Land Subdivision

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 14,200 land subdivision firms in the US purchase and prepare property for division into multiple lots and subsequent sale to builders for residential, commercial, or industrial use. They typically develop property that they own, but may also subdivide and prepare sites for other property owners. About 66% of land subdivision firms have no employees. They rely on subcontractors to perform all services in preparing land for development.

Complying with Government Regulation

Land subdivision firms must comply with a wide range of federal, state, and local regulations governing land development.

Local Opposition To Development

Concerns over rampant growth or changes to existing neighborhoods can lead to opposition to new land subdivision projects.

Industry size & Structure

The average land subdivision firm with employees has about 8 workers and generates about $2 million in annual revenue.

    • The land subdivision industry consists of 4,500 firms with employees and 8,800 single operator firms that together generate about $10.7 billion annually.
    • The average single operator (non-employer) firm generates $176,000 in annual revenue.
    • Single operator firms rely on subcontractors to perform all services in preparing land for development.
    • About 79% of firms with employees have less than 5 employees. Only about 74 firms have over 100 employees.
    • The largest states for land subdivision are Texas, California, and Florida.
                            Industry Forecast
                            Land Subdivision Industry Growth
                            Source: Vertical IQ and Inforum

                            Recent Developments

                            Jan 12, 2024 - Large Investors Move into Build-for-Rent
                            • Pressures, including high interest rates and a shortage of new homes available to purchase, are prompting housing bulls on Wall Street to construct entire build-to-rent communities, according to The Wall Street Journal. In Q3 of 2023, large landlords that own between 100 and 1,000 homes purchased just 1% of homes sold in the US, compared to 3% for all of 2022, according to John Burns Research and Consulting. Once a model that worked well when foreclosure rates were higher, industry watchers suggest that finding and managing investment homes individually has become too time-consuming, costly, and inefficient. While the build-to-rent community market is still small – about 900 neighborhoods in the US, according to the Urban Institute – the National Association of Home Builders believes that soon 10% of new homes will be build-for-rent.
                            • The value of US commercial construction starts is expected to be mixed in 2024, depending on project type, according to a recent forecast by Dodge Construction Network. Marking a potential record level of activity for the sector, manufacturing construction will rise 16% to $112 billion in 2024, supported by the CHIPS and Science Act and the Inflation Reduction Act. Government funding is also giving a boost to highway, street, and bridge construction. Dodge expects spending for bridges to rise 25% in 2024 and highway and street to grow 23% for a total of $147 billion. Amid a pullback in planned investments by major warehouse builders Walmart and Amazon, the value of warehouse construction is expected to decline 11% in 2024 to about $44 billion. Low occupancy and weaker demand will reduce office construction spending to about $37 billion in 2024, down 6% compared to 2023. Office projects will be mostly confined to alterations to existing buildings. Speculative office construction, where offices are built before securing a tenant, has become less common.
                            • Amid a US housing shortage and lack of affordable homes, some local governments are changing their zoning regulations to allow for more density, according to The Wall Street Journal. In some rapidly growing cities, housing has become scarce, and middle-class workers, teachers, police, and firefighters often cannot afford to live where they work. So-called upzoning rules are either in place or are being considered in Dallas, Boston, metros in Northern Virginia, Minneapolis, and Portland, Oregon. In 2023, zoning rules in Austin, Texas, were changed to allow up to three housing units on a single lot. However, housing industry observers point out that rezoning’s impact on affordability remains unknown. Attempts to change zoning to increase housing density have sometimes led to community backlash.
                            • New single-family home sales decreased 12.2% month-over-month and were up 1.4% year-over-year in November 2023, according to the US Department of Commerce. While high interest rates continue to weigh on new home sales, the expectation that interest rates have peaked and tight inventories of existing homes for sale may boost new home sales later in 2024, according to the National Association of Home Builders (NAHB). Lower home prices may also lure buyers; the median new home sales price in November was $434,700, down 6% from November 2022 but up 4.8% compared to October 2023.
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