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 14,600 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 7 workers and generates almost $2 million in annual revenue.

    • The land subdivision industry consists of 4,800 firms with employees and 9,700 single operator firms. Together, they generate about $10.7 billion annually.
    • The average single operator (non-employer) firm generates $171,000 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

                            Nov 15, 2022 - US Home Sales Drop
                            • New single-family home sales decreased 10.9% month over month and declined 17.6% year over year in September 2022, according to the US Department of Commerce. On a year-to-date basis, new home sales were down 14.3% in the first nine months of 2022 compared to the same period in 2021. According to Freddie Mac, on November 10, 2022, the US weekly average rate on a 30-year fixed mortgage was 7.08%. A year ago, the rate was just over 3%. Industry watchers expect new home sales to remain weak as the Fed uses interest rate hikes to bring down inflation.
                            • US housing affordability fell to its lowest point since the Great Recession in the third quarter of 2022 amid rising mortgage rates, inflation, low housing inventory, and high home prices, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI). Only 42.2% of new and existing homes sold between July 2022 and the end of September were affordable for households with a median income of $90,000. The third quarter of 2022 marked the second consecutive quarterly record low for housing affordability in more than 10 years. According to the HOI, the median home price in Q3 2022 was $380,000, down from the all-time high of $390,000 set in Q2 2022.
                            • The Dodge Momentum Index (DMI) increased 9.6% in October 2022 to 199.7 (2000=100), up from the revised September reading of 182.2. The DMI Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. On a monthly basis, the commercial planning component increased by 13%, and institutional rose by 2.9%. An increase in office and lodging projects boosted the commercial planning pipeline. The institutional sector was mixed amid a growing pipeline of recreation and education projects, but the number of healthcare and public planning projects declined. Developers and project owners continue to see healthy demand, despite recession concerns, although continued inflation, high interest rates and materials costs, and labor shortages have the potential to blunt the flow of new projects.
                            • Home builders are finding it increasingly difficult to find land for new developments, according to The Wall Street Journal. Restrictions on land use and a lack of public investment in infrastructure like roads and rail are making it more difficult for developers to purchase land near existing population centers, especially in the Sunbelt region, where land values have more than doubled over the last two years, according to Land.com. Zoning rules often favor single-family homes over multifamily developments, which tend to eat up more land. Many economists say zoning rules need to be reformed to ease land inflation. However, homeowners tend to push back on such measures because they benefit from rising land prices. They also resist costs associated with infrastructure spending that could enable more housing development.
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