Writer: Max Crampton-Thomas
2 min read July 2021 — Landeavor, LLC, is a full-service real estate development company specializing in master-planned residential communities. Managing Principal and Co-Owner David Frame spoke with Invest: about the pandemic’s impact on housing and dealing with the pricing challenges that are rampant across the industry.
What are the factors driving the housing market?
A few years before COVID, we started seeing a migration out of the cities, especially among millennials who were getting older and having children. COVID accelerated that migration trend. Due to the pandemic, we also had supply chain shutdowns and there were issues with financing, which contracted the supply side of the business. When lots are not being developed to replace supply, prices are going up. Interest rates are low but there is also a tremendous increase in prices of raw materials for housing, driven by supply issues. For instance, we’re starting to see concrete backlogged on smaller jobs due to a shortage of Portland cement. The huge demand has put a real strain on the system and the pipeline.
How is Landeavor positioned in the Atlanta market?
We have two large communities. The River Club is a very high-end gated community on the northside of Atlanta in Gwinnett County, where we are seeing a significant increased demand for lots. We’re on the last 10% of the supply. We also have Great Sky, which is in Cherokee County with home pricing from the high $200,000 to $600,000. These lots are also seeing high demand. This community is about 50% built out so it has an identity and positioning, and we have inventory. Trying to replace a community like that in today’s environment is exceedingly difficult, both in terms of land constraints and on the financial side.
How will the challenges related to high materials prices play out?
In terms of materials, there was a lot of speculation that when COVID restrictions began to wind down, we would see a reversal of this pricing trend. This has not been the case so far. Builders are continuing to have difficulties with pricing. When negotiating a presale or custom build contract, trying to lock in the cost of materials is very difficult. We have also seen that builders are consciously slowing down sales due to the difficulty of predicting build time due to material and labor constraints and costs.
How is the working from home trend changing consumer needs?
There will be a percentage of the workforce that will work from home at least for a proportion of their week going forward. As builders, we’re making accommodations for that. High speed internet is a given but also isolated workspaces are in high demand. A lot of people will go back to the office because, in reality, nothing replaces face-to-face communication and collaboration.
How have some of your commercial properties expanded?
In some of our master plans, we had commercial pods but most of our communities have no large commercial components. The office sector has experienced a pullback, as has the retail side. Most of the growth that we see in real estate today is residential. The flip side to that is that rooftops create demand and as rooftops expand in the suburbs and major corridors develop, grocery-anchored centers and big box stores will follow. At Great Sky, one of the selling points were the amenities the community already provided, including a Publix, Chick-fil-A, Home Depot and a hospital. At this point, it would be impossible to find a tract of land that large in the suburbs with access to those kinds of services.
What is your strategy for growth in Atlanta?
We have two strategies. The first is doing some smaller, amenitized communities of 200-500 units. The other strategy that we’re pursuing is purpose built for rent. This started in Phoenix a few years ago and has really taken hold because there are a lot of people who would like to rent a single family home or townhouse. The people who rent these units do not want to live in a four-story walk-up but in a suburban-type community. With the increased migration to the suburbs, they are given another option.
What is your outlook for the next 18 months?
We are now getting back to some semblance of normality so hopefully COVID will start to disappear. We are at an unprecedented point in our real estate markets in terms of pricing and absorptions and we have enough inventory in most of our communities to take advantage of this while it lasts. There is inflation in the market, but we still have not seen if this is transitional. If it is deep-seated inflation, we will have interest rate issues, which will have an impact. I don’t see that being a problem in the next few months but it is difficult to predict the situation beyond the 12-month mark.
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