|To: peter michaelson who wrote (141)||1/4/2012 5:35:21 PM|
|From: J Scott||Read Replies (1) | Respond to of 1625|
Yes, given that a typical house with entry-level finishes would likely run about $70-80/sf in my area, and given that you're not going to get more than about $120K for anything less than about 2000 sf, it's currently not feasible for builders to start on new developments. That said, there are a couple smaller builders who believe there is a market in the $140-180K range, and who already own parcels of land from pre-2008, who are starting to build again. Even if they are willing to write off the land costs, are able to get huge economies of scale and can build for $65/sf and can then sell for $180K, after all fixed costs (holding costs, commissions, concessions, etc), they aren't going to make much money (at most, $20-30K per lot).
They are doing this primarily to get the land off their books and get their employees and contractors back to work, as they believe the market is going to improve over the next 2 years and they want to be positioned to take advantage.
If you go a few miles west (towards Atlanta proper) or north (where the school systems are much better), there are some larger builders who didn't lose everything over the past couple years and are getting back to work; for the most part, they are finishing out partially developed communities where the land has already been paid off by earlier sales, and the planning/grading/lot-prep has already been completed, reducing the scope/cost of the project significantly.
What kind of commercial property are you working on? Are you developing on spec or do you have tenants lined up? If you can keep OE + economic loss (vacancy/concession/rent loss) to under 40% -- which wouldn't be too hard with long-term NNN tenants -- the numbers should work out pretty well.