January 2, 2009
Annually, ALCS provides a state-wide real estate analysis retrospective and projection, based on our actual field experiences. No doubt about it, 2008 will be remembered as a year of extremes and growing uncertainty. The first two quarters saw decent growth with many markets in strong positions. Third and fourth quarter markets were terribly mixed or terrible, period, with values and products randomly scattered across the landscape, a clear sign of unease and uncertainty. Rural real estate markets have mostly been consistent and steady, while commercial and residential real estate markets are taking enormous hits.
ALCS has maintained its focus on brownfields in markets where ALCS has either identified a specific use or has teamed up with another landowner for complimentary leverage. Brownfields redevelopment enjoys superior liability protection in Pennsylvania, although improvements can be made to law and policy. The advantages to investing in a brownfield are relatively low price, government and citizen support for redevelopment, low infrastructure costs, and potentially quick turnaround times. The disadvantages are potential (even expected) environmental contamination, potentially high remodeling and remediation costs, and the usual liability.
On the rural raw land side, prices are coming down a bit, but still remain higher in many areas than potential uses can support. This may be a simple issue of relative value, where east coast populations continue to sprawl out, leaving individual buyers with a personal incentive to privately purchase land for both their personal pleasure and as a hedge. In fact, it is ALCS’s opinion that Pennsylvania’s rural raw land has been a de facto hedge fund for the past ten to twelve years. This may explain why prices in many areas have risen above the potential use of the parcel will support.
Natural gas leasing has dropped dramatically, which may be contributing to the slight decrease in rural raw land prices.
ALCS wishes everyone a Happy New Year in 2009!