The development of new apartment projects continues at a robust pace throughout Manhattan.

Development has revitalized the Financial District, a market that few experts expected to rebound so quickly after September 11, and is bringing high quality housing to neighborhoods where little if any existed before, such as Fifth Avenue in the mid-30s.

Within the past year, I have witnessed a transformation in the market from rental apartment development to for-sale condominium projects.

The views expressed below are based upon the substantial levels of construction financing I have arranged for various high profile condominium projects.

Speaking to the strength of the market, I have arranged, or am working on, more than $1 billion of financing for condominium projects, with discussions now in progress on several new condominium projects with major developers to provide similar services.

Condominium construction loans generally also require the arrangement of a bridge loan to assist in the acquisition of the property.

As luxury high-rise housing development in New York City continues briskly across the board, the construction of new rental apartments--even several of those in the planning stages--has in many cases given way to for-sale condominium projects.

The reason for the recent switch from rental to condominium development is the rapid and dramatic escalation in land and construction costs. At present, the construction of high-rise, luxury rental apartments is not in many cases economically feasible, despite increased consumer demand and rapidly rising rents.

Consider these facts: There has been a 25% increase in construction costs alone in the last six months.

Land costs in many parts of Manhattan have more than doubled in the past year to in excess of $300 per FAR square foot. Developers are eager to provide new rental apartments, and they are very confident of their ability to lease them, but construction and land costs are forcing these developers to re-think commencing new rental projects.

On the other hand, the average sales price of a residential condominium apartment in Manhattan now exceeds $1 million, more than covering rapidly escalating land and construction prices. This is indicative of a shortage in the supply of condominium units. Higher sales proceeds tip the balance from rental to condominium development, and allow developers to realize a higher, more attractive return on their land investment.

But the market is cyclical. Since there are fewer rental projects being developed, and demand for such projects continues at a very high level, existing rental properties are now achieving higher rental rates due to a shortfall in the supply of such apartments. Rents at many locations are approaching $60 per square foot and are expected to go higher in the next 12 to 24 months.

According to the latest data, only approximately 2,400 rental units were delivered to the Manhattan marketplace last year, compared to an annual average of more than 3,400 units over the previous five years. Also according to the research firm Reis Inc., average asking rents at the end of last year were $2,287 per unit, up 5.6% from the end of 2003. Our own data at The Singer & Bassuk Organization shows that rents are up 20% over the past two years alone. At these higher levels, I believe that rental projects will once again become an increasingly attractive alternative for developers, especially 80/20 rental projects, which continue to constitute an important part of our business