Land is in Demand—Consideration for raw land investing
Land & Industrial
By Genieve Posen, NAI Maestas & Ward Land and Industrial Advisor
On both a local and national scale there has been an increase in land sales. This past year has demonstrated that investors are rediscovering and regaining confidence in land real estate which resulted in an impressive year for land sales. It is also projected among the industry leaders that land sales will continue to perform strongly over the next year to 18 months.
As it relates to residential development, much of this demand for land was brought on by the effects of COVID-19. People were looking to invest in land outside the city where they have an opportunity to be near open spaces, enjoy privacy and build a home that can comfortably support a live-work situation. This movement of buyers coming from urban or suburban areas spurred on the need for more retail services, thus an uptick in land sales and ground leases of appropriately-zoned land for quick-serve restaurants and convenience stores. The pandemic also accelerated the demand for industrial properties, and with such limited supply in the Albuquerque Metro area, buyers are turning to appropriately-zoned land for construction.
Land development makes for a complex investment—however, if done correctly, the results can yield significant profit. To be clear, land development is defined as the process of buying land for the purpose of developing/building on it or conserving it for long-term appreciation. Mark Twain famously said, “Buy land, they’re not making it anymore.” This quote supports the idea that land is a limited resource, making it an asset that can gain considerable value. Other benefits of developing land is that the purchase price and holding costs are lower than other asset classes, and the appreciation potential can remain high even with less than desirable market conditions.
When it comes to developing raw land, there are several site factors that an investor needs to evaluate prior to purchasing:
- Availability of dry and wet utilities
- Lot configuration
Although a property may check all the boxes on a site evaluation, the most important factor of raw land investing is understanding its economic feasibility. Does the opportunity “pencil-in” for the developer and provide the desired return? While the figures will be an estimate, understanding the viability of the project, including estimated costs, revenues and overall returns will guide an investor’s success and lessen their risk on the venture.
Anyone interested in investing in land should have a strong understanding of market cycles and real-time market activity to make the strongest strategic moves. Today’s top opportunities in raw land are unlimited and can be driven by creativity and good decision making. Follow that up with the assembly of a strong professional team that understands the land market, government development processes, site design, construction and marketing, and you have the key elements to a successful development.
Contact me today to help you navigate your next land investment move.
In addition to Genieve’s professional insights, she is known for her ability to connect people to the right location. With a background in commercial site planning, master planning and urban development, she brings vision to value for her clients.
For more information on land development opportunities, industrial/warehouse space and other asset classes, contact Genieve Posen.
NAI SunVista is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.