(Real Estate BisNow, by Catie Brubaker) – Rockspring Capital’s Jim McAlister talks with BisNow’s Catie Brubaker…
Rockspring Capital’s Jim McAlister and Cushman & Wakefield’s Will Condrey graciously mugged for our camera yesterday morning before speaking at O’Conner & Associates’ land forecast. Will outlined a bunch of recent Inner Loop land sales, some with prices at pre-recessionary levels. Take Frost Bank’s purchase of the former Bike Barn site on Kirby. It paid $135/SF in October 2010 for one acre of dirt. At the other end of the spectrum: the former Houston Ballet site on West Gray, a 2.14-acre lot went under contract in ’09 for $90/SF, but the deal fell through, and the site was foreclosed. That same potential buyer snagged the site from the bank for $56/SF last year. But these sales are in the vast minority: Most land owners in Texas are not distressed and know demand is strong so they’re keeping pricing high.
We noticed most of the deals Will mentioned closed in October 2010—Jim (who shared this photo of him hunting with his best friend Champ) tells us that’s about when banks started lending for land acquisitions again. Class-A multifamily infill development is rampant, but land is being snapped up for numerous uses (well, numerous land uses). Jim says Houston was at the cusp of a massive wave of redevelopment when the recession hit, and he’s seeing the smartest of those deals return. Many of the infill sites being purchased have buildings on them that aren’t the highest and best use. After these are all bought and redeveloped, he believes the land sales will expand to the quiet suburban markets.
Jim tells us we need a lot more single-family residential growth to spur development in other areas. Today, single-family lot sales are only happening as extensions of master-planned communities or in ready-to-develop small tracts in proven areas. Houston’s positioned better than most in this regard: We lead the nation in annual new home closings and have the third-lowest new home inventory (about six months) and vacant lot inventory (about 47 months, a fairly normal amount). Jim says lot delivery and absorption have dropped well below population growth and need to catch up.
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