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Yesterday my wife and I visited a part of the city that is already fairly developed but is still building up rapidly. Among the many piles of dirt and construction fences, one particular site caught our attention. The land will be home to a new office building, but an advertisement posted in front of the fence revealed that the owners are seeking lessees. Later, as we headed home from our errands, we saw several warehouses under construction in a different part of town. These also advertised open commercial space for rent or lease.
We found this quite confusing. In the wake of the COVID-19 pandemic, and especially in this area, telecommuting is quite common. We don't see many businesses expanding their physical presence in the city, and indeed many companies are increasingly being priced out of competitive areas. So why are construction companies creating a glut of supply and building buildings before anyone chooses to occupy them--and if there is such a glut, why aren't commercial rental prices going down?
I suspect the answer has to do not with the buildings, but the land itself. Real estate interests are not building all these structures in order to create a glut of buildings: they are trying to create a shortage of open land on which people and companies can build structures of their own. These interests snap up land in prime locations, such as in populated areas and next to major transit routes like interstates and railroads. Companies then rent out the buildings to perform business, but the interests maintain their wealth in land equity and leasing fees. Essentially, I suspect it's a form of land scalping.
I don't object to the concept of renting property or anything else. Seeing this trend in land development, however, is very frustrating to me. I believe land should be used sparingly and mindfully, especially if we intend to be kinder to the environment. Building extra buildings people don't actively need, just for the purpose of retaining asset wealth, is wasteful.
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[Last updated: 2024-10-06]