Land, the saying goes, is the best investment around because they aren't making any more of it.
But that only holds true for land that people want, bringing into play that other beloved bromide: The three most important things to remember when buying real estate are location, location and location.The Wasatch Front apparently scored in all three categories last year as strong demand continued to reduce the inventory of land available for commercial and residential development.
According to the Salt Lake office of CB Commercial Real Estate Group Inc., available and desirable parcels of land diminished along the Wasatch Front last year, pushing up prices.
For 1998, CB Commercial forecasts that raw land prices will increase as much as 10 percent. Industrial and office land uses will level off and speculative developers will remain cautious. Retail projects will drive up the value of well-located retail sites.
Despite a steady slowing of in-migration during the past four years to a low of only some 10,000 in 1997, demand for land has remained high, said Eldon Haacke, commercial senior associate for CB's Salt Lake office.
"Developers are still being forced to look at historically high land values as most of the favorable parcels remaining are not for sale," he said. "This has required creative land planning to maximize land uses (and) rationalize the prices required to motivate sellers to consider new offers - always with the goal of bettering the last offer made."
This is particularly true in the single-family-home land market, he said, where there was a significant drop in building permits last year from 1996 - a decline that Haacke attributes to fewer development opportunities and a lack of product for sale.
Haacke said that as smaller plots of land continue to be developed in the Salt Lake Valley, construction of homes is being pushed south into Utah County, west into Tooele County and north into Davis County.
Is the Salt Lake Valley running out of land? "Either that or we're running out of willing sellers," of land, said Haacke.
"The cost of raw land for single-family home development has risen so drastically that out-of-state developers are eager to find sites where they can develop smaller lots (for) entry-level buyers, such as those with zero lot lines."
The goal, he said, is to build starter homes with monthly payments within $100 of average rental-unit payments. Garages and other amenities become options in that scenario.
"Developers will shy away from the high-end homes," he said. "They have found they can build more entry-level homes and build them faster and for equal or greater profit."
Multifamily-home building permits issued in 1997 dropped to 28 percent of their 1996 numbers, said Haacke, while vacancies declined from 4.4 percent to just 3 percent. Again, the lack of "zoneable and economically feasible" building sites are the culprit.
Among the bright spots last year in multifamily, he said, was housing for the elderly. The aging population, deregulation and tax incentives have made this sector attractive, according to Haacke.
"The fact that developers can achieve higher densities without traffic and school crowding will lead to higher values for some otherwise difficult land opportunities."
Hotel and motel development was off by 62 percent through the third quarter of last year compared to the same period in 1996, said Haacke. Extended-stay hotels were the strongest sector.
Land sales for other commercial uses continued to thrive in the build-to-suit market while speculative development has leveled off.