Land Subdivision

Industry Profile Report

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

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, 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

                            Coronavirus Update

                            May 12, 2022 - Home Builders Court Wealthy Investors
                            • In 2021, the vast majority of new homes were sold to individual buyers, but as interest rates and home prices push higher, builders are increasingly catering to investors who are buying homes in bulk, according to The Wall Street Journal. More than 25% of the homes purchased by professional rental investors in the fourth quarter of 2021 were newly-built homes, according to a recent report by John Burns Real Estate Consulting LLC and the National Rental Home Council. In the third quarter of 2019, only 3% of homes bought by investors were new construction. The trend may accelerate as the lack of affordability becomes an issue for more potential individual buyers.
                            • The pandemic slowed the addition of new housing inventory, leading to a housing shortage. Headwinds to subdividing land into smaller lots are a contributing factor to the shortage of US homes, according to the National Association of Homebuilders (NAHB). Restrictive zoning often prevents contractors from building smaller, more affordable homes, such as townhomes. The land must often be subdivided into smaller lots to build such homes. Existing homeowners often oppose new higher-density developments in their neighborhoods due to concerns about increased traffic.
                            • The Dodge Momentum Index increased 6% in April 2022 to 164.8 (2000=100), up from the revised March reading of 155. 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. The commercial planning component increased by 9%, and institutional planning rose by 2%. The commercial planning pipeline was robust due to data center, warehouse, and hotel projects. While the backlog of nonresidential building projects is strong and should remain solid in the coming months, rising interest rates and higher materials costs could moderate construction activity through 2022.
                            • Homebuilder sentiment, as measured by the National Association of Home Builders/Wells Fargo Housing Market Index, decreased to 77 in April 2022 from 79 in March, marking the fourth consecutive monthly decline. Higher materials costs and rapidly rising interest rates are making housing less affordable, which is weighing on builder confidence. Builders report that sales traffic and current sales conditions are at their lowest levels since summer 2021. Higher mortgage rates and supply chain disruptions have unsettled the US housing market, especially for potential first-time homebuyers.
                            • The number of building permits issued for privately-owned housing units increased 0.4% month over month and rose 6.7% year over year in March 2022. Housing starts increased 0.3% month over month and 3.9% year over year in March. Housing completions decreased 4.5% month over month and fell 13% year over year in March.
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