Demand for vacant land is on the rise.

Demand for vacant land showed strength across all types of properties and in nearly all markets in a recent national land yield survey conducted by the Price Waterhouse Real Estate Valuation/Advisory Services Group.

The survey results "underscore the positive momentum that continues to spread through nearly all sectors of the commercial real estate industry," said James R. MacCrate, Northeast Region Practice Leader for PW's Real Estate Valuation/Advisory Services Group.

"While expected returns have held constant, actual profits on recent projects tend to be higher than anticipated due to upward pressure on prices being paid for finished product," MacCrate said. Rising demand had not been forecast in the projects' proformas, he added. Helping to fuel this increased demand is the availability of financing for all types of development, including residential housing, hotels and even speculative office buildings - particularly in suburban markets where vacancy rates are below 12 percent.

"Typically, the minimum return expected to attract investors in land development must be between 10 and 30 percent," MacCrate said. "Without governmental development approvals or entitlements in place, developers often expect returns in excess of 20 percent and as high as 60 percent for large, long-term development projects that might take five or 10 years to develop and absorb."

"Conversely, many survey respondents also expressed concern about the seeming new flood of capital flowing into real estate development projects," MacCrate said. "Their basic concern is that there may be too much money chasing too few good deals."

Other respondents noted that loan commitment requirements for developers have been loosened recently, which could make some projects more speculative and risky. Still others expressed cautious optimism due in part to the improved conditions in many markets.

Price Waterhouse's Mid-year 1997 National Land Yield Survey Report includes a number of topical analyses, including: MidYear Development Outlook; Mid-Year Returns Outlook; Residential Outlook; NonResidential Outlook; and Valuation Methods.

To order a copy of the report, which is free of charge, contact Scott Koenig in Price Waterhouse's New York office at [phone]; or Thomas Derr at [phone].