Slow Development Means Opportunities for Landowners and Buyers
Residential and commercial developments have slowed to a crawl in recent years, but the slumbering market is presenting some valuable opportunities for both potential land buyers and current landowners.
Guests on this week’s “Commercial Real Estate Show” participated in a wide-ranging discussion about land and development trends. Topics included record-low land prices, the best land-acquisition opportunities, the eagerness of local governments to rezone properties for development, and the health of the residential housing market.
“Land is an incredible buy right now,” said Perry Hayes, an associate broker at Bull Realty Inc. “There are some tremendous deals out there. This is one of the best times to take advantage of some of the best prices we’ve ever seen.”
“Investing in land is a little bit like the stock market,” added show host Michael Bull, president and founder of Bull Realty. “You don’t have to buy at the absolute bottom to make nice profits, and I think everyone would agree we’re close to the bottom in almost all markets, so it’s a good time to buy.”
Hayes noted that infill residential land and land along interstate corridors are land types that should be in demand in the future and would therefore constitute smart buys.
Demand for land for apartments has heated up, but zoning attorney Woody Galloway, a principal with The Galloway Law Group, said he’s also recently seen increased demand for land from the office and industrial sectors.
A Chance to Reposition
While the record low land prices are presenting good opportunities for potential buyers, the snail’s pace of development means that local governments are more willing than ever to work with landowners to rezone properties for future use.
“It’s much to [cities’ and counties’] advantage to make the process easier,” Galloway said. “You’ve got many different property owners who are deciding this is the time to reposition their properties to make them more marketable once the climate comes back.”
Zoning attorneys can provide a short due diligence on behalf of landowners to examine the feasibility of their rezoning request succeeding, Galloway added.
The Hits Just Keep on Coming
Meanwhile, the residential housing market continues to sputter along. Steve Palm, president of Smart Numbers, opened the show with an overview of the market and noted “prices in September and October reached new bottoms, unfortunately.”
High-growth Southeastern cities like Atlanta, Charlotte, N.C., and Orlando, Fla., have performed particularly poorly, Palm noted. He added that median home prices in Atlanta fell to 1993 levels this fall.
Palm did say that residential foreclosures will decline in 2012 – if only because there will be fewer homes to foreclose on – and predicted that smaller homes will be in demand in the future because Baby Boomers will want to downsize as they age and first-time homebuyers are likely to have less buying power.
He also said there could be a slight uptick in the value and sales of residential land in 2012 if people sense that next year’s elections will result in “big change in Washington.”
Lenders to Be Aggressive
The show guests also predicted that lenders will be more aggressive in 2012 about selling land. “Lenders are being forced by regulatory agencies like the FDIC to write down their REOs,” Hayes explained. “As lenders hold on to these properties for longer periods of time, their appraisals keep coming down. It’s going to cause them to be much more aggressive in getting these non-performing assets off their books.”
“[Lenders] have always been aggressive,” Palm added. “Let’s just hope we have more demand so that they can be more able to be aggressive.”
Other topics included land appraisals, tips for making offers on land and the prices of construction.
To listen to the complete show, click this link.
The next “Commercial Real Estate Show” airs Dec. 10 and will examine tax strategies for commercial real estate. It will be available for download at www.commercialrealestateshow.com.
Michael Bull, CCIM
Show Host, Commercial Real Estate Show
President, Bull Realty, Inc
800-408-2855 ext 2001