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The Slow Pace of Change
By Tracy Dickinson
HOME TRENDS August/September 2018
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The Slow Pace of Change

A look at the development situation around the metro.

From the outside, it can seem like fads come and go and trends change quickly. In reality, even clothing styles, color trends, and fad diets take months to make their way in and out of popularity.

When it comes to land development, the pace of change can seem even slower. But local developers say that gradual adjustment occurs for several reasons. And that’s not always a bad thing.

The Length of the Process

“There’s so much prework that goes into developing land,” says Bill Kimberley of Kimberley Development in Ankeny. “Just getting an analysis done by the Army Corps of Engineers can take six months.”

Kimberley says it typically takes more than a year to complete all those advance processes: city approvals, site analysis, stormwater detention plans, sewer and water lines, and more. That means it can take developers a little longer to respond to changes in the marketplace, and municipalities and states take even longer.

According to Newblood Development’s Eric Grubb, peripheral factors, like highway access and infrastructure, which can enhance growth in outlying communities, are planned out so far in advance that development often takes place several years before infrastructure catches up.

“The Department of Transportation is not reactionary,” Grubb says. “They think in decades, not months or years, so any potential infrastructure needs as a result of development are usually a ways down the road.”

According to Accurate Development’s Kevin Johnson, “We’ve been watching the changes in the market, but things are really staying on the expected course. It just takes time to get plats available once the process starts.”

Kimberley agrees. “We have a lot of plats going in right now, but we’ve been working on those developments for a couple of years. It’s taken this long to get everything ready.”

The Regulatory Requirements

From code requirements to city demands on developers, regulatory issues are one of the most significant factors in the rising cost of new construction. Those issues also affect the length of time it takes to prepare a development for construction.

“Development will go where cities make them welcome,” says Johnson. “They can make it easy or really tough to develop.”

Kalen Ludwig of Peoples Company agrees. “Some cities are not allowing developments with smaller lots. They want properties with larger footprints, three-car garages. It’s true that for a while that’s where the demand was. But that’s changing, and cities haven’t kept up with that.”

Communities have long used tax abatements and similar incentives to draw development, and that has been a successful tool. In fact, Adel had such success with a 7-year tax abatement program that it is being phased out in order to manage the city’s growth.

“Things will definitely slow down in Adel over the next several years,” Johnson says. “The commercial development hasn’t quite kept pace with the residential development, so this scale-back is a good move to give the city itself time to develop, too.”

“Overall, we have a pretty healthy market around the metro,” Grubb says. “Developing is always a struggle with city requirements. It makes it more expensive for sure.”

Kimberley says the length of the development process and the city requirements fuel each other. “It takes so long to do the studies and the planning, and then cities bring on more requirements and ask for more engineering studies. And they change the definitions of terms, and that requires more studies. A lot of times that puts the burden on the developer instead of the city in order to keep a project moving.”

The Demands of the Market

The slow pace of the development process can make it seem like developers aren’t responding to changes in the marketplace. But that’s not the case.

“There’s a trend toward smaller lots and not-so-big homes,” Grubb says. “Developers want to meet the price point the market is demanding. With the cost of land and development, this is one way to address that.”

“Developments that were started several years ago have plenty of larger lots available, and they’re selling. But they’re not selling fast. The market is saying smaller lots, lower prices, and developers are having to adjust to that,” Kimberley says.

Johnson says lots in the lower price ranges are absorbed much more quickly than larger, more expensive lots for multiple reasons. “There’s definitely a demand at that level, and there aren’t enough available. Lots in the pricier ranges, there’s too many. And the more expensive the lot, the more particular the buyer will be about the amenities they expect to get along with that. And that adds to the development cost.”

Those expected amenities are a two-edged sword for developers. Designing neighborhoods with desirable amenities can draw buyers to the development. But adding amenities drives development costs up and eliminates many potential buyers from the market.

Planned communities, like those at Ponderosa, Prairie Trail, and the new Heritage at Grimes development, require extensive segments of development land, which are not available often. And the cost—and time frame—to develop such a neighborhood can be prohibitive for most developers.

Ludwig explains, “Cities see those planned areas working for other communities. So they want to develop them in their own communities. But those changes take time, and it really takes everyone working together—cities, developers, builders.”

“One good thing about the slow process is that you have time to reevaluate and adapt,” Kimberley says. “We’ve got a number of subdivisions going in, and we’re looking at those again to see how best to do those based on what’s going on in the market right now.”

“There’s a lot of uncertainty right now as developers and builders adjust to the changes in the market,” says Ludwig. “But the Des Moines metro is still a growing community. We’ve been protected from a lot of the ups and downs we’ve seen taking place nationally.”

The pace of change is slow when it comes to developing land. But around the metro, that may not be such a bad thing. Growth hasn’t slowed yet.

 

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