The race is on to build and deliver new units while the upturn still has momentum, but the frenzied pace of competition has bumped up land prices significantly.
Developers purchased more than $3.6 billion in new development land in the first quarter of 2013, according to data from New York-based Real Capital Analytics (RCA). This is the largest amount of new development land purchased in the first quarter of a year since the Great Recession began.
Steven Coon, a principal at Kansas City-based Land Development Strategies, said securing financing isn’t the most difficult part of getting a land acquisition deal done. In today’s market it’s more about finding a prime location to build upon and hoping it has been primed for the beginning stages of development.
“You buy raw sites when the market cycle is down,” he said. “Since the market cycle is up, most people are looking for a more developed site because they want to build now. They want to be able to deliver new product—now, as soon as possible.”
Coon estimates the price of land has risen by about 10 percent over the last year as the race to find a good place to develop gets more competitive.
As the demand to break ground on multifamily housing grows, so do the pockets of those who bought land to develop.
Demand is pushing some land owners to consider selling even though their property isn’t on the market, Coon said.