SIC 6552 Land Subdividers and Developers, Except Cemeteries

Encyclopedia of American Industries | 2005 | Copyright

SIC 6552
LAND SUBDIVIDERS AND DEVELOPERS, EXCEPT CEMETERIES

This category includes establishments primarily engaged in subdividing real property into lots, except cemetery lots, and in developing it for resale on their own account.

NAICS Code(s)

233110 (Land Subdivision and Land Development)

Industry Snapshot

Real estate development is a multifaceted industry. It includes the purchase of vacant or raw land, its subdivision into small parcels, and the construction of residential single-family houses, condominiums, or apartment buildings. It includes construction of retail shopping centers, industrial plants and warehouses, office buildings, schools, prisons, hospitals, and almost any type of structure. Additionally, it includes the renovation or restoration of warehouses to loft apartments or offices and the construction of parking garages. Generally land development and subdivision falls into three categories: rural, urban, and suburban.

The value of new construction put in place in 2001 totaled $842.5 billion, of which $650 billion was used for private construction. Of that total, $388.7 billion was directed toward residential buildings, and $201.1 billion was used for nonresidential purposes, including commercial, office, and industrial buildings. Although almost all non-commercial sectors showed growth over a five-year period, expenditures on new office space more than doubled between 1995 and 2001, from $23 billion to $49.6 billion.

The beginning of the twenty-first century was marked by low interest rates that provided an historically strong housing market. New-home sales totaled nearly 950,000 in 2002, down slightly from a record of just over 975,000 in 2001. Housing starts in 2002 stood at 1.71 million, with the same expected for 2003. An unsettled political situation with Iraq in early 2003 threatened to impact the U.S. economy and investors worried about the economic impact of prolonged U.S. involvement that might lead to higher interest rates and slow the growth in the real estate market.

Organization and Structure

In the twenty-first century, land developers coordinate a battery of activities necessary to carry out the development of land into useable space. Developers typically purchase a tract of land, devise a building program, obtain government approvals and financing, and then set about to have the structures built. After the building is complete, the developer may sell all or part of the property, or keep it on account and manage the property by leasing space to tenants. There are nearly as many different scenarios as there are developers.

Successful development firms operate under a variety of paradigms, including that of niche developer, such as Francesco Galesi of the Galesi Group. Galesi, a global corporation, developed 900 million square feet of space in the twentieth century. Galesi purchased the land from the General Service Administration (GSA) of the United States government and developed the acreage into strategically located distribution centers for military supply depots, some capable of holding 20 or more railroad cars. The company's operating cash flow exceeded $12 million annually by the end of the 1990s. Likewise, industry leader Simon Property Group led the real estate industry in North America by the end of the twentieth century through extensive investment in the shopping mall arena.

Among the leading developers' associations, the 15,000-member Urban Land Institute encourages effective urban planning and studies new area development.

Background and Development

Real estate development in the 1990s underwent a dramatic change from previous decades. Several factors spurred long-range change in the real estate development industry, including a severe economic recession in the early 1990s that affected many geographic regions of the United States. In 1991 a Census Bureau study found that 57 percent of all families were unable to afford a median-priced home in their community, a circumstance that led developers to increase construction of apartments and other multiple dwellings over single-family residences. Beginning in 1993 an overall surge in the American economy and growth in housing...

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