I want to differentiate between HIGHRISE and typical 3-4 story, wood and stucco projects. If I could offer $300,000 condos in a downtown HIGHRISE, I am fairly certain that I could sell every one of them in a very short amount of time. The reality is that I would need to sell them for about $650 psf ($650,000 for a 1,000 sf unit)to make a profit right now. It is true that the DEBT and EQUITY markets are not convinced that the pool of buyers at these levels is very deep and therefore, they have curbed some of their lending and investment.
In a HIGHRISE, the land component is an expensive but minor factor. Currently, a 240 unit, 30 story tower on 60,000 sf in downtown San Diego would cost nearly $200 million including financing costs, design, permits, etc. The land accounts for 10% to 15% of the cost of the project.
In a single family detached home, land costs are approaching 55% of the finished cost of the house.
