Industrial, Apartment, SFR Developers Fuel Hot Land Sales Market
April 25, 2022 | Beth Mattson-Tieg | WealthManagement.com
The past year was a record year for land sales volume and price appreciation in many markets, according to Cushman & Wakefield.
Dirt is typically not a sexy part of the commercial real estate sales market. The sector is often overshadowed by news of trophy asset deals and the latest record-setting cap rates. However, land sales have been on a tear over the last year with pricing on prime, shovel-ready sites that have risen as much as 50, 100 or even more than 200 percent in some cases.
The past year “was a record year for both land sales volume and price appreciation in many markets around the country,” notes Andy Slowik, a managing director and co-lead of the land advisory group at commercial real estate services firm Cushman & Wakefield. Despite higher interest rates, the land market has maintained momentum in the first half of 2022 as demand continues to outpace supply, he adds.
Especially for owners of entitled land with infrastructure in place, it’s a very good time to be a seller. For example, Cushman & Wakefield worked on the sale of a 243-acre industrial parcel in Central Florida that was acquired in December 2019 for $15.5 million. The parcel had some challenges that the buyer was willing to take on to create an entitled site. After resolving the issues, the owner sold the same site to an industrial developer last November for $60 million.
The past year “was an incredibly strong year for land sales across the board in a majority of our markets in the U.S.,” says Davis Adams, a managing director in the Houston office of JLL Capital Markets, Americas, and a co-leader of the firm’s land group. Land sales go hand in hand with development, and what’s driving the bulk of land sales are industrial, multifamily and single-family construction projects. “Those three asset classes are where the majority of the volume is in land sales across the U.S.,” notes Adams.
According to JLL’s 2022 U.S. Construction Outlook, commercial and multifamily construction starts nationally increased 16 percent in 2021, but remain below 2019 levels. Larger metro areas have been slower to rebound as demand for construction shifts away from denser urban areas to the suburbs and secondary and tertiary markets. That suggests that there could be more runway ahead if geographic markets and sectors that have lagged in the recovery, such as retail, office and hotels, gain traction.
