The Informed Land Reaper
What is Land Worth in the Treasure Valley?
As early as 2004 through 2006, land for residential development, commercial, and potential investment was being acquired at rapid pace with ‘price’ taking a back seat to marketplace positioning.
The backbone of the valley, productive agricultural land, was then worth $30,000 to $50,000 per acre, far more than the land produced over a ten year period growing hay, sugar beets, corn, carrots, or even onions. The potential end product was PUDs (planned unit developments) new residential communities to satisfy the population growth, each with its own unique image and price point. The more successful projects had easy access to utilities along existing corridors of growth, while other were content to wait out the longer process of entitlements, annexation, or patiently waiting on the city’s services to be extended. The demand only created a frenzied market and some questionable business decisions, which in turn, resulted in unfulfilled commitments and financial loss. A bit grim one might say.
As customary, commercial and retail followed residential growth in the pasture lands with new power centers and strip malls, all built in the familiar earth-tones and sculptured cornices, and the generic cell phone store. Granted, the need of big and mid-boxes retailers was welcomed to support the new communities, and the initial strip centers quickly had smaller users. This accelerating success now spawned higher rent rates to justify the higher costs of commercial land-$6 to $10/SF. The recently completed (in 2007) neighborhood strip centers are now struggling to secure credit worthy tenants at $20/SF plus NNN asking rates.
The population growth and median income was there, but their proximity to the center was spread over a 10 mile radius. By contrast, existing inner city retail/commercial service centers, with the same demographic numbers, draws from a 3 mile radius. True, the older centers lacked the aesthetic, variety, or sizes of the new, but they still maintain ‘business as usual’. And true, as retailers moved to growth areas, many of the older centers had sizable vacancies, suffer from ‘utility’ and deferred maintenance. It was just a bit grim, but not unsalvageable from some perspectives.
When inner cities experience a departure to the new sub-urban developments, developers pursued a new tact to redevelop the city’s core with refurbished town homes, city parks, new affordable housing, and encouraged community retail, often with their own urban malls and marketplaces. Two events or consequences evolved: a recapture of ‘neighborhoods’, and a sustainable retail/commercial environment to service a new demographic comparable to the sub-urban. Closer to work, medical services, shopping, existing school campuses, creative art and music centers, and dinning establishments was an unexpected bonus experienced in the revitalized urban center.
This new tact works well for large urban areas - three times the size of the Boise Metro Area. Do we need to wait until we are three times our size or reach an urban spread undistinguishable from one city to the next, to enhance our inherent natural environment? That too, may well be grim, if we do wait.
What do we have to work with? Land and property values which exceeded everyone’s expectation, so much so, they need to be realistically revisited more in keeping with practical affordability in acquisition and disposition, the development there of, and for the end user. Aside from inflation, time has a way to play catch up, but will that be one or several years? Municipalities can make practical and achievable decisions, such as reassessing valuations, project and complete infrastructure, and plan for more than 5 years out, all within budget. Land opportunities are plentiful, but at current asking prices which challenge any astute developer, residential or commercial, or banker to engage in the process.
In reality we cannot recapture the past. We will begin to see opportunities to secure land at ’wholesale vs. retail’ prices, housing prices adjusted and taxed to reflect value, and tenant retail spaces priced to encourage entrepreneurial endeavors as well as national brand tenants not yet in our valley. When we reassess our current land use opportunities and city core assets, it will enable a “reaping” of new found rewards as we move forward.
Are there parts of the city/valley where we can look with fresh eyes? To our good fortune, this examination is being initiated in the immediate downtown core, but we will need to overcome the city’s intense process of the process. Progress is slowly being achieved. What about other parts of the city? Look at the portion known as the ‘garden’ area. It is most centrally positioned, yet it often overlooked as having a potential for development. This area has some challenges but the structure or bones are there: for location, transportation corridor, recapture of the riverfront, retail within reach from everywhere, and land for affordable mixed-use housing, commercial and retail. Having the utility infrastructure in place off-site costs are reduced when compared to the outlying projects.
What is this land worth? Parcels with recaptureable improvements (up to $10/SF for 5 plus acres) are valued more than assemblages which may require a longer entitlement process. Infill projects are available at reasonable value, as well as those underutilized parcels accessible to existing amenities. Some can imagine the benefits if this area or other areas of town were pursued in earnest. What about the airport district, the linen district, the west bench district, or hill district? The challenge is grim at first blush, but how bountiful the harvest, for both the end user and the creative investor/developer.
If you believe you can reap what you sow, then now is the perfect time to plant those seeds.
Jan Ozimkiewicz is a commercial agent with SelEquity Real Estate. Applying his early training as an architect, he worked in the cities of Chicago, New York, and Phoenix, for fortune 100 corporations. Being in their corporate real estate department, a focus was in acquisition, disposition, site selection, facility planning, and property management.