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 4,600 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 8 workers and generates about $2 million in annual revenue.

    • The land subdivision industry consists of 4,600 firms with 38,500 employees and 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

                            May 10, 2024 - Industry Poised for Rebound
                            • The land subdivision industry is expected to return to stronger sales growth in 2025 after a weak housing market hurt demand in 2023 and 2024. The industry’s year-over-year sales declined 2.4% in 2023 and is projected to further slow to just under 2% in 2024, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth in the land subdivision industry is expected to increase to 6.45% in 2025, then grow by an average annual rate of about 6.3% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
                            • On May 9, the average fixed rate for a 30-year mortgage declined slightly to 7.09%, marking the first weekly decline in rates in six weeks, according to Freddie Mac. Elevated mortgage rates come amid the spring home-buying season. Freddie Mac says one-third of annual home sales occur between March and June. Freddie Mac also noted that some buyers may have adjusted to the higher-rate environment, as recently released data suggest that pending home sales were at their highest level in a year. However, the National Association of Homebuilders (NAHB) estimates that if the average fixed-rate for a 30-year mortgage had remained at levels last seen in February 2023 (under 6.25%), an additional 4.5 million US households would be able to afford a median-priced new home.
                            • The Dodge Momentum Index (DMI) increased 6.1% in April 2024 to 173.9 (2000=100), up from the revised March reading of 164.0. The Momentum 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 improved by 12.6%, but institutional declined by 6.3%. Dodge’s associate director of forecasting, Sarah Martin, said, “The Dodge Momentum Index (DMI) saw positive progress in April, alongside a deluge of data center projects that entered the planning stage. Outsized demand to build Cloud and AI infrastructure is supporting above-average activity in the sector. Most other categories, however, faced slower growth over the month. Across these industries, it’s likely that owners and developers are grappling with uncertainty around interest rates and lending standards, thus delaying their decisions to push projects into the planning queue. If interest rates begin to tick down in the latter half of 2024, more substantive growth in nonresidential planning activity should follow.”
                            • Total nonresidential building construction spending is projected to rise 9% in 2024 over 2023, according to FMI’s second-quarter 2024 North American Engineering and Construction Outlook. With growth of 19%, manufacturing will lead 2024 nonresidential building construction, followed by lodging (+14%), public safety (12%), transportation (10%), educational (+9%), and healthcare (+8%). Some other segments of the nonresidential building sector face headwinds, including high interest rates, inflation, and tighter lending standards. These pressures will reduce commercial project spending by 2% in 2024. High vacancy rates will hinder office spending and keep growth at a muted 2% over 2023. High interest rates will also challenge the housing market. Single-family construction spending is forecast to be flat in 2024. Spending for multifamily is expected to decline 8% in 2024 after projects in development peaked at 1 million units in mid-2023. Home improvement project spending will rise 2% in 2024.
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