The Real Deal Miami

Declining land prices could be a boon for future development

By Jennifer LeClaire | July 25, 2008 01:42PM

Developers of all property types have long cited a common challenge across South Florida: finding affordable, strategically located land for new projects.

That may be changing, with land prices plummeting, a credit crunch lingering and fewer deals closing. Indeed, recent reports suggest today’s post-boom market could be one of the best times for forward-thinking developers to secure land for the next wave of commercial real estate projects.

New York-based research firm Real Capital Analytics reveals sales volume across the commercial real estate market fell 69.2 percent in the first quarter in South Florida. Land deals earmarked for warehouses, offices, apartments and retail center development fell from $2.6 billion in the first quarter of 2007 to $796.5 million in the first quarter of 2008.

It’s not just South Florida, either. Land price declines are a global phenomenon. The volume of land deals fell 46 percent worldwide in the first quarter, Real Capital Analytics reports.

Nationwide, land prices dropped by more than 6 percent in 2007 and continue to decline. Real Capital reports the price per buildable square foot of land set for retail development averaged $44 this year. That compares to $79 in 2007. The average land prices for condos are $87 so far this year, compared to $151 last year.

Despite the dramatic downward slide and the positive news for buyers, there is also a glimmer of good news for some landowners. While South Florida’s commercial and industrial land prices are tanking, the bleeding is nowhere near the magnitude the residential market is experiencing, according to according to Brad Cobb, attorney with Tripp Scott Law Firm in Fort Lauderdale.

“Commercial rents are holding strong in the region and credit availability for the acquisition or construction of commercial properties is significantly stronger than the residential market,” he said.

Still, significantly stronger isn’t necessarily strong.

Amid the hundreds of thousands of global listings posted on, there is clear evidence that South Florida land prices are deteriorating rapidly. While million-dollar-plus homes are still selling in Palm Beach, for example, the county is nonetheless experiencing the most significant drop in land listing prices, LandWatch reports.

“Palm Beach County median land list price has declined in the neighborhood of 15 percent over the past six months,” said Satbir Khanuja, senior vice president of marketing and business development at SecondSpace, owner of

As prices begin to bottom out, more buyers may begin to emerge. South Florida has in fact seen some mega land deals in recent weeks as activity seems to be picking up across the tri-county area.

Mercedes Homes sold its 29.5-acre Savanna Trace project in Port St. Lucie to The Church of God Prince of Peace for $1.35 million this month. The property had been on the market since January. Also this month, Biscayne 36th St. Associates sold a 15,000 square foot vacant lot in Miami for $1.07 million. The property is located east of U.S. 1 at the entrance to the Julia Tuttle Expressway.

Who’s doing the buying? Several different types of buyers are emerging in this market. Vulture funds with liquidity are actively seeking out distressed land as well as larger national real estate investment trusts, investment banks, and specialized real estate firms.

“Different buyers have different property types that they are looking for ranging from large unentitled tract lands to failed condo conversions,” Scott said.

While the residential market continues hemorrhaging, data offers a ray of hope for owners: Buyers from Missouri, Georgia and California in the U.S. and Canada and the U.K. internationally, are especially interested in the South Florida marketplace.

Said Satbir, “While prices are dropping, South Florida as a second home destination continues to be an attractive area for buyers around the world.”