|By Bill Eshenbaugh ALC, CCIM and Ryan Sampson ALC, CCIM Eshenbaugh Land Company, LLC|
|“Under all is the land” -thus begins the National Association of Realtors Code of Ethics, written well over 100 years ago. All development, whether greenfield or urban redevelopment, starts with the land. |
Back in March 2020 when coronavirus swept in and our country shut down, our team went home, as did most of you. The phones and email traffic dried up, but interestingly, our scheduled closings did not. Many buyers did ask for 60 to 90-day extensions so they could sort out the impact of what we then referred to as Covid 19. To our surprise, by June 2020, builders were calling for land and telling us home sales were off the charts. By September, the apartment developers were once again actively searching for sites.
The 2021 market saw a boom quickly sweeping across any available parcels in Hillsborough County and a huge push inside the Urban Service area in Pasco County. At the beginning of 2021, builders were struggling with pricing of $15,000 per raw lot, but by mid-2021 were offering $25,000/undeveloped lot and we were able to contract three locations at over $30,000/undeveloped lot for future closings once rezoned and permitted.
As the year progressed, a wave swept over Hernando County too, snapping up most of the sites that were entitled, but not developed, back in the 2005 boom market. The same happened across northern Manatee County as virtually every major site across Moccasin Wallow Road from US 301 to US 41 was put under contract, followed by sites on Buckeye Road and east on SR 62 from US 301 in Parrish.
For our team, we had a record year in 2021 with 94 closings and $307,000,000 in sales, up from 72 sales and $143,000,000 in 2020. Land prices jumped tremendously in many cases. For example, we sold over 400 entitled but undeveloped lots in Hernando County in September 2020 for slightly over $4,000 per lot.
By April 2021, we were receiving offers on land for residential development located in the middle of Hernando at pricing over $20,000/lot for an impressive 500+% increase.
Multi-family is a top asset class and land for development is a high profile target.
Well-located apartment land has seemed to have almost doubled over the last 12 months or so in the Tampa MSA. This past December we closed a deal in Wiregrass Ranch on SR 56 in Pasco County, FL at $48,200 per unit. We have two others on SR 56 under contract at pricing north of $40,000/unit set to close in the next couple of months. Prior to the Wiregrass closing, the highest comp in Pasco we are aware of is $25,000/unit in 2021. Additionally, we sold a site on Moccasin Wallow Road in Manatee County in December at $25,000/unit; today that market likely is north of $35,000/unit based on what we are seeing in offers being submitted on actively marketed parcels in the same submarket. We have sites in Ruskin under contract at north of $30,000/unit. An apartment site at Lakewood Ranch is rumored to be fetching over $125,000/unit for the land, but that is a pad-ready surface parked site, which is very rare in higher-rent submarkets. We are inundated daily by new apartment developers looking to enter the market and the offers they are submitting are getting more and more aggressive every week.
We have recently launched four new apartment sites at the first of the year with call for offer days in the next 30 days or so. Submarkets include Bradenton, North Port, Wildwood and Punta Gorda. If you have any interest in one of those sites or a zoned apartment site you wish to sell, don’t hesitate to reach out as we would love to discuss further. These four opportunities total over 2,000 units.
Distribution is another favorite asset class. We recall the days of warehouse land selling for maybe $40,000 per acre. As we enter 2022, any land along I-4 that can be zoned and developed has gone through the roof at over $250,000 per acre. One broker told us he has one under contract in mid-Polk County for well over $325,000 per acre.
Our firm has been fortunate to put sites under contract along I-75 at SR 52, and all the way to SR 44 at Wildwood, Florida. Our firm is very blessed heading into 2022 with 81 contracts for $365,000,000; letters of intent totaling $1,120,000,000 and a powerhouse of listings totaling over $200,000,000.
Our team has well over 100 years of combined experience as brokers and our focus is almost 100% on development land. Our Tampa Bay geographic market has stretched over the last two years. To serve our development clients, we are active into Marion, Citrus and Sumter Counties to the north and a much heavier presence in Manatee, Sarasota, and Charlotte Counties to the south. Our ag land specialist, Michael Strahan MAB, ALC, CCIM covers agricultural land across the state.
