Mind the Infill

Between the house in Alexandria and my office in Arlington, a drive of about 5 miles (I could take Metro, but the commute is a 15 minute drive or a 1 hour subway commute), there are signs of a stirring economy. When I read the paper it’s all doom and gloom – here comes a double dip, this is going to be worse than the Great Depression, etc. – but the story I am seeing on the ground right now is different.


What I find encouraging is 8 examples of “infill” development going on. Infill is a kind of development that typically occurs in urban or suburban settings. One type of infill is the development of lots that were left empty during earlier building stages; a second type is when an existing building or house is no longer economically viable – for reasons such as being dilapidated beyond economically feasible to repair, or where the previous use simply isn’t in demand anymore.

Now, I usually call the second type a “scrape-off” because that’s what appears to happen. You’ve probably driven by a neighborhood of homes that have a consistent size and style, and seen that one that is out of place because it is too small or hasn’t been kept up. This is a candidate for scrape-off: the land is too valuable to justify the building that is there when compared to the other houses. A developer will try to get the house and land at a good price, and simply tear down the old house, replacing it with a new home, and making an acceptable profit to cover all of this.

The Wikipedia article on this topic describes an example of an outdated 9-hole golf course in a suburb being acquired and developed into new homes. The course simple wasn’t paying for itself, and the best repurposing of that land (a 9-hole course is usually about 60 to 80 acres) was to put new houses on it.

So what’s happening in our neighborhood is a couple of the remaining empty lots (this neighborhood was actively developed from the 1920's into the 1940's) were bought over the last few years, and the market has finally come around to the point where developers are breaking ground. There are four cases of this type of development going on, from the lot sale, to getting building permits, to framing already up.

One of those sites was a lot that was adjoined to a nice four-square from the ‘40’s. In that sale, the house on its original lot was also taken. The developer plans to put in two new houses on the empty lot, and either renovate or scrape off the old house. And the price the three new homes averages $1.3 million; easily profitable over the likely price of the old house and lots - the total is probably triple the cost of the original purchase price.

Getting back to my point about the economy…this type of investment won’t occur if things aren’t turning around. Individual investors may be content to buy a piece of land and sit on it, waiting before they build. But once other conditions are right – houses start selling again, financing is available again – this cycle gets going. And I am taking that as a positive sign about economic recovery.

Not everywhere yet, and still on a pretty small scale. But it’s a start.