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Business Observer Friday, Feb. 1, 2019 6 months ago

Land demand trending toward infill, multifamily

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Notable real estate land brokers see similar and diverse challenges in marketing land and lots in diverse Florida markets.

An anticipated cooling of the housing market and a trend toward homebuilders seeking to minimize risk may result in fewer land deals in 2019, say two land brokers in contrasting markets.

Randy Thibaut, president and CEO of Fort Myers-based Land Solutions, says higher land costs and increasing government-imposed impact fees are encouraging homebuilders to seek higher-density opportunities on smaller urban parcels. Similarly, Tampa-based Eshenbaugh Land Co. founder and President Bill Eshenbaugh sees a pullback in larger master-planned developments and a pushback by builders who want to pay less — and pay later — for entitled land and finished lots.

“I think the homebuilders as a group are in a pause mode right now,” says Eshenbaugh. “It started in July with the increase in interest rates, so there is a little bit of a reset happening. There are some builders who sell into higher price points finding buyers are really stepping back from the table. We had some land deals in the embryonic stage in November and December pushed back into January and beyond while builders wait to see how the year is going.”

Eshenbaugh says inquiries from apartment developers in Atlanta, Chicago and Dallas looking for multifamily sites is trending. This is in spite of conventional wisdom.

“They are looking for Class A, 240- to 300-unit sites in the Tampa Bay area,” Eshenbaugh says. “They say the demographics all warrant it, even though last year we thought we were approaching oversupply.”

The trick to timing a successful land buy? Thibaut says there isn’t one — other than increasing scrutiny.

“I think it’s a matter of knowing the site is suitable and is intended for residential development, and in part having a feel for where the market is going and buying at the right price,” says Thibaut. “You need to know you will be able to obtain the appropriate entitlements that allow you to develop the property in a way and at a cost that allows you to sell it at a price where the builders can afford to build homes that sell. It’s a complicated and risky scenario.”

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