Land Use From a Different Angle

Marschall: “What people don’t realize is that California is the fifth-largest producer and supplier of food and fiber and agricultural commodities in the world.”

SAN DIEGO— Land , agribusiness and natural resources are of huge importance, so developers and landowners must be aware of the regulatory environment surrounding them, CBRE SVP Matt Marschall tells GlobeSt.com. Marschall recently joined the firm as SVP, along with Dylan Marschall as financial analyst of CBRE’s capital-markets division, specializing in land, agribusiness and natural resources practice here. Combined, the pair has more than 40 years of experience in land, agricultural properties and natural resources, which includes wind, solar and water rights. Prior to joining CBRE, Matt Marschall was an executive managing director for Cushman & Wakefield Western Inc. and was the national practice leader for the agribusiness, natural resources and energy valuation and advisory specialty group. He was also involved with the national land group and was the founder of the land group brokerage practice, which was headquartered in San Diego, specializing in land and agricultural properties. We spoke exclusively with Marschall about the importance of land use, agribusiness and natural resources to commercial real estate and strategies developers can use regarding land. GlobeSt.com: How important is the land-use, agribusiness and natural-resources area of commercial real estate? Marschall: You can live three days without water and three weeks without food, and without either one of them we’re in big trouble. That’s the industry. Looking at this opportunity globally, it’s best to start from the top and look down. We are in a global economy, and we are in a situation globally that is the first time in history where we’re seeing significant constraints on the world supply of food, commodities, food production, water and energy . When we look at that, here’s the driver overall. We have a huge growing middle class in the world, and that middle class growing demographically is putting a tremendous demand on the need for commodities, food and protein. As the world evolves to a more middle-class economy, this demand increases dramatically. Today, roughly 60% of the people on the globe live on less than $5 per day. As the GDP of these emerging economies grows, we have to provide food and commodities on the land in areas where my expertise lies. What is that opportunity, from a CRE perspective? The long-term fundamental in investing in land, agribusiness and natural resources is excellent. Long-term projected return on permanent crops in the US since 1990 has been 12.87%, and return on well-cropped land as an investment class has been 11.25%. There’s a cyclical nature in this, of course, but investment in this asset type is decades long with low volatility. It makes for excellent diversification for portfolios ( REITs , etc.) focused on industrial , retail , hospitality , scientific research, etc. But that’s the driver, and the situation is coming to an apex. CBRE has reached out to me to say we need to be a bigger player in this space; it’s a strategic decision. Why San Diego or California? What people don’t realize is that California is the fifth-largest producer and supplier of food and fiber and agricultural commodities in the world—it’s a $54-billion industry. California, by far and away, is the largest agricultural producer in the US—no state is even close. San Diego is a $2-billion industry about, so where else do you want to be? Plus, I have a family history of farmers, so I have long-standing experience in this area. GlobeSt.com: What strategies can developers can use regarding land? Marschall: When we look at developer, we can look at an agricultural developer or a developer of buildings. Either way, land is a fundamental building block of real estate value—you can’t do any real estate without land. And land, either through zoning or a general plan or other regulations or restrictions, ultimately is being developed to various buildings or uses. So land has a life of its own. You take a piece of desert land out in the middle of nowhere, the Inland Empire, and vacant land without a lot of use starts being farmed and evolves to a higher use. You put in roadways and infrastructure , and in five or 10 years, it gets rezoned commercial and residential . It’s already gone through a phase change from raw to agricultural to residential/commercial. It’s highest and best use may be agricultural land, but it’s been transformed into other use. The reality is, a variety of developers, whether agricultural-land, affordable or commercial, will be involved in that land. Whatever phase you’re at, those developers have to be inexorably involved with national, regional and local economic trends, but they have to thoroughly understand the regulatory environment: storm-water discharge, groundwater, density, infrastructure. Developers need to understand the trends and understand the local environment, including the political and local-resident push and pull there will be. Developers must be keenly aware of these things—they can’t be in denial. Land owners have to be really involved and continue to think out of the box. EIRs have started to address components that create or decrease value—the environmental or ecological approach to development. The interrelationships of all these systems and how they impact land values requires expertise, so we need to pull together and really get it. GlobeSt.com: How can developers remain environmentally responsible while developing? Marschall: My masters is in environmental quality. I’m a farm-boy environmentalist who understands the issues of ecology. The key thing there is no one can go into denial. All good development is very environmentally conscious and socially aware. To create that responsibility requires the developer to embrace that. We have diminishing environmental treasures, and we have to protect those. All the good developments that I’m seeing today are extremely good stewards of the land and are trying to make sure good land-use management is in place, that open space areas are being provided and ecology is being protected to create a lifestyle for residents and employees that is desirable. China has a terrible history of environmental pollution, and the impacts can only be sustained for so long.