The Federal Reserve Bank of New York today released The Price of Land in the New York Metropolitan Area, the latest article in its series Second District Highlights.
Authors Andrew Haughwout, James Orr and David Bedoll find that the price of raw, or unimproved, land in New York is very high. They estimate that the price of an acre of vacant land near the Empire State Building, their assumed center of the metropolitan area, rose sharply over their study period to more than $90 million in mid-2006.
The authors rely on a unique data set to calculate and analyze the price of vacant land in the New York metro area between 1999 and mid-2006. The sparseness of data on vacant land sales typically makes the land’s value difficult to measure accurately. However, the detailed data set allows the authors to isolate those real estate transactions that involve vacant parcels of land or parcels with structures that the buyer plans on removing, which in turn enables them to gauge prices more directly than studies using other methods.
The study also finds that proximity to the center of the metro area is extremely valuable and firms and households will pay a large premium to locate in or near Midtown Manhattan. A relatively sharp decline in land prices was observed with distance from the Empire State Building; an upward movement in prices over time was also seen.
The rising price of vacant land, according to Haughwout, Orr and Bedoll, is an indicator of the strength of the New York metro area’s economy and the increasing value of the productivity and amenities of a location in the region. The area’s desirability for all types of activities began to increase sharply in mid-2002, as the region emerged from a recession and the disruptions of the September 11 attack on the World Trade Center.
The escalation of the region’s land prices also points to an increase in the perceived value of owning vacant parcels as potential building sites to meet future property demands. The value of this option may be particularly high in New York City, as witnessed by the many ongoing conversions of existing property throughout the city.
Andrew Haughwout and James Orr are assistant vice presidents in the Microeconomic and Regional Studies Function of the Research and Statistics Group; David Bedoll was a research associate in the Function when the data set supporting the article was created.