Development opportunities
I have a niche business. I’m a commercial real estate broker and development consultant in Northern and Central California. I specialize in acquiring land for developers and assisting them with getting their governmental approvals for their projects.The Market
I think that everyone will agree that the current market is a bit unique. Over my thirty-plus year career, I’ve seen many up and down cycles, but never one like the one we’re currently in. This situation seems to have confused many people in both the commercial and residential development industry, including developers of retail projects, retailers, and homebuilders.
There are many opportunities out there. Prices have come down and sellers are, for the most part, more negotiable and flexible than they have been in a long time. The “conventional wisdom” would be that developers would be taking advantage of these opportunities and be aggressively tying up property for the future. But, no, for the most part, they are sitting on their hands.
Granted, financing is more difficult to obtain, and there is concern about whether the “bottom” has been reached, but the housing market, especially in areas with high barriers of entry, is recovering, mostly due to more people being able to afford to buy homes.
For the most part, the development cycle in my market is longer than in most parts of the country. This is a result of several factors- limited supplies of developable land, onerous regulations, and community activists who question everything. I’m not saying that any of that is necessarily bad, but it is a fact of life. As a result, a new project, whether residential or commercial, takes two or three years from the point where the developer has optioned the land to the place in time when all permits have been received and the project is ready to start construction. Then, it takes between six and twelve months before the shopping center is ready to open or the housing tract is ready for sales.
Even the most pessimistic economists and pundits believe that the economy will turn around within that timeframe. So, why aren’t developers taking advantage of this opportunity? It would seem that they have a relatively unique opening to obtain land at better prices and to be able to get their projects through the approval process while the governmental entities aren’t overburdened with work. In addition, they can design and entitle their projects without the customary time pressures.
So, why aren’t they?
Granted, financing is more difficult to obtain, and there is concern about whether the “bottom” has been reached, but the housing market, especially in areas with high barriers of entry, is recovering, mostly due to more people being able to afford to buy homes.
For the most part, the development cycle in my market is longer than in most parts of the country. This is a result of several factors- limited supplies of developable land, onerous regulations, and community activists who question everything. I’m not saying that any of that is necessarily bad, but it is a fact of life. As a result, a new project, whether residential or commercial, takes two or three years from the point where the developer has optioned the land to the place in time when all permits have been received and the project is ready to start construction. Then, it takes between six and twelve months before the shopping center is ready to open or the housing tract is ready for sales.
Even the most pessimistic economists and pundits believe that the economy will turn around within that timeframe. So, why aren’t developers taking advantage of this opportunity? It would seem that they have a relatively unique opening to obtain land at better prices and to be able to get their projects through the approval process while the governmental entities aren’t overburdened with work. In addition, they can design and entitle their projects without the customary time pressures.
So, why aren’t they?
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