While the demand curve remained high through the last day of December, there are some dark clouds on the 2022 horizon. Will the Covid 19 migration from New York and other northern high-tax states continue to move to Florida? Will employers from California and other west coast locations find Florida a great place to move their companies and employees because of our business-friendly environment that enticed many here in 2021? Time will tell. A significant number of our 2021 closings were motivated to close as soon as possible because of the fear of a major increase in capital gains taxation. While Congress was unable to get the votes to pass it, the fear of the unknown tax consequences will continue to be a factor in motivating sellers in 2022.
We have been operating in an environment of extremely low interest rates, especially for homebuyers. An upward trend is likely coming on rates, so the impact will be to make it more difficult for consumers to absorb the supply-chain cost increases and less likely to afford a new house, as rates make more buyers less eligible for a new home.
Ivy Zelman, a well-known market trends analyst boldly forecasts a general slowdown coming for homebuilders, as the population growth slows. She’s smart and well versed in the homebuilder industry, so she may very well be right on target. Even so, how will this impact Florida and Tampa Bay builders? Perhaps we defy gravity a bit as job formations here may continue to be better than many other parts of the country.
Our more immediate concerns are for the entitlement process. It appears that our homebuilders, apartment developers and industrial and distribution demand for entitled land parcels are exceeding the replacement pace of new entitlements. This of course means demand exceeds the current ability to replace the supply. The result is upward pressure on approved sites. Many government agencies are still working from home and the demand for the past 18 months has strained the staffs and processes.
The approval process to bring new land to the marketplace also faces government-imposed obstacles. The Hillsborough County process for new entitlements is stymied by Urban Services areas covering a long stretch of I-4 between Tampa and Plant City that’s off limits for development. The same is true for miles of land from Sun City Center south to the Manatee County line. Hillsborough County failed to keep up with school development in the past decade and as a result, the County denies development in a large portion of south County as well until the school capacity issue is resolved.
The Tampa Bay apartment segment has had record rent growth, with increases of upwards of 30%. This may be the highest in the nation and has attracted a tremendous interest for new development headed into 2022. At the same time, wages have not kept up with this pace of rental increases, so many tenants are hard-squeezed between these rent rates and inflation on food, gasoline, and other costs of living.
Elsewhere, Pasco County has a Commissioner’s district under a moratorium for new apartments and there has been discussion about expanding the area of the ban. Pasco County has also joined the discussion on apartment rent freezes, an action underway in St Petersburg and on the agenda for discussion in the City of Tampa.
We conclude that 2022 will be a good year, but the demand curve will show a decrease overall for housing. Our dark clouds are:
1. Potential interest rate increases impeding buyers qualifying for loans
2. Continued costs of building materials and supply chain disruptions
3. Trend line of a slower growth in population
4. Landowners will continue assessing timing and impact of capital gains tax
5. Government approval processes continue to take a slow course
6. Elected officials will consider moratoriums and rent freezes as solutions
7. Inflation will be felt increasingly in 2022
You may be interested in the Tampa Bay Builders Association market update on January 18th featuring Lesley Duetch of John Burns Consulting. For more information, see their flyer below.
|and The Tampa Bay ULI Market Trends is set for January 25, 2022. See their info below: https://tampabay.uli.org/events/detail/C5087EFF-301C-47B7-B9EF-138DC892B661/ |
NOTE: ALC is Accredited Land Consultant, a designated awarded by the Realtor Land InstituteCCIM is a Certified Commercial Investment Member, a professional designation awarded by the National Association of Realtors affiliate CCIM organization ULI is the Urban Land Institute. For more information, please contact Bill Eshenbaugh, President, Eshenbaugh Land Company 813-287-8787 ext. 1ORRyan Sampson, ALC, CCIM, Principal, Eshenbaugh Land Company 813-287-8787 Ext. 4.