Evaluating the Washington Land Market
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By
Bart Waldon
The Washington land market is a complex beast, with plenty of moving parts for investors and farmers alike to consider. Recent data paints an interesting picture: farm real estate values in the state jumped to $3,060 per acre in 2022, up 8.5% from the year before. This tidbit comes straight from the USDA, and it's got people talking. Why the surge? Well, it seems the appetite for good farmland is growing, especially in areas known for cash crops like apples, cherries, and wine grapes. But don't be fooled – this isn't a one-size-fits-all situation. The price tags on land can vary wildly depending on whether you're looking at the lush fields of Eastern Washington or the more crowded western side of the state. For anyone trying to get a handle on Washington's land market, understanding these regional quirks and what's driving the changes is key.
Lay of the Land – Geography and Development
Spanning over 66,000 square miles, the Evergreen State presents diverse real estate opportunities. From the Puget Sound to the Cascades, Columbia Plateau to Palouse Hills, landscapes range from coastal rainforest to high desert. Metro centers like Seattle, Tacoma, Spokane and Yakima anchor regional development and drive land values. Beyond the cities, smaller communities nurture local industries, agriculture, and recreational tourism.
With major ports and rail access, Washington links Asian and broader western states markets. The educated workforce and moderate business climate have grown key sectors like aerospace, software, life sciences, logistics, agriculture, and advanced manufacturing. This steady economic expansion fuels real estate, especially around expanding urban areas.
Strong population growth in and around cities contrasts with slow or declining rural areas. Owners of farmland or timber holdings face stagnant or declining valuations, while urban fringe sites climb. Proximity to infrastructure and construction activity impact pricing significantly.
Factors That Shape Land Values
Pinpointing the value of a land asset requires weighing several local factors. While models assume rational markets, in reality sentiment and supply-demand imbalances move prices. Here are key considerations for buyers, owners, and sellers.
Location Views on Value
The adage in real estate “location, location, location” rings especially true for land. Values track nearby development, infrastructure, and amenities. Properties next to highways or urban centers command peak pricing. Peripheral parcels hold potential for future appreciation. But remote sites only attract buyers seeking isolation or incentives.
Beyond proximity, attributes like waterfront access or mountain views boost value for future construction or recreation. Even visual obstructions like power lines or highways can depress nearby prices. Favorable school districts also sway residential land buyers. Small differences in location weigh heavily.
Follow Infrastructure Investment
Land prices climb in areas with transportation access, utilities, and services. Existing infrastructure elevates valuation and development potential. Buyers prioritize parcels on major roads, near highway interchanges, served by rail lines, or adjoining flood control projects.
Public and private investments in infrastructure ripple across the local real estate market. Examining recent spending and expansion plans identifies up and coming areas before wider notice. Planned highway interchanges or utility growth corridors signal good land buys, even if undeveloped today.
Know the Rules of the Game
In local real estate, zoning and regulations hold all the cards, so buyers should understand the “rules of the game”. Properties allowing residential, commercial or industrial uses warrant higher acquisition prices than raw vacant land limited to agriculture.
Beyond current zoning, investigate if parcels can be re-zoned to more valuable uses. Area growth patterns may support rezoning applications. Some “flex” zoning also allows mixed use development. Due diligence provides clarity on feasible options.
State or county growth restrictions can also limit development. Innovative zoning and permitting sometimes unlocks potential, but may require extended timelines. Investigate before overpaying based on misassumptions.
Do the Math for Commercial Land
Commercial or industrial land requires different valuation metrics than raw acreage. Buyers should analyze market rents and cap rates, absorption and vacancy rates, and local tenant demand drivers. These inputs help model investment returns on income generating property.
Discounted cash flow analysis projects future revenue streams and expenses over the holding period. The discounted net sums equal a net present value for comparison to the asking price. Only sound assumptions support paying more than today’s valuation.
Factor in Carrying Costs
For raw land purchases, while future potential justifies some premium, buyers should consider carrying costs. Budgeting property taxes, upkeep, interest payments and other holding expenses evaluates true return timelines.
Generally, land within a 3-5 year development horizon warrants bigger premiums over inactive sites. Large remote tracts often merit only nominal bids above current rural use. Patient buyers avoid overpaying on speculation alone.
Watch the Life Cycle
Timing entry and exit to the growth cycles in an area can make or break returns. Investing early in emerging locations brings lower buy-in costs but requires patience. Buying at the peak may overpay.
Life cycle positioning is key. Maximum valuations flow to land when demand is high yet inventory scarce. Sellers aim to time the market’s peak appetite, often easier said than done. Even markets have life cycles requiring awareness.
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Field Guide to Washington Land Markets
Drilling down locally reveals opportunities guided by metro area growth patterns and regional industries. Markets remain interconnected but cycle at their own pace.
Puget Sound
The densest development radiates from Seattle southward along the I-5 corridor through Tacoma and Olympia. The expanding tech workforce escalates housing and commercial construction, with ripple effects reaching Snohomish County and south Pierce County. High buyer competition creates a seller’s market for already zoned, infrastructure-served land.
Further from cities, sites along planned transportation projects offer future upside. Investors monitor permitting activity for signals of shifting neighborhood patterns. For example, multi-family zoning and building mark areas transitioning from single family housing.
Spokane & Eastern Washington
The smaller Eastern metro areas like Spokane, Yakima and Walla Walla nurture growth of healthcare, education, tourism, and food/beverage industries. Healthy agriculture sustains the economy of smaller towns and irrigated croplands. Hanford nuclear site and associated research bring steady employment.
Commercial and residential development follows economic and infrastructure expansion, notably around Spokane. Higher education enrollments and affordability compared to Western Washington also attracts buyers.
Outside metro zones however, rural small towns struggle with aging populations, limited services, and oversupply of homes. This depresses values for vacant lots and tired properties. Private amenities help rural and lakefront sites hold values.
Central Washington
The Central region spanning Kittitas, Chelan and Okanogan counties builds on recreation, agriculture, and unique local industries. Retirees and tourism support real estate in Chelan, Leavenworth and Wenatchee. Agribusiness anchors Yakima and Ellensburg economies.
Infrastructure upgrades including new data centers diversify land demand. Leisure and recreational buyers seek out properties with access to hiking, fishing, and winter sports. Public lands and arid climate constrain private development opportunities, directing growth into incorporated areas.
Professional Guidance Builds Market Smarts
In Washington’s complex real estate mosaic, local brokers lend critical insights that data alone misses. Qualified real estate professionals track recent sales, new listings, buyer demand shifts, failed developments, and zoning adjustments.
For buyers, they identify promising options on or off market. Sellers benefit from accurately pricing land and marketing to qualified buyers regionally or nationwide. In volatile times, experts moderate expectations while pursuing opportunities.
In summary, Washington’s steady if uneven growth rewards knowledge of hyperlocal conditions. Leveraging experienced advisors, infrastructure cues, and market timing unlocks potential across the diverse landscape. With preparation and realistic expectations, land can build lasting value.
Final Thoughts
For landowners and investors, Washington's diverse landscape presents options ranging from passive holds to developing income properties. While the broader market grows at a measured pace, strategic purchases timed to local cycles and infrastructure expansion generate solid returns. Success requires reading macro trends as well as neighborhood nuances. Engaged professionals, informed analysis, and reasonable optimism help convert market potential into real ROI. With the right approach, Washington land can provide a stable platform for building future value.
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Frequently Asked Questions (FAQs)
What areas of Washington see the most land development?
The Puget Sound region surrounding Seattle and Tacoma has the most real estate development, especially for residential and commercial projects. Other growing areas include Spokane in Eastern Washington and smaller metro regions like Yakima, Tri-Cities and Walla Walla which attract housing, retail and healthcare projects.
How can I determine the value of land I want to sell?
Research prices for recent comparable land sales nearby, looking at location, acreage, zoning and utilities. Also consider development capacity if zoned commercial, or absorption rates if planning a housing development. Local realtors can provide pricing guidance through appraisals and their market experience.
What tips would help me time my land purchase or sale?
Monitor permitting activity and new project announcements to see growth trends in specific areas. Join local real estate groups to network with investors and track chatter on markets. Don’t overpay for land far ahead of infrastructure improvements, but be ready to act when expansion is announced.
Should I use a real estate professional to navigate the land market?
Yes, experienced local real estate professionals have insights on zoning, comparables, developers, and emerging opportunities that aren’t readily available otherwise. They help price and market land appropriately for your goals.
What resources help assess land investment potential?
Research recent sales prices, absorption rates, and local development plans. Drive the area to evaluate site access, visibility, surrounding uses and infrastructure. Seek insights from brokers, attorney and appraisers. Use online tools like mapping and satellite imagery to supplement direct research.