Developing residential land vs. suburban sprawl:
Developers talk about expansion in central PA

By Bill Gladstone and Charla Keiser, NAI CIR Company


Pennsylvania grew by 1.4% in population between 1982 and 1997, but consumed 41% more land to do it than any other state. The Philadelphia Inquirer described the area as growing “an acre an hour” in 1999, and there is still concern today about the future of expansion in Central Pennsylvania.

“Harrisburg is conveniently located in the midstate near all of the major highways, so it is good for businesses to be located here,” says Stan Custer of
Custer Homes Inc. “It is also relatively inexpensive to live here compared to some other nearby cities, such as Philadelphia and Pittsburgh.”

The location isn’t the only reason for expansion. Low interest rates and favorable financial conditions are also high on the list of reasons for the rapid expansion in residential development. “People want to get into a new home before rates go up,” said Custer.

While expansion seems very rapid, development projects take a long time to complete. Harry Fox, a local developer, attributes delays to Pennsylvania’s “poly-fragmented local government structure, each with its own
set of rules and regulations with respect to development. The biggest factors are all the various environmental requirements and constraints, everything from wetlands to endangered species and historical review situations.”

“Many townships seem to be experiencing rapid growth and very vocal citizen groups are opposed to development,” said Custer.There are extended negotiations with townships and their officials concerning new developments. Rather than spend the time and money involved with fighting the decisions made, many developers simply drop the projects.

“There is very little ‘downside’ for them,” said Marc DeSouza of DeSouza Brown Inc. “It costs a township relatively little to fight such battles and only increases the developer’s carrying costs for every month they manage to stretch out the fight.”

As a result of the demand for expansion, there is a smaller supply of available land. Due to the more restrictive development processes, the costs for developments are increasing rapidly. “Our buyers are more interested in one story homes with very open floor plans with lots of architectural details and finishes—arches, columns, tray and coffered ceilings, luxury hardware, fixtures and materials,” said Custer. There is also a demand for more home technology, such as lighting controls systems, home theater systems, and radiant heating. “We see continuing trends in the luxury multi-family market, specifically
townhome and condominium units with first floor master suites and attached
two car garages,” said DeSouza.

One of the reasons for those trends is the aging population.“You’re going to see baby boomers looking for a product that is conducive to their change in circumstances— more ranch type one story living will be desirable,” said Fox.

“The other trend I see is an increasing view that housing is the best place to put money,” Mr. Fox continues.“The best long term return would be simply holding land that is capable of being developed in the future. If someone is in the position to do it, land banking is going to exceed just about anything they can do with their money.”

“Residential building lots will continue to escalate in value,” said Custer. The value will increase because of the increasing difficulty of approving projects. DeSouza said the downside is that “the rental end of the business has suffered at the hands of rapid sales in the last few years.”

“The general perception over the last ten to 15 years is that development is negative,” says Mr. Fox. “It used to be, when I started 25 years ago, that development was perceived to be okay, as long as you did not cause problems or pollution.” The continuing concern about suburban sprawl in Central Pennsylvania has led to the feeling that the process of developing in itself is a negative act.

Bill Gladstone, CCIM, SIOR is a sales agent for NAI/Commercial-Industrial Realty Co. Charla Keiser is a marketing director for Bill Gladstone.
Friday, March 25, 2005

Reprinted from NJPA Real Estate Journal • 781-871-5298 • 800-584-1062 • 781-871-5299 (fax) • njpajournal.com

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