land development INTERVIEW
Hot
Land Market as as Houston has ever Seen It! Written by Janis Arnold Ryan Sweeney, a Houston land broker with NewQuest Properties, has been in the business for nine years. Ryan entered the land market at a time when Houston was experiencing tremendous growth in the single-family residential market. Ryan has worked on the disposition of commercial assets on behalf of NewQuest Properties for a number of different commercial uses as well as marketing and representing thirdparty landowners and portfolio landowners on the disposition of those assets. In the last two years, Sweeney has been involved in the sale of land for industrial, hospitality, senior living, medical, multi-family, retail and single-family development. At the present time, the land market is as hot as Sweeney has ever seen it. Single-family developers and homebuilders are purchasing large and small acreage tracts as quickly as they become available, on and off the market. Currently in the greater Houston area, if there’s a land tract that’s over 25 acres in a market with good school districts, utilities available, and reasonable infrastructure that can be engineered to develop the majority of the site, it’s either been looked at, bought, or is currently under contract. The school districts seeing the most demand include Ft. Bend County, Katy, Spring Branch, Spring, Cypress-Fairbanks, The Woodlands, and Pearland. Additionally, all inner-loop tracts that have configurations able to accommodate high-end, highdensity development are in play as well. Sweeney suspects that the Houston area land market could plateau in the next year as multi-family and office developers reach the maximum that they can pay for dirt based on the rents that they feel are achievable. 95% of the land transactions that Sweeney has handled in the past 18 months have been cash deals, so financing on the land acquisition is not evident prior to closing. Today’s buyer is sophisticated and has the tools and resources necessary to be able to evaluate a tract and make sound decisions, engineering wise, based upon their pro forma. All properties have to address utility availability, engineering and detention aspects of the site. In some cases, utility capacity to serve the tract, regardless of being in a district or not, is not readily apparent. In those cases, additional time and expense are needed to develop and go through the procedures of expanding any type of water plant or storm sewer plant. Developers today are taking the initiative to provide the amenities of a small city: nearby grocery, retail, medical, office, and small business workplaces
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designed to reduce commute time and add to the tax base of the greater Houston metro areas. One caution for land owners is that, as available properties are evaluated for development acquisition, all land is not created equal. In today’s market, the word is definitely out that prices have gone up, and that a plateau may be imminent, but no one is exactly sure how to interpret land value. Sometimes a property’s characteristics are such that it can’t be easily duplicated and thus will justify top dollar; however, brokers need to be able to recognize and report that not all land tracts are justified to have the same rapid value appreciation. A property that is in the right location, and has the infrastructure already in place is likely already sold. Properties that lack some of the key characteristics, other than location, can be developed, but feasibility studies alone can take months which adds to the bottom line and needs to be accounted for in the purchase price. And today’s buyers are much more sophisticated. They can tell the difference between raw land and shovel ready land.
Currently in the Greater Houston area, if there’s a land tract that’s over 25 acres in a market with good school districts, utilities available, and reasonable infrastructure that can be engineered to develop the majority of the site, it’s either been looked at, bought, or is currently under contract.