Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/536709
July | August | 2015 CCIM.com With more capital coming into the market than at any time since the housing market implosion more than six years ago, land investment activity is once again on solid ground and expanding in many U.S. markets. Employment and population growth, coupled with eco- nomic expansion and an improving housing market, are coming together to make land more attractive to investors. Demand for land is largely driven by end users, particu- larly within the housing sector of growing markets. Taken together, this activity has been the single most important factor for inf uencing land prices. Low interest rates are also fueling improvements in the housing industry and providing more opportunities for land investment. Available capital allows developers to build, businesses to expand, and homebuyers to purchase. Further contributing to the growth, home mortgage inter- est rates are predicted to remain low in 2015, according to Housingeconomics.com from the National Association of Home Builders. T e publication cites interest rates on f xed- rate mortgages at 3.86 percent and 2.58 percent on adjustable rate loans as of March. Stratford Land's strategy is to buy land in the development path of Sun Belt markets where the economies are coming back. A few market areas that are particularly strong now are Texas metro areas, such as Austin, Dallas, and San Anto- nio; Atlanta; Orlando, Fla.; and portions of North and South Carolina. In these markets, most of the demand is for well-located land that is ready or near-ready for residential development. Lots for single-family or multifamily sites are in highest demand when they are zoned and already have roads, sewer, electric, and other infrastructure in place. Builders of en f nd these properties to be in short supply as home construction increases. Texas Markets T roughout the economic downturn, the Texas economy remained stronger than most of the United States, and all of the state's major markets of ered compelling opportu- nities for land investment. While other markets suf ered, the diversif ed economy and availability of jobs allowed for continued growth in Texas. With strong education and employment, not to mention the music scene, the Austin metropolitan area is one of the fast- est-growing markets in Texas and the U.S., with a population growth expected to explode by as much as 55 percent between 2010 and 2030, according to an Urban Institute report. Austin jobs increased at an annualized rate of 4.5 percent — more than 3 percentage points faster than the state — as reported in an April report from the Federal Reserve Bank of Dallas. Increased housing demand has pushed inventories down to a 2.5-month supply throughout the f rst two months of 2015, spurring home construction. Moreover, housing per- mits in Austin are up 27 percent year over year, according to the report. T e Dallas-Fort Worth area is another example of a grow- ing market with good opportunities for land investors. T e DFW area created jobs at a 3.4 percent pace in 2014 — the fastest among major Texas metropolitan areas, according to the Federal Reserve Bank of Dallas, which says the area is on track to continue its strong job growth. As in many markets, corporate relocations account for large job growth. Toyota Motor Co. will begin relocating as many as 4,000 employees to the Dallas market this summer as the company moves its headquarters to the area. Addition- ally, Boston-based Liberty Mutual recently announced that it will also relocate to the DFW area, bringing as many as 5,000 workers. Each company will relocate to Plano, Texas, a Dallas suburb, which bodes well for continued economic growth in the area. According to the Federal Reserve Bank, DFW home inventories will remain tight, with 1.9 months of inven- tory in Dallas and 2.1 months in Fort Worth. Strong demand and a limited supply have continued to spur residential construction, fueling demand for well- located land. Tourist city San Antonio continues to draw visi- tors from around the world, which helps to keep its economy humming, but the area is also experiencing strong job growth that is fueling population expan- sion. San Antonio jobs grew at an annualized rate of 3.6 percent throughout f rst quarter 2015, with growth across all industries. T e strongest growth, however, was in construction, insurance, manufacturing, and government jobs, according to data from the Federal Reserve Bank. Housing inventories in the San Antonio market are at a 3.7 month supply. LAND INDEX U.S. Average Land Price Index 2.5 2.0 1.5 1.0 0.5 0.0 2003.4 2004.4 2005.4 2006.4 2007.4 2008.4 2009.4 2010.4 2011.4 2012.4 2013.4 23 Source: Lincoln Institute