Development Land

Development land is always in demand.  Something is always being built, and something else is either being torn down or transformed.  What was in demand in 1990 was different from what was in demand in 1950.  And what is in demand in 2014 is different from what was in demand in either of those earlier times.

 

At the peak of the demand scale in 2014 is multi-family land.  Multi-family land is in demand not only in Boston’s upper-income neighborhoods and inner suburbs but also at suburban “smart growth” sites next to subway and commuter rail stops.  Demand is so strong that developers turn to locations that are not even zoned for apartments – office and industrial parks – where the availability of large parcels and the ability to override zoning (so long as projects include affordable units) make multi-family construction legal and feasible.

 

Medical land is in strong demand.  An aging population needs places to maintain its health.  But not all locations make for a successful medical office building or clinic.  Success in real estate is defined by rent and price.  A location near a hospital is a strong prerequisite.

 

Development Land Demand Trends, 2014

 

strong demand                                  in the middle                                 weak demand

 

multi-family land

 

medical land

 

recreational building land

 

restaurant land                                               

 

hotel land                                                retail land

 

drug store land                              religious facility land

 

bank land                                                                                                                                

 

school land                                                                                                                             

 

biotech lab land                                                                                         golf course land

 

                                                                                                                                office land

 

                                                                                                                         industrial land

 

Land for recreational buildings is in demand.  Fitness centers, gymnastics schools, and indoor soccer and lacrosse “fields” absorb either empty space in high-ceilinged older buildings or new development land.

 

Restaurants are in demand.  The American population gets an ever-increasing proportion of its food from restaurants.  That means more dollars spent in restaurants, more people employed in restaurants, and more restaurants.  In the city, those restaurants occupy older storefronts.  In the suburbs, they create a demand for “pad sites” in front of shopping centers and along through roads, the sites filling up with buildings for national chains.

 

Banks fill up sites in the same strips as restaurants.  Bank branches prefer sites for free-standing buildings.

 

Drug store land is in demand.  If the neighborhood in a radius around a site has enough spendable dollars and if the site can produce what the store wants in terms of traffic, access, and the land for parking and the store, a CVS or a Walgreen’s may pay a price for the site that bears little resemblance to the prevailing price per square foot of land for other nearby development sites – sometimes, double or triple the going rate.

 

Dunkin’ Donuts land is in demand.  Dunkin’ Donuts can fill two and sometimes three sites in the same strip.  We just can’t get enough doughnuts.

 

The same for storage space.  We are drowning in our own stuff.  Our stuff creates demand for mini-storage land.

 

Schools are on the rise.  New schools need new locations.  Old schools and colleges tend to spread, amoeba-like, absorbing adjacent vacant land.

 

To make the list complete: land for car dealerships, biotech labs (at limited locations), and hotels.  All those are in demand.

 

For every use that is on the rise, another is in decline.  Some are on the edge: neither up nor down.  Retail is in the latter category.  The end of the recession brought expectations of a retail resurgence.  But stagnant incomes and the effect of online shopping weigh as heavily as the positive forces.  Some retail is up, and some is substantially down.

 

All that can be seen in a simple graphic.  The graphics for 1950 and 1990 would have looked different.  The graphic for Greater Boston in 2014 accompanies this text.

Eric T. Reenstierna, MAI

 

The Reenstierna Associates Report is published as a service to the clients of Eric Reenstierna Associates, LLC and other real estate professionals. The views expressed are those of the articles' authors and do not necessarily reflect those of other members of the organization. Copyright 2014. All rights reserved.

Eric Reenstierna Associates, LLC
24 Thorndike Street
Cambridge, Massachusetts 02141
(617) 577-0096

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