COVID-19 Impacts on Commercial Development Land

A panel of Accredited Land Consultants of the REALTORS® Land Institute (RLI) shed light on the impacts of the Coronavirus (COVID-19) outbreak on land values and land market trends across the country in a recent Virtual Round Table session. The panel, which consisted of expert land agents from across the country, mostly pointed towards a positive outlook for the land market despite volatility in other areas. One key market they covered was commercial and development land real estate.

Accredited Land Consultant (ALC) Matt Davis with Cushman & Wakefield in San Diego, CA, says the biggest issue they are running into in the commercial land development market is that “most developers, investors and lenders we’re working with don’t know how to underwrite the risk. They don’t know how much of a discount is reasonable, so, to eliminate the risk, they’ve put their pencils down.” He went on to note that “There are buyers who are still underwriting deals. The ones we’ve talked with have been using more conservative assumptions, some of those assumptions include slower lease absorption for new construction, expecting no rent growth over the next couple years, and increased cap rates at their exit. Again, those are all conservative assumptions that will result in a lower land value than there would’ve been a month ago.” So what does he recommend sellers do now? “It is a great time to put together marketing collateral and be prepared to enter the market.”

He also shared some good news about the development land market. He is seeing “very different impacts on transitional land since these properties are less likely to be impacted in the short term. The biggest disruption for [transitional land] transactions is coordinating site visits and meetings with municipalities, project consultants, and other parties needed to complete the transaction. Overall though, there is good news on the longer-term development front.”

For more insights on the impacts of the outbreak and shutdown on the commercial development land market from Matt as well as insights on how other land markets are being impacted, make sure to watch the full Impacts of COVID-19 on The Land Market Virtual Round Table presented by the RLI 2020 Future Leaders Committee or check out the related posts below:

• COVID-19 Impacts on Rural Residential Hobby Farms
• Are Buyers Moving To Recreational Land In The Age Of COVID-19?
• COVID-19 Impacts on Agricultural Tillable Farmland
• What Ranchers Need To Know About COVID-19’s Impacts on The Ranch Land Market
• COVID-19 Impacts on Timberland

If you are interested in buying, selling or investing in land real estate, make sure to Find A Land Consultant, like an ALC, in your area with the expertise needed to best assist with your transaction.

About: Matt Davis is a real estate broker with Cushman & Wakefield. He is based in San Diego, CA, and assists clients with the disposition and acquisition of investment grade agricultural and transitional land assets. He is also founding member of the company’s Land Advisory Group and Agribusiness Solutions Team. Matt is a member of RLI, received their 2019 Land Rising Star award, and serves the 2020 Future Leaders Committee.