Along with replacement costs, it is important to understand how the new Zoning Code affects the potential project or investment. Projects that are in high-income locations and distant (defined by the Zoning Code) from a Metro or Traffic Corridor and were approved under the old Zoning Code have a significant advantage going forward. These projects will face lower competition because often it is difficult to build in those regions at a scale that allows a developer to make a significant profit. New supply is limited in regions that are far from the central corridors of public transportation but still in top-tier locations.
If the projects are close to a metro or bus corridor, developers can build to a larger construction coefficient and can add mixed-use with no reduction in gross residential saleable area. Developers purchasing new land sites can build similar projects in these areas; however, due to the restricted supply of profitable land for developers to build on, the pricing in the corridors should increase due the limited supply of land and increase entrants’ cost basis and limit their competitiveness on pricing.
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