Recession offers landowners ways to add value to future development, but be careful

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By Jesse McKnight
Executive Vice President, The Saint Consulting Group

recessionRecession is a great time to go after development entitlements. Many landowners sit on properties that may have a higher value and better use. In addition, cities and counties are much more receptive to economic development. They need the tax revenue and may be less strident on approving new projects. The Saint Report has carried accounts of how NIMBYs are taking a back seat to recession.

Without turning over a shovel of dirt, owners can add significant value to their property by adding development entitlements and then holding off on construction until the economy improves.

One owner may use the downturn to rezone land so that when economy recovers, he can better market the land to a developer at a much higher return than if they kept the industrial zoning it has now.

Despite the downturn and uncertain need for new retail and office properties in a major metropolitan area, another developer may forge ahead a significant mixed use project, arguing that more development will help drive a recovery in the region.

However, this is not without its challenges. Existing or recently entitled projects have a limited shelf life. And when this time runs out, depending upon the form, the extension of time can be challenged. Generally, a permit is good for so much time (12 or 24 months), and if the owner doesn’t start the use or construction then the permit lapses.

recession-specialSometimes the city ordinance allows the planning director or city manager to extend the time period for good cause; other ordinances require the landowner to file a formal application to extend the time. The requests for extension are rarely denied or challenged, as this is a pretty pro forma activity. However, if the proposed land use is controversial, there have been occasions where requests have either been denied or approved with additional conditions.

In Montrose, NC, the Charlotte Business Journal reported, one developer whose ambitions for a 9,000-home community waned in recession is now looking at options to set aside 2,000 acres for a Sun City-style age-restricted community.

He’s using the down time to line up regulatory approvals for bringing utilities and a sewer plant to the site. “We’ve been using this time wisely for entitlements, studies and approvals.” That will position Montrose for a fast start once the economy improves, he adds.

See San Jose Business Journal for updated feature by Katherine Conrad on how California cities are throwing the construction industry a lifeline to keep entitlements alove.

Jesse McKnight is executive vice president, The Saint Consulting Group, email mcknight@tscg.biz, phone 510 279-4271

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