“The city is saying that they want to focus the greater density along the LRT, so therefore developers know if they’re close to the LRT or the primary 13 stations, they’re going to achieve additional height. That’s what’s really causing values to rise,” says Tom Brethour, vice-president of the land and investment division of DTZ Barnicke.
However, individuals owning land in the shadow of the planned light-rail line could easily underprice their land if they don’t properly assess its worth, according to John Clark, vice-president of The Regional Group.
“Property owners, if they’re not aware of the changes that are coming as a result of (light rail), sell property at a price that is far below what it can actually fetch,” he says.
A recent study completed for the City of Hamilton found that light-rail lines add a premium of between four and six per cent to the price of vacant residential land within 500 metres of a station, and eight to 14 per cent to vacant commercial land.
The appreciation in value is lower for built-out properties – two to four per cent for both residential and commercial sites. There was no difference for industrial or institutional land.
However, the study notes that the change in value cannot be directly attributable to the improved transit service.
Governments often modify land-use policies for properties close to transit stations to allow for greater density and height, which make a property more valuable.
Mr. Clark and Mr. Brethour have several suggestions on maximizing land value in a sale.
1) Examine properties nearby to determine the value, perhaps with help from a person tracking land prices. Land near the light-rail line has increased in value by as much as five times from a few years ago, says Mr. Clark.
2) Consider a joint venture with a developer, rather than immediately selling it outright. The property will increase in value once a structure is built. “The developer benefits without having to buy the land right away. The owner benefits from waiting and getting a lift in value,” Mr. Clark says. But Mr. Brethour warns that there are pitfalls from such an arrangement. “You can also enjoy the downside if you get into bed with a partner that you’re not happy with.”
3) Look at the area’s community design plan, a city-approved guide to the long-term development of specific neighbourhoods that sets parameters for building heights, density and other guidelines. In recent discussions with a property owner, DTZ Barnicke discovered the design plan limited the height allowance in the neighbourhood in which the property sits. The firm has now hired an urban planner to discuss the situation with the city and attempt to negotiate.
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