Quote:
Originally Posted by PKDickman
^People don't build parking lots in River North because it is highly lucrative; they do it because it is lucrative enough.
The real problem is that the price of land per buildable foot in downtown Chicago is so low compared to New York, or Boston, or San Francisco, that it is a sound investment strategy to landbank it until the market catches up.
As glad as I am to see the parking go, these lots are zoned DX7 and DX12. A two story store front is so far below their highest and best use, that there can be no doubt that this is just another way to cover the bills until the property values change the equation.
Given the useful life of the building and an income that covers the cap rate this guy bought himself 20 years to wait it out. The parking lot guy took a hard look at selling every year when it was time to sealcoat..
|
The comparison to other cities' land costs makes little sense (unless you think that for some reason Chicago's land costs should be much closer to those cities, and the land here has somehow been chronically underpriced, relative to the coastal gateways, by the market...... but of course that's quite likely not the case, as there are entirely very valid reasons why Chicago's land prices should be well below those of the much higher supply-constrained coastal markets..........you see this kind of absolutely crazy rationale by investors -who clearly don't comprehend the dynamics - sometimes when they prioritize investing in a city because you can buy a building at xyz per sq ft in city a, which is such a bargain compared to the 3xyz per sq ft you'd have to pay in cities b, c and d. This strategy - based soley on this rationale - is truly one for an idiot's idiot - and I've found there's never an acute shortage of these guys out there).
And sure, in some cases, investors may make out quite alright with cyclical landbanking plays - but they may also make out quite alright developing their otherwise income-producing surface lots into high-rises (which many have and will continue) this cycle.......
Prev
Linear Mode
