Land speculation in Manhattan began in 1626 when Peter Minuit bought the island for 60 guilders, or $24, from the Canarsee Indians. The tradition is alive today, with local and international investors buying up pieces of the most valuable land in the world — and paying record prices for them.

The executive director and a principal at Eastern Consolidated, Alan Miller, said that after a first half of 2007 during which he witnessed “a spate of land sales at prices I never thought achievable, I have finally given in to the fact that we do exist on an island in Manhattan and that it really rings true that ‘they ain’t making any more of it.’

“The insatiable demand to acquire any parcel in Manhattan for development has been supported by worldwide attention from many different first-time purchasers from abroad,” he went on. “Firms from Dubai, Spain, Ireland, Great Britain, Italy, Israel, China, and numerous other countries have come to this great city of ours and show confidence that this local melting pot continues to be the best market in the world to invest in.”

As a result, prime locations zoned for residential condominium developments have been selling at record prices. As I reported last month, Macklowe Properties bought the building at 823 United Nations Plaza, which was then owned by the Anti-Defamation League, for about $100 million in October 2005. With Dag Hammarskjold Plaza to the north, it comprises the entire blockfront between 46th and 47th streets on the west side of First Avenue. According to the trade, the entire 242,000-square-foot development site, which includes 421-a tax abatement and inclusionary bonus air rights, is in contract to be sold for more than $160 million, or about $660 a buildable square-foot.

Around the corner, Eastern Consolidated is marketing a development site at 313-317 E. 46th St., between First and Second avenues, that comes with approved plans for a 90,000-square-foot building. It is commanding bids at or above $40 million, or $445 a buildable square foot.

Farther uptown, a 105,000-square-foot residential condominium development site on East 85th Street and Second Avenue, which is vacant and comes with 421-a tax certificates as well as inclusionary bonus air rights, sold for about $430 a square-foot. A nearby site on the corner of Third Avenue and East 84th Street recently traded for a substantially higher price, one north of $500 a buildable square foot.

Even farther north, the booming hospitality industry is also boosting prices to near-record levels: According to sources in the trade, a development site in central Harlem slated for a boutique hotel is expected to sell for close to $180 a square foot.

Back in Midtown, a site west of Times Square is in contract for more than $445 a buildable square foot. A former residence hall in Midtown owned by a nonprofit recently traded for more than $400 a square foot.

Just south of Midtown, Mr. Miller told me several sales in West Chelsea have solidified its status as the hottest district for development. “Nearly every available parcel has been sold or is in the process of being traded,” he said.

A 125,000-square-foot site on West 27th Street that also fronts on West 28th Street between Tenth and Eleventh avenues went under contract for about $340 a buildable square foot. Another site on West 21st and West 22nd street, presently occupied by Time Warner Cable and zoned for commercial development only, will soon close at a price in excess of $50 million for less than 100,000 buildable square feet. Several blocks south, in another Chelsea deal in which the price exceeds $500 a square foot, a 300,000-square-foot blockfront development site will be sold for more than $150 million, according to Mr. Miller.

Downtown, Massey Knakal Realty Services is marketing a site at 130 Williams St., between John and Fulton streets. The 27–store building, with approximately 130,000 square feet of space, can be delivered vacant. The asking price is $59.95 million. Farther west, a prime development site on Greenwich Street is being marketed for sale for $140 million, or $316 a buildable square foot.

Outside of Manhattan, a number of prize development sites are also on the market. In downtown Brooklyn, Massey Knakal is marketing an opportunity at 300 Schermerhorn Street. The as-ofright buildable footage — the amount that can be built without undergoing public review — is about 83,000 square feet for a mixed-use development project, and 90,000 square feet for one with community space. The asking price is $12 million.

Also in Brooklyn, the Hudson Companies, developers of the “J” Condominium in DUMBO, last month purchased a site at 111 Third St. in Brooklyn’s Gowanus section for $7.775 million. The asof-right development property on the northwest corner of Third and Bond streets contains about 46,728 buildable square feet. It is walking distance from the planned Whole Foods market on Third Street and Third Avenue and sold for $166 a square foot. The developer plans to break ground for a luxury low-rise condominium development this summer.

A number of major retail, residential, and mixed-use developments are for sale in the Bronx. A prime retail development site at 5673 Broadway, on the southwest corner of 234th Street in Riverdale, is currently configured into seven retail stores and a parking lot. The property lies near Van Cortlandt Park, Manhattan College, and major transportation. The owner of the 49,000-squarefoot site is seeking offers of $22 million and the site can be delivered vacant.

In Queens, a vast amount of development is taking place in Flushing, the home of the Mets. In addition to the new stadium, Muss Development is building an 800,000-square-foot retail center with 1,100 residential units and a 2,500-car parking garage. Adjacent to this property, at the western end of 40th Road, is a site by the Van Wyck Expressway, west of College Point Boulevard. It is being marketed for sale for $49 million.

421-A CONCERNS HAVEN’T HURT PRICES

These record prices come after many industry leaders had expected land zoned for residential development to diminish in value due to proposed changes in Section 421-a of the Real Property Tax law, which has provided tax benefits for construction of new residential buildings

The 421-a program has been responsible for encouraging the construction of new housing since 1971. On December 28, 2006, Mayor Bloomberg signed the New York City Council’s Local Law No. 58 of 2005. The legislation contains extensive revisions to the 421-a tax incentive program and becomes effective later this year, coinciding with the extension of the state authority for the program (if, as is likely, the Legislature chooses to extend it beyond December 21, 2007).

Today, a bill which has been agreed by Assembly leaders will be brought to the floor of both houses and is expected to pass and be approved by Governor Spitzer. The plan will expand the exclusion zone, which dictates the how many affordable units must be included for new developments into twelve neighborhoods in Brooklyn, Queens, and Upper Manhattan. One of the major benefits of the bill for developers of new housing is an extension of the current 421-a program, through June 2008.

“The effects of the revisions to the 421-a program on the land market have, amazingly, not been reflected yet in land pricing,” the chairman of Massey Knakal, Robert Knakal, said. “These revisions have a tangible effect on the monthly payments residents and tenants will face that should be reflected in the land value. We have seen prices, at worst, hold, and, at best, continuing to escalate. This dynamic is reflective of the tremendous strength and depth of the consumer condominium market and the rental markets for apartments, offices, and hotel rooms.”

The president of Metropolitan Valuation Services, Steve Schleider, concurred with Mr. Knakal: “The recent wave of core Manhattan land sales for condominium development do not seem to have been bothered by the pending 421-a rule changes. Buyers are simply acquiring building plans and other predevelopment attributes to allow for existing program benefits by meeting the December 2007 foundation deadline.”

Even considering the tightness in the capital market that has required investors to provide more equity and less debt, I have to agree with Mr. Knakal’s statement, particularly when he points out that “activity on all our development sites is tremendous with dozens of bids on each of them. The buyers are a mixed bag of established developers, building owners who have not developed in the past and developers who are new to the New York market.”

In spite of everything, New York City real estate is selling at a record pace.

Mr. Stoler, a contributing editor of The New York Sun, is a senior principal at a real estate investment fund and a television broadcaster. He can be reached at mstoler@newyorkrealestatetv.com.