Commercial Real Estate News / Development / The Art of Land Assembly in Washington's Commercial Real Estate

The Art of Land Assembly in Washington's Commercial Real Estate

Published: 11-08-23 Category: Development

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Adjacent plots of land often hold a lot of potential value, but disparate ownership often prevents their complete utilization. Further, restrictive zoning and development codes might limit what developers can achieve on a single plot of land.

Land assembly projects combine several adjacent plots of land into a single plot for more flexible and efficient development.

As such, land assembly is a potential tool investors can use to maximize the value of a particular land investment, a tool that should prove greatly beneficial to those looking to invest in Washington State's heavily industrial- and agriculture-dependent economy.

With that in mind, let's talk a bit about land assembly practices and how you can apply them when buying land for sale in Washington State. We'll discuss the efficiency of land assembly, benefits and risks, and provide examples.

Let's get started.

The Power of Land Assembly in Commercial Real Estate

The Art of Land Assembly in Washington's Commercial Real Estate

Land assembly is pretty straightforward: Developers will buy multiple plots of adjacent land and combine them into a single parcel for larger development projects. In this scenario, the buyer would be literally “assembling” a larger parcel of land from the smaller adjacent pieces.

Land assemblies often occur when neighbors decide to sell their properties jointly as a single package. The buyer can then tear down the existing structures on the land and redevelop it for their own purposes. You can think of land assembly as uniting a property with much value yet fragmented ownership.

Land assembly projects are important because they stimulate growth and make it easier to coordinate large-scale development projects. Land assembly can also rehabilitate condemned land for more productive use.

Steps to Assemble Land Parcels

The exact steps for a land assembly project will differ depending on local regulations and development codes. Still, there are three general steps of the process, each with several smaller steps:

The first step is site selection. Investors will pick adjacent plots of land that are being underutilized, and that could be redeveloped for more efficient use.
The next step is approaching and coordinating the sellers. This is arguably the most complex step as it can be extraordinarily difficult to get everyone on the same page, hence the often-discussed ‘lone holdout' problem in land policy.
The last step before development can occur is getting permissions and permits. You might have bought the land, but you'll have to perform a site evaluation and acquire all the necessary permits and certifications before breaking ground on the project.

The land assembly process is long and complex, so adding a broker and real estate attorney to your investment team will save you stress in the long run.

An Example of Land Assembly

Here is a hypothetical example of land assembly in action. Say a developer wants to buy several plots of adjacent land for sale in Washington state in Whitman County to develop it into wheat farmland.

The developer might approach the adjacent plot owners and offer a lump sum to buy all the land collectively.

The land owners and buyers could then negotiate a sales contract for the collective plot. This is a stripped-down hypothetical example, but it illustrates the main parties involved (i.e., landowners and buyers) and the general structure of land assembly agreements.

Benefits and Risks of Land Assembly

From the buyer's perspective, land assembly reduces risk, especially when the buyer buys all properties in a single transaction. Another major benefit of land assembly is flexibility. The additional land is useful for redevelopment, and it's easier to work around development requirements, such as roads, utility requirements, etc.

From a higher-level perspective, land assembly can stimulate urban growth. Land assembly can open up commercial land for development and make land use more efficient, especially for plots that have outdated or unused structures.

From the seller's perspective, landowners can often make more selling together than individually.

The main risk of land assembly is time. Land assembly projects are complex and involve coordinating several disparate actors, so it can take several years to finalize a deal. In that time, the property's value might fluctuate, or the market might shift in such a way that redevelopment is no longer feasible.

Case Studies of Successful Land Assembly Projects in Washington State

To look for successful cases of land assembly in Washington, consider the state's brownfield restoration projects. Washington State has the Brownfields Revolving Loan Fund, a land loan fund that exists to reclaim contaminated former industrial properties.

According to state data, every dollar spent from the fund generates $64 in business revenue, $14 in payroll taxes, and $12 in local & state taxes—quite a high ROI. Many of these projects have converted lost land into affordable residential housing.

Most real estate investors won't be reclaiming contaminated land for sale in Washington State. Still, the existence and success of the brownfield reclamation program demonstrates how land assembly projects can unlock the development potential of contiguous parcels.

Regulatory and Legal Considerations

The main legal challenge for land assembly projects in Washington State is coordinating a sale between all the individual owners. Land contracts for assembly sales must balance the interests of all sellers, and creating a legally sound, fair deal takes time, effort, and lots of negotiating.

In terms of regulation, zoning is always a factor. Land assembly projects might also require rezoning so the buyer can complete the development they want.

For example, converting several residential plots into a single larger plot for a warehouse would most likely require rezoning the property for commercial industrial use.

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