small retail buildings will likely need to coordinate with neighboring owners to maximize value. Individually, these sites may not support efficient large-scale development. Collectively, however, assemblages can command substantial premiums due to improved floorplate efficiency, increased buildable area, and enhanced redevelopment feasibility.