Recent trends seem to reflect a growing trend of real estate developers becoming more like redevelopers. New and ground-up construction is becoming an ever bigger challenge as this category of financing has gotten more difficult as supply chain issues and rising material costs are causing issues. New York is a high-end and extreme example, but there is a point to be made. Research confirms that more than 8,300 office buildings were in plans for conversion to residential in the year 2025 in the New York City metro area. Meanwhile, as the below linked article confirms, the cost of a new “tall building” build from the ground up has increased by 30% since the pandemic.
Converting an office building to residential is a contractor project which can have a timeline, deadlines, and clear responsibilities. There are fewer permits and procedures. Land in busy downtown areas of large municipalities is considered extremely valuable, often making a small build not feasible due to the land value. Now the cost of building on that valuable land is reducing profit potential and, consequently, incentives for a developer to pursue.
It is another example of how real estate research based on other factors besides the numbers can significantly impact potential transactions. Brokers, lenders, and contractors also need to be aware of these trends and considerations. Knowing the best possible path to take comes from analyzing every possibility and not from a decision made in 30 seconds because of “easier” resources or access. Doing thorough homework is the way to be “first in” on a great real estate opportunity. My team and I make it possible for you and your team to have a fractional research team to find your next deals while you keep your same schedule.