CCIM Q & A
By Nicholas Leider
OPTIMISM IN THE LONE STAR STATE
When you hear everything ’ s bigger in Texas , it ’ s easy to assume that ’ s just a bit of local pride . But anyone who has driven across the plains of West Texas understands there ’ s a bit of truth in that aphorism . When it comes to land — and its associated farmland and ranch real estate markets — it doesn ’ t get much bigger than the Lone Star State .
While some commercial real estate sectors can count on a steady supply of new assets , land is inherently constrained .
Russell Webb , CCIM
Considering this physical limitation , increasing demand can mean more people looking to scoop up similar assets . COVID-19 greatly impacted interest in land for farming , leisure , and speculation , so understanding the temporary and fundamental changes to the land market is essential to survive and thrive in a competitive space . Russell Webb , CCIM , managing partner with Silver Oak Commercial Realty in Southlake , Texas , outside of Dallas , has put together 20-plus years in commercial real estate , specializing in land , among other sectors . Additionally , before turning his attention to CRE , he spent his early career in the gas and oil business , which is not surprising considering how essential the energy industry is to his home state . Commercial Investment Real Estate spoke with Webb about COVID-19 ’ s impact on CRE , how demographic changes may impact the land market , and opportunities in energy for CRE professionals .
CIRE : IN THE WAKE OF COVID-19 , PEOPLE HAVE TALKED A LOT ABOUT RETURNING TO THE OFFICE OR RETAIL ’ S RETURN . WHAT HAS BEEN THE SITUATION IN RANCH AND FARMLAND ? HOW HAS THE PANDEMIC IMPACTED THE SECTOR ?
RUSSELL WEBB , CCIM : We ’ ve seen a real increase of interest in farm and ranch land since COVID-19 . There was also a rush in
If you own a ranch in West Texas with mineral rights , you can pick up both the basis on the land and income off royalties from any future production .
demand for recreational properties outside Dallas and Fort Worth , with potential buyers looking towards Abilene and Wichita Falls . People were looking for space and vacation properties in lower-density areas . These trends also led to a huge increase of interest in land for RV parks .
In the last two years , I ’ ve seen a lot of activity by commercial real estate investors looking to buy large tracts of land to subdivide them to meet this rising demand . There are a lot of people in big metropolitan areas like Dallas , Fort Worth , Houston , and Austin who are looking for ways to escape the hustle and bustle . Considering the growth in working from home or working remotely , people are not tied to an office like they were before COVID-19 . It ’ s possible to live farther and farther away from a central office location — and that can change the importance of being in a city or nearby suburb .
The land market in Texas has been pushed to new heights during COVID . You can go to some counties in South Texas where folks are asking anywhere from $ 10,000 to $ 50,000 an acre . If you ’ d have gotten some investors together and bought a bunch of contiguous land before the pandemic , held it , and sold it today , that rate of return would be huge . But I still think there ’ s room to grow in this market because we have so many people moving to Texas or looking at our state for investment opportunities .
CIRE : OUTSIDE OF THE PANDEMIC , WHAT ABOUT FARMLAND AND RANCHES DRAWS INTEREST FROM INVESTORS ? WHAT ASPECTS OF THE SECTOR ARE UNIQUE WHEN COMPARING THEM TO OTHER SECTORS OF CRE ?
WEBB : It is an especially appealing investment opportunity if you can keep the mineral and executive rights . If you own a ranch in West Texas with mineral rights , you can pick up both the basis on the land and income off royalties from any future production .
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE SUMMER 2022