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An acre in the mediocre parts of Palo Alto is ten million, an acre near anywhere it makes sense to put a 50+ storey building in SF is much closer to 100 million

An acre in the mediocre parts of Palo Alto is ten million, an acre near anywhere it makes sense to put a 50+ storey building in SF is much closer to 100 million. Plus at most only about 2/3 of the floor plate is saleable square footage. So $300,000 of land cost per 2000 sq ft condo. Realtor fees, taxes, surcharges, local improvement fees, etc., and everything else legally mandated is another $250k on top. Builder overhead, insurance, interest on the bank loan, a margin for delays, etc., is at least another $200k. So even if construction cost was zero and the zoning process flawlessly smooth, the builder would need to charge at least $750k per unit to break even. Even if land cost was zero as well, it would still be at least $450k per unit to break even.

AnthonyMouse 3y ago
> in SF is much closer to 100 million. The cost of land in SF is less than $10 million/acre: https://www.statista.com/statistics/1376626/land-price-in-selected-cities-in-the-us/ https://www.statista.com/statistics/1376626/land-price-in-se... > an acre near anywhere it makes sense to put a 50+ storey building What is "makes sense"? Are condo units available in Palo Alto for anywhere near $20,000? It makes sense anywhere that the cost of land is high. > Plus at most only about 2/3 of the floor plate is saleable square footage. So actually more than the 1/2 used in the numbers above. > Realtor fees, taxes, surcharges, local improvement fees, etc., and everything else legally mandated is another $250k on top. Builder overhead, insurance, interest on the bank loan, a margin for delays, etc., is at least another $200k. Half of these aren't part of the list price and the other half are just other words for "zoning and construction costs". > Even if land cost was zero as well, it would still be at least $450k per unit to break even. You now seem to be arguing that the land isn't the primary cost.
- MichaelZuo 3y ago
  Are you confusing me with someone else? I never said land was the ‘primary cost’? If your confused about the terminology, $300,000 is a smaller number than $450k. “Saleable square footage” means net of elevator shafts, hallways, etc….
  - AnthonyMouse 3y ago
    > Are you confusing me with someone else? I never said land was the ‘primary cost’? The premise of the post you replied to is that land isn't the primary cost. For a building that puts 500 units on an acre, the cost attributable to land is only $20,000/unit even when the land is $10 million/acre. You replied trying to add in construction costs and regulatory requirements, which was the point -- that's where most of the cost is, because regulations make construction bureaucratic and labor-intensive, where they don't prohibit it outright. > “Saleable square footage” means net of elevator shafts, hallways, etc…. Which is why I only allocated half of the footprint of the lot to livable area to begin with. If you could allocate the entire acre of footprint to living space, one acre of land could have more than 20 units of 2000 sq ft per floor and a 50 story building would have 1000+ units instead of 500+.
    - MichaelZuo 3y ago
      Please carefully reread the first comment, these figures are already assuming a perfectly smooth zoning process with no setbacks or roadbumps whatsoever. In the real world it is probably going to be a lot more complex as you mentioned.
      - AnthonyMouse 3y ago
        Paying $100M/acre for land would only be the case in the most expensive parts of the city, but there is nothing (outside of zoning) requiring you use the most expensive land, and most of that land already has a tall building on it which doesn't make for an ideal site when you want to build a new one. There exist properties for sale in San Francisco with more than an acre of land that cost less than $10M, and indeed the average cost of land is less than $10M/acre. Your method of calculating costs is also flawed. Things like loan interest, taxes and realtor fees are a percentage of the other costs, not a fixed amount. If construction and regulatory costs were lower then you could take out a smaller loan and pay less interest etc. The dominant costs here are the premium on sites zoned for tall buildings, which is the cost of zoning rather then cost of land and could be alleviated with the stroke of a pen, and construction costs which are themselves significantly higher than necessary as a result of regulatory requirements.

AnthonyMouse 3y ago

> in SF is much closer to 100 million. The cost of land in SF is less than $10 million/acre: https://www.statista.com/statistics/1376626/land-price-in-selected-cities-in-the-us/ https://www.statista.com/statistics/1376626/land-price-in-se... > an acre near anywhere it makes sense to put a 50+ storey building What is "makes sense"? Are condo units available in Palo Alto for anywhere near $20,000? It makes sense anywhere that the cost of land is high. > Plus at most only about 2/3 of the floor plate is saleable square footage. So actually more than the 1/2 used in the numbers above. > Realtor fees, taxes, surcharges, local improvement fees, etc., and everything else legally mandated is another $250k on top. Builder overhead, insurance, interest on the bank loan, a margin for delays, etc., is at least another $200k. Half of these aren't part of the list price and the other half are just other words for "zoning and construction costs". > Even if land cost was zero as well, it would still be at least $450k per unit to break even. You now seem to be arguing that the land isn't the primary cost.

MichaelZuo 3y ago
Are you confusing me with someone else? I never said land was the ‘primary cost’? If your confused about the terminology, $300,000 is a smaller number than $450k. “Saleable square footage” means net of elevator shafts, hallways, etc….
- AnthonyMouse 3y ago
  > Are you confusing me with someone else? I never said land was the ‘primary cost’? The premise of the post you replied to is that land isn't the primary cost. For a building that puts 500 units on an acre, the cost attributable to land is only $20,000/unit even when the land is $10 million/acre. You replied trying to add in construction costs and regulatory requirements, which was the point -- that's where most of the cost is, because regulations make construction bureaucratic and labor-intensive, where they don't prohibit it outright. > “Saleable square footage” means net of elevator shafts, hallways, etc…. Which is why I only allocated half of the footprint of the lot to livable area to begin with. If you could allocate the entire acre of footprint to living space, one acre of land could have more than 20 units of 2000 sq ft per floor and a 50 story building would have 1000+ units instead of 500+.
  - MichaelZuo 3y ago
    Please carefully reread the first comment, these figures are already assuming a perfectly smooth zoning process with no setbacks or roadbumps whatsoever. In the real world it is probably going to be a lot more complex as you mentioned.
    - AnthonyMouse 3y ago
      Paying $100M/acre for land would only be the case in the most expensive parts of the city, but there is nothing (outside of zoning) requiring you use the most expensive land, and most of that land already has a tall building on it which doesn't make for an ideal site when you want to build a new one. There exist properties for sale in San Francisco with more than an acre of land that cost less than $10M, and indeed the average cost of land is less than $10M/acre. Your method of calculating costs is also flawed. Things like loan interest, taxes and realtor fees are a percentage of the other costs, not a fixed amount. If construction and regulatory costs were lower then you could take out a smaller loan and pay less interest etc. The dominant costs here are the premium on sites zoned for tall buildings, which is the cost of zoning rather then cost of land and could be alleviated with the stroke of a pen, and construction costs which are themselves significantly higher than necessary as a result of regulatory requirements.