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Factors Affecting Land Value for Development

Land is a valuable asset that has been sought after for centuries. Whether it's for agricultural use, commercial development, or residential purposes, land holds immense value due to its limited supply and potential for development.

Various factors can influence the value of land across the United States. In this guide, we will explore some of the key factors that can affect the value of land and how to strategically market land for sale, taking into consideration the unique attributes of the property in addition to the target audience.


Location is often cited as the most crucial factor influencing the value of land. The proximity of a piece of land to key amenities such as schools, shopping centers, public transportation, and recreational areas can significantly increase its worth. Conversely, land situated in remote or less desirable areas generally fetches lower prices due to lower demand. This is because land in prime locations offers convenience, accessibility, and potential for development.

There are exceptions to this rule! Depending on the best use case for a piece of land, remote parcels can also be highly valuable.

  • Building and Commercial Development

Land situated in bustling city centers, close to transport links, and in areas of high footfall, is particularly attractive for commercial development. Similarly, accessibility is another critical factor – easy access to highways, airports, or railways can significantly increase a land's commercial value.

  • Solar or Wind Energy Development

The recent renewable energy boom has expanded the number of solar farms and wind farms in the U.S. Land located near electrical infrastructure (substations and transmission lines) significantly impacts its potential value for solar panels or wind turbines. Local renewable energy incentives and the size of a property also affects its value for solar or wind energy projects.

  • Agricultural Development

The nature of the surrounding infrastructure, such as roads, impacts land value. Good transport links facilitate easier access to markets, thereby increasing land value. Additionally, the availability of water and the quality of the soil are crucial. Rich, fertile soil types with easy access to water sources for irrigation fetches higher prices.

Figure 1: Example of Soil Data within LandGate's Property Report

Zoning Laws and Regulations

Zoning laws and regulations set by local governments also play a vital role in determining the value of land. These regulations dictate the type of development that can be done on a particular piece of land. For instance, if a plot of land is zoned for commercial use, it will have higher value compared to land zoned for residential or agricultural purposes. Zoning laws also restrict the density and height of buildings, which can affect the potential revenue generated from a property.

  • Building and Commercial Development

Land zoned for commercial use can be extremely valuable, given that it permits the construction of office buildings, retail stores, hotels, and more. A critical aspect related to zoning is the potential for expansion and building height limitations. Land that allows for vertical growth can accommodate larger, multi-story structures, which may be more lucrative for developers.

  • Solar or Wind Energy Development

Zoning regulations dictate what kind of development or activity can occur on a specific piece of land, and as such, they have a substantial bearing on where solar farms can be established. Areas zoned for industrial or agricultural use are often ideal for solar farm installation because of the large areas of land they typically comprise and the minimal shading from buildings.

However, if a plot is zoned exclusively for residential or commercial use, the establishment of a solar farm may not be permitted. Even where solar farms are allowed, there could be restrictions pertaining to the size, height, or appearance of the solar panels.

  • Agricultural Development

Zoning laws determine the permissible uses of land, which means they can restrict certain types of agricultural practices. For example, a parcel may be zoned for light agricultural uses such as growing crops, but not for intensive livestock farming. Alternatively, some areas may be zoned for organic farming only, limiting the use of conventional farming methods.

Zoning can also dictate the size of agricultural parcels, with certain areas requiring a minimum acreage for agricultural use. This can affect the practicability and profitability of smaller-scale farming operations. Additionally, zoning laws can influence the value of agricultural land. For instance, agricultural land that is zoned for potential future residential or commercial use may have a higher value due to its development potential.

Access to Utilities

Another factor that can affect the value of land is its access to utilities such as water, electricity, and sewerage. Land located in areas with readily available utilities tends to have a higher value compared to those without. This is because it eliminates the cost and hassle of installing these services, making the land more desirable for development.

  • Building and Commercial Development

The availability of utilities such as water, electricity, sewer, and gas on the site can heavily influence a land's commercial value. The cost of bringing these utilities to an undeveloped site can be significant, so a plot with these services already in place can command a higher price.

  • Solar or Wind Energy Development

Land located near electrical infrastructure (primarily substations and transmission lines) significantly impacts its potential value for solar or wind energy development.

  • Agricultural Development

Key utilities such as water, electricity, and telecommunications are crucial for the efficient operation of modern agricultural practices. Reliable water supply is fundamental for irrigation and livestock needs, and the availability of this resource can directly affect the productivity and profitability of the land. Electricity, on the other hand, powers necessary equipment and machinery, including irrigation systems, milking machines, lights, and refrigeration for product storage.

Economic Factors

The state of the economy can also have a significant impact on the value of land. In times of economic growth and stability, land values tend to increase as there is a higher demand for development. On the other hand, during an economic downturn, land values may decrease due to a decrease in demand. Additionally, factors such as interest rates, inflation, and consumer confidence can also influence the value of land.

  • Building and Commercial Development

During periods of economic growth, businesses expand and demand for commercial land rises, leading to an increase in land prices. In contrast, during economic downturns, demand often falls, leading to potential decreases in land values.

Additional economic factors that can influence commercial land development include interest rates and access to capital. Lower interest rates can encourage borrowing, making it easier for developers to finance new construction projects. Meanwhile, the availability of capital and favorable lending conditions can stimulate commercial development, as developers are more likely to take on new projects when funding is readily available.

  • Solar or Wind Energy Development

First and foremost, the costs associated with the installation and maintenance of renewable energy sources can be substantial, and thus, the availability of capital is instrumental. Lower interest rates can facilitate increased borrowing, making it easier for developers to finance renewable energy projects. Secondly, government economic policies, including subsidies and tax incentives for renewable energy developments, can encourage or impede such projects.

  • Agricultural Development

Market demand for agricultural products, for one, heavily influences land use and development. High demand for certain crops can incentivize farmers to cultivate those crops, impacting land use decisions. Additionally, commodity prices and their fluctuations can dictate the profitability of farming certain crops, affecting the economic viability of agricultural land development.

Natural Disasters

Natural disasters can significantly affect land values, especially in areas prone to them. Floods, hurricanes, earthquakes, and other natural disasters can cause extensive damage to properties, leading to a decrease in land value. Insurance costs may also increase for these high-risk areas, making the land less desirable for development.

  • Building and Commercial Development

Natural disasters can significantly impact commercial land value, often leading to depreciation. Factors such as the severity and frequency of the disasters play a pivotal role. For instance, land situated in areas prone to severe weather conditions or geological disturbances - like hