PHOENIX-After more than four years of declining land values across the metro area, prices have finally stabilized, according to a land expert from Cassidy Turley/BRE Commercial’s local office.
“I’d estimate that 90% of the bad land assets have made it back to the lender or back out to the private market – that’s important because it means we won’t see continued deterioration in values,” says Brent Moser, executive vice president of Cassidy Turley/BRE Commercial’s land group.
Moser says commercial land values are off by about 70% from their peak in 2006 and 2007, while residential land values suffered even more. Neither has recovered yet. “We’re not seeing a lot of movement in the right direction,” he notes. “We’re all waiting on what will be a new baseline for commercial land prices.”
In 2006, for example, the average land price in the Phoenix metro area was $1.55 per square foot or $67,484 per acre, according to CoStar. Today, the average land price 79 cents per square foot or $34,580 per acre.
Moser tells GlobeSt.com that he is currently marketing 110 acres in Glendale that sold for $7.50 per square foot at the peak. The property, which offers Loop 101 visibility and is entitled for a mix of uses including office, retail and hospitality, is being marketed at $2.50 per square foot. “It’s a pretty dramatic example that reflect the shift in values,” he contends.
Demand from single-family home builders drives land prices and investment in Arizona, Moser notes, and he’s starting to see this group show interest in acquiring land again. “Things are definitely improving because builders are looking to cut deals today to deliver product in late 2012,” he says, adding that they’re asking for long escrows.
So far this year, $250.5 million worth of land has changed hands in the Phoenix area, according to CoStar. In comparison, $3.1 billion of land deals closed during the same period in 2006.
On the commercial side, most of the investment activity is occurring with multifamily developers or land speculators. “There are 10 active apartment developers looking for sites right now,” Moser notes. “We’re seeing valuations for multifamily land that we saw in 2004 and 2005. That is one area where there is strong demand and good values.”
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