Toll Brothers gets creative to find land

Dive Brief:

Homebuilder Toll Brothers is looking beyond farms and other undeveloped land for new places to build homes closer to the urban, walkable neighborhoods today’s homebuyers prefer, according to The Denver Post.
CEO Douglas Yearley Jr. said the company is considering out-of-use shopping strips, car dealerships and office buildings as possible new building sites. As one example, the builder worked with Starwood Capital Group to build a hotel and 100 luxury condos in a neglected area of Brooklyn, NY.
Although the high-end production builder is rooted in the mid-Atlantic, it is looking west to states like Texas and Colorado. The west region accounts for more than half of the company’s new-home sales today. Toll Brothers is also considering multigenerational and smart homes.

Dive Insight:

Toll Brothers is one of the largest homebuilders in the country — No. 6 by housing revenue and No. 10 by closings in 2016 — so its approach to the current lot shortage offers insight into builders’ continued struggle to find land in areas where homebuyers want to live.

The new land types Yearley mentions aren’t as far out as the farms typically bought for development but instead are in or near cities. For the product Toll Brothers offers, which sells at a higher price point than many of its production builder competitors, buyers may be willing and able to pay the price of living closer-in.

A recent report from the Urban Land Institute’s Terwilliger Center for Housing found that the suburbs of the country’s 50-largest cities accounted for 79% of the greater metro areas' population and 91% of their population growth between 2000 and 2015. While 75% of those regions’ millennials live in the suburbs, the report noted, they are drawn to economically challenged, as well as greenfield, areas, lending some credence to Toll Brothers’ new strategy.

Still, according to Zillow, more than 50% of millennials already live in the suburbs and another 20% reside in rural areas due to the generally lower housing costs there. While people of all ages tend to prefer being close to work, entertainment, retail and other resources, price and the desire to own rather than rent their home often outweighs the city-living benefits.

For its new, millennial-focused T|Select home product, the builder is looking to growing markets like Houston, Jacksonville, FL, and Boise, ID. The homes won’t have as many structural options and upgrades as Toll Brothers typically offers, but that will make for quicker delivery times and a modest price decrease.