Residential Real Estate Development Industry Profile

Companies in this industry prepare land for development and subdivide it into lots for sale to builders; services may include excavation for the installation of roads and utilities. Major companies include Forestar Group, The Related Companies, and WCI Communities (all based in the US), as well as Nexity (France), Tokyu Land (Japan), and Vanke (China). Major homebuilders also often have their own land development divisions.

The Asia/Pacific region and Latin America provide growth opportunities as young populations, diversifying economies, and increasing access to capital propel real estate markets. The mature European residential real estate market continues to struggle. Many leading US-based real estate companies conduct a significant amount of business internationally.

The US residential real estate development industry includes about 5,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $9 billion.

COMPETITIVE LANDSCAPE

Demand for land development services is driven by population growth,?personal income, employment rates, interest rates, and access to capital. The profitability of individual companies depends on accurate cost estimation and successful bidding. Large companies have advantages in having greater access to capital. Small companies can compete by focusing on a specific geographic area or market niche. The industry is fragmented; the top 50 largest firms account for about 40% of industry revenue.

Poor economic conditions can decrease demand for housing and cause companies to have to hold land in inventory longer than planned. Those inventory ...