Strategic Land Acquisition in Washington State: A Guide for Commercial Real Estate Investors
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Strategic land acquisition is the process of acquiring land parcels that fit your long-term investment goals. Commercial real estate markets change and evolve daily, so identifying components of successful land investments ensures your strategy stays on track.
Washington's massive $725 million economy and beautiful landscapes make the state a prime place to buy land. Its economy also houses several industries that need land, like manufacturing, agriculture, forestry, and defense.
Here, we'll cover key details and strategies commercial real estate investors can use when buying land for sale in Washington State. We'll look at how to navigate zoning regulations, how to negotiate land deals, and case studies of successful commercial land acquisitions.
Let's get started.
Understanding the Washington Commercial Real Estate Landscape
Washington's economy has been historically stable, thanks to its agriculture and industrial sectors. Today, the state is seeing a surge in industrial real estate development: Seattle alone has over 14 million square feet of industrial space under construction, and experts remain optimistic about the sector's future.
Such industrial growth has been matched by other retail sectors in the state, particularly in suburban areas. Office activity is currently acclimating to a new normal, but office markets in some Washington-based cities remain volatile.
Washington state is also a major agricultural producer, which presents opportunities for farmland investing. Washington state produces significant amounts of apples, milk, cattle, and wheat, and average cropland rents hover around $238 per acre.
Identifying High-Potential Commercial Land Opportunities
It's evident that commercial real estate in Washington presents plenty of potential. Now, let's look at tactics and strategies you can use to narrow that down into profitable investment opportunities.
#1 – Understand the Market
Finding the right opportunities means knowing the lay of the land (pun intended).
Metrics like commercial real estate occupancy levels, average rents, unit absorption, and tenant retention can help you discern the most profitable niches.
Construction activity metrics, in particular, are relevant to land investors, as they provide snapshots of current land demand.
#2 – Consider Past Trends
Look into the history of the markets that interest you. What developments occurred there in the past, and what were the effects?
You can often find past case studies in similar cities to get an idea of where current real estate trends might lead.
#3 – Infrastructure Matters
One of the most important markers of real estate opportunity in a region is infrastructure development. Land projects need access to roads, gas lines, water, electricity, and other utility essentials. Highway, road, and transit development can stimulate business growth and development.
Evaluating Land for Commercial Development
An important part of choosing land is evaluating whether it's suitable for your intended development. Below are some general pointers on evaluating a piece of commercial land for your development project:
- Double-check permits. Older structures on land might be grandfathered in for land uses that current zoning policies restrict. Tearing down existing buildings might void any applicable grandfathered status, so you'll have to build according to current permitting regulations and restrictions.
- Inspect beneath the surface. Landowners are responsible for any land contamination remediation, so it's in your best interest to get an environmental assessment and report ASAP.
- See if your property falls within wetlands. The EPA has regulations to protect wetlands, and they affect development feasibility. You can check whether the land for sale in Washington that you're looking at is in a wetland with your local planning department.
- Don't forget to check for any land easements. Easements affect property usage rights and may also affect what development projects you can perform.
Site assessment and preparation are possibly the most important parts of the development process, so it's crucial to do your due diligence to ensure development feasibility.
Navigating Zoning Regulations
Zoning regulations in Washington state occur at county and city levels. Many municipalities in Washington have unified development codes that provide a comprehensive account of zoning codes, review procedures, and permitting processes. Other municipalities might have separate legislation titles addressing these factors.
Zoning is crucial for commercial real estate investors as it determines and restricts potential land uses. If you plan to develop a plot of land for commercial purposes, you must ensure the land is zoned for that particular commercial use.
A real estate agent or attorney can help you navigate your zoning concerns.
Tips for Negotiating Land Deals
Finding a good piece of land for sale in Washington State is only part of the process. You also need to put in an offer and negotiate a contract.
To help you out, we've put together some tips you can use to successfully negotiate your land deals:
- Compare your offer with surrounding land prices. Unless the parcel has a particularly special feature, fair value should be roughly the same as surrounding plots.
- Find covenants and restrictions. Private covenants may put additional limits on land use, so work with an attorney to find out everything you can about relevant land use restrictions.
- Consider a land contract. A land contract is a special agreement that allows the buyer to directly pay the seller in installments instead of paying with a typical land loan lump sum. A land contract can make sales terms more flexible for both parties.
- Don't keep negotiations open-ended. You should give the seller a particular time frame for the offer—about one to three days is ideal. This gives the seller motivation to follow through.
If you're uncomfortable handling contract negotiations, a commercial real estate broker can take the helm and perform the negotiations on your behalf.
Case Studies of Successful Commercial Land Investments
A simple example of successful acquisition of land for sale in Washington State is the recent trend of office-to-apartment conversions in Tacoma: Owners and developers are acquiring old office properties and converting them into residential apartments.
This activity reflects good acquisition practices—assessing local demand, identifying a niche, and creating a plan for building development and repurposing.
Further, experts estimate about 15% of office properties in cities across Washington are suitable for this type of conversion.
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