Bullpen Consulting just released its Q3-2024 high-rise land report for the Greater Toronto Area. Here's a figure showing average high-density land prices (on a per buildable square foot) by quarter since 2018:

Here's their summary data broken out by Toronto versus the Greater Toronto Area:

And here's a list of all the land transactions last quarter:

At the highest level, the average high-density land trade last quarter across the GTA was at around $98 per buildable square foot. This is down 13% from $112 pbsf in Q3-2023. And going back to the first chart in this post, there also seems to be a longer-term decline in high-density land prices.

But as Bullpen rightly points out in their report, there are limits to what can be gleaned from data like this. And that's because land transactions can be structured in countless ways. Did the vendor provide cheap financing? Was there a delayed close? Are there any unique site conditions that could be impacting value? The list goes on.

So even though prices and transaction volumes are down (which is what one would totally expect right now), it still doesn't feel like this data accurately reflects what's going on in the market today. I think the reality is worse.

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Figures: Bullpen Research & Consulting

Following yesterday's post about the most expensive home in Brooklyn's Dumbo, Jed Bryne of Oak City CRE fame shot me a note asking about the typical land multiple that developers need in Canada in order to make a project feasible. In other words, if your land cost is $X, what multiple on this would your top line number need to be in order to have a project? And he mentioned that in North Carolina, he often sees multiples in the range of 3-5x the land acquisition cost.

My initial response was that we don't typically look at this metric. Many years ago, the rough rule of thumb for new condominiums here in Toronto used to be 10x the land price per buildable square foot. So if you were buying development land at $100 per buildable square foot (calculated as land price divided by the total gross floor area of the project), then you likely needed to sell your condominiums for somewhere around $1,000 per square foot.

On some level this can be a useful metric, because it allows you to quickly tell if a parcel of land is too expensive. And in some situations, it might allow you to compare sites/markets. If you have two different markets and land at the same $X price pbsf, but one requires a 10x multiple to be feasible and the other a 5x multiple, then it tells you something about the cost structures of these two markets. Construction costs probably won't vary all that much (assuming similar builds), but project timelines, development charges, and many other things sure can.

But again, this isn't a number that we typically care a great deal about.

There are a lot of variables in a pro forma and the "required" multiple can change overnight. Maybe it's 10x today, but then development charges go up by 49% and now you need an even higher multiple in order to make the project feasible. So for us, the salient land number is the price per buildable square foot. What is the price per pound of development density? And the way you determine if you have a reasonable number is by doing a residual land value calculation.