Broader Concerns

While the downfall of a decadent condo boom tends to hog the spotlight, all corners of the New York real estate market are facing challenges. Apartment landlords are offering concessions to sign tenants as a slew of new units become available, while a glut of hotel construction is dragging down room rates. Office owners are contending with a shrinking financial-services industry and increased competition from new towers being erected downtown and at the sprawling Hudson Yards complex. All of these factors filter into land values.

There is “a lot that needs to be played out before we can really determine where prices are going to be in a year or two,” said Shimon Shkury, president of Ariel Property. “We are in the beginning stages.”

The average price paid for a square foot of land to build on in Manhattan was $694 as of June 30 -- slightly higher than the 2015 average, according to Cushman & Wakefield. But that figure is skewed both by deals that were agreed to last year and by the paucity of recent data points, Knakal said.

Indicators such as the drop in land deals, deteriorating fundamentals and a plateau in real estate values suggest that a downturn in the Manhattan property market is already under way, Knakal said. Real estate weakness is being masked by low interest rates, a rising stock market and turmoil abroad, he said.

“Fear is a little more pervasive; people are being a little more cautious,” Knakal said. “The market is correcting.”

Varying Factors

Prices for land vary widely, depending on the neighborhoods and zoning, with developers at the most attractive sites paying twice the average, Shkury said. In one of the highest-profile deals, Ziel Feldman’s HFZ Capital Group paid $870 million for a full square block in Chelsea in May 2015. That price equates to about $1,138 per buildable square foot, making it among the most expensive development sites ever sold, Ariel Property’s data show.

HFZ is seeking to build smaller apartments, with prices starting at less than $4 million, Feldman said in an interview shortly after the land purchase closed. The developer is currently excavating and driving pilings at the site, according to Harriet Weintraub, a spokeswoman for HFZ. She declined to comment further on plans for the project.

Smaller sites for more modest uses are still attracting buyers, Shkury said. His firm recently negotiated a contract for a 14,860-square-foot (1,380-square-meter) lot at the corner of Lexington Avenue and 29th Street.