The Lay Of The Land

10/1/2008 - REDNews

These days, the state's land brokers adn investors could probably paraphrase a popular bumper-sticker slogan like so: "Land dealer by birth - Texas land dealer by the grace of God."

Indeed, industry folks in Houston, Dallas, San Antonio and Austin seem to feel just a little bit blessed lately. Even though the capital market's tougher restrictions have drastically slowed down land transactions here, the Lone Star State's diverse industries and healthy job growth have helped insulate Texas somewhat from a slump that has stymied much of the rest of the country. Give it a few years, industry experts say, and Texas will bounce back - probably more quickly than other states.

"The reality is that Texas is till...probably the best state to be in," says Brett Williams, a principal at Silver Tree Partners, a real estate investment and development firm in Addison. "You read the paper, you hear that every day, and it's the truth because of the job growth, the economy....Texas is going to feel some of the effects - it's just natural - but we're fortunate. And most of the Sun Belt states are going to be fortunate.... They're so well insulated because of the diversity of the industries. [Houston has] energy and gas; in Dallas, we have everything from healthcare to banking to research and development and technology. We're just so diverse."

Keith Grothaus, a land broker with Caldwell Companies in Houston, echoes his North Texas colleague's assessment. "We're just so blessed to be in Houston," he says. "I talk to people in my industry in other parts of the ocuntry - they are not doing much. Some specific markets have a big hole to dig themselves out of. It's just economics, and what fuels everything is job growth. New jobs mean that people are being brought to the region - they need houses, they need a place to buy groceries, they need an office to work in. The job growth is the engine that fuels the whole thing."

With that in mind, many in the industry have decided to sit back, put their boots up for a spell and wait it out. "Quite frankly, that's what you're seeing with a lot of the raw land situations," Williams says. "People are just kind of sitting back and saying, 'You know what? If you don't want to pay us this price,...we'll just hold it for a couple of years and wait for the capital markets to open back up and we'll be back in business."

Stan Creech of Stan Creech Properties in Houston has dubbed it a "catching-up period." Land prices are too high for the current real estate market, he says. Meanwhile, demand has exceeded supply. "Absorption needs time to catch up to those projects recently completed or under development. This should take two, three, five years," he writes in an e-mail to REDNews. "This applies across the board to all categories of land."

Houston, specifically, will experience a relatively easier time due to its lack of zoning regulations, says Bill McDade, broker and founder of McDade, Smith, Gould, Johnston, Mason + Company in Houston. But he cautions that the city's status needs to be viewed with some perspective. "Basically, Houston is better than anyplace else in the United States to be today, but that doesn't mean it's good," he says. "When the capital market, the credit market, dried up, it affected Houston just like it did everybody else." Lack of equity and tighter lending restrictions have certainly impacted local buyers, but McDade is confident the industry will rebound quickly. "A lot of deals were on the drawing board," he says. "Like everywhere else, they can't get capital, so they were put on the shelf. As soon as they get off the shelf, when they come back, they'll just dust off those deals and actually start 'em."

In San Antonio, where hot spots for land purchases and development include West San Antonio and the I-10 West and I-35 North corridors, one real estate specialist expects those areas will continue doing well in the next few years.

"The best tracts will continue to see good purchase and development activity, while the marginal deals will struggle," says Jamie Sullivan, president of Sullivan Commercial Realty in San Antonio.

Throughout the major cities in Texas, land dealers will find themselves playing catch-up and experiencing a revival as the industry levels out in the next few years.

"As demand and supply meet in a more equilibrium balance, the real estate market will become stronger," Creech says. "This especially holds true for the Houston, Dallas, Austin, San Antonio and other real estate markets throughout the state of Texas, which will continue to lead the nation with a strong economy and job growth in the years ahead."

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