VOL. 42 | NO. 32 | Friday, August 10, 2018
Developers scrap for every piece of buildable land
By Hollie Deese
Lisa Culp Taylor has seen lots of changes in the 23 years she has been working in real estate in Middle Tennessee.
She grew up in real estate, too, hearing stories from her Realtor dad as the Brookside subdivision off White Bridge Road was converted from duplexes into single-family homes or as he worked with a developer and started Stonebrook in Millersville, one of the first subdivisions in that area.
“I grew up in Brentwood, and my dad had this farm listed, which is now Brentmeade, and I remember he told the story that the owner was like, ‘Oh, Ken, just let’s take it off the market, nobody wants to live out here.’ And you know, it was probably five years later that Brentmeade was developed.”
Today, landowners are getting so much more money for their land, because it’s such a scarcity. It is very difficult for an individual to find land to buy and then pick a builder, because more times than not, the builders are buying the lots as soon as they can find them.
The land grab means Middle Tennesseans, including Realtors, buyers, sellers, developers and builders, are having to adapt to the diminishing landscape.
“Even if they’re not ready to build right that minute, then they know that they’ve got their next project lined up,” Taylor says. “It’s tough, and the larger parcels that are available often go to larger developers. So, for the custom builders, it’s especially hard to find land right now.
Taylor notes she has a hard time finding anything for her clients in the $800,000 to $1 million range right now – she primarily works in Williamson County – and the closer to Nashville, the harder it is to stay under a million dollars.
“But you start getting out in Franklin and for new construction, it’s really tough to find even $500,000-$600,000 homes,” she adds.
“The cost of the land drives up your price per square foot because somebody still wants to put a 3,000-square-foot home on the lot. If it would have been a $150,000 lot previously, and now it’s a $250,000 lot, then you’ve taken that extra hundred thousand and you’re putting that in the same 3,000-square-foot house.”
And that is before you start adding in the cost of design and construction.
“If we didn’t have (growth), none of us would be as happy because there’s so much that came to Nashville with the influx of people,” Taylor explains. “So I think there are positives and negatives on all growth.
“It just takes a little bit of time. There’s always going to be a little bit more land to develop. Somebody is going to find pocket neighborhoods, or as you see happening frequently both in Nashville and in Williamson County, you’re starting to see a lot of tear down. And so, you know, we’ll always find a way. When you want new, you’re always going to find a way.”
One those builders finding a way is James Carbine, president of Carbine & Associates. Carbine has ridden the highs and weathered the lows of Middle Tennessee development since closing his first development deal in 2003 – a definite high – to walking out of the closing office hours later to learn the country had invaded Iraq – a big-time low.
“I don’t think anybody sold a house for several months after that,” he recalls.
But Carbine and his partner, his late brother Denzel, never thought about giving up. They had grown up in the home building industry, second-generation builders after their father, Gene. But that doesn’t mean they wouldn’t have done things differently, looking back.
“We probably didn’t have any provisions in our contract to get out of at that point, but it sure made us pause for a minute,” he says. “It’s humorous now. It really wasn’t humorous then.”
But today’s high times have given him some pause and caused him to focus on building smaller, boutique neighborhoods.
“We’ve got infill stuff in Nashville and Green Hills and WeHo,” he acknowledges. “Those are all two lots here, two lots there, scattered stuff. Then, we’ve got some developments here in Franklin. We’ve got one in Franklin, two in Williamson County. They’re 20 to 35 lots, so nothing large.”
One of those neighborhoods is Water Leaf, located in Franklin off Gosey Hill Road. There are 26 acre-plus home sites offering privacy with easy access to community resources. The neighborhood home prices range from mid-$800,000s to over $1 million.
Carbine says that the infill development has been incredibly popular for him because it’s one of the only supply of lots that many local builders have access to anymore, because there just aren’t many lots on the ground.
“One of the biggest challenges is you can’t put together a 200- or 300-lot community where you can have five to 10 local builders in it anymore. The larger tracks are just gone,” Carbine explains.
“But the infill provides a market for local builders to acquire lots, because there’s virtually an endless supply. When the price points reach a certain point in places like The Nations, and it slows, it just moves to a different location, a little further out to a new section of Nashville.”
Smaller, boutique neighborhoods typically have higher HOA fees because there are fewer homes to spread out the maintenance of common areas, but the homes often have larger lots, so each home is able to have their own pool instead of having the community amenities larger subdivisions have, with a large clubhouse and community pool.
“Risk management is the No. 1 thing, and even in the boutique communities that we’re in, we’re keeping half the lots and selling half the lots to other like-minded builders that have the commitment to architecture,” Carbine says.
“It is just risk management, because eventually things will slow down, although there’s no signs of it here right now. You can’t plan for no slowdown. You always have to plan for a slowdown. We just don’t want to crash again.”
Carbine runs his own utility crews because subcontract can be difficult and take longer.
“Land’s at all-time high prices now, even higher than ‘05, ‘06, ‘07,” he continues. “You couple that with increases in cost of a lever, equipment, materials … everything just costs a whole lot more today than it did a decade ago.
“It’s hard to believe that the big crash was a decade ago. Of course, back then the issue was all of the different loan products that were generating artificial demand. Today’s issue is we don’t have a supply of lots right now. We’re in the critical shortage stage.”
Still, Taylor says there will always be land available for development.
“If you’re looking at interstate corridors, you may have to go further east and you may have to go further west, or you’re going further south. But there’s always land available.”