The REALTORS® Land Institute (RLI) and National Association of REALTORS® Research Group have released the results of their latest Land Market Survey. The survey shows that while the COVID-19 pandemic battered the commercial real estate market in 2020, the land market held up to the pandemic’s severe blow, according to survey participants. A 3% increase in land sales contrasts starkly with a 40% drop in commercial sales transactions of properties or portfolios of at least $2.5 million.
Land sales prices were also on the rise, with respondents reporting a 2% increase on average in 2020. In contrast, the Green Street Commercial Price Index, an appraisal-based index of the properties held by REITS, indicates that commercial real estate prices fell 6% in 2020. The strongest price increases were reported in residential (+6.8%) and recreational (+3.6%) land, due to the robust demand in home sales especially in the suburbs and for vacation homes and the acceleration in e-commerce sales.
As for the 2021 outlook, respondents expect an increase in land sales and land prices for all types of land, except for sales of land for office, retail, and hotel use. Respondents expect the strongest sales growth in sales of residential land (5.9%) with prices rising on average by 5%. Sales of timber land are also expected to remain flat. Respondents expect the strongest price growth for industrial and recreational land, each growing at 3% in 2021.
RLI’s 2021 National President, Renee Harvey, ALC, stated, “The land market saw incredible growth in the face of unprecedented challenges in 2020. As the only commercial asset with positive growth during the COVID-19 pandemic, land continues to be a sound investment.”
Lawrence Yun, PhD, Chief Economist and Senior Vice-President, Research for the National Association of REALTORS®, stated, “The acute housing shortage facing the country means the continued need to build more homes. The very first step requires land acquisition. Therefore, I expect the land market to continue to show robust growth this year. In addition the acceleration of e-commerce will be another major force that will continue to drive the demand for land for new warehouses and distribution centers.”
The annual Land Market Survey is a tool for landowners and land real estate professionals in all sectors of the business to use for bench-marking and as an informational resource when conducting business. This year marks the seventh consecutive year that the survey has been conducted to reveal current trends and the ever-changing state of land markets within the industry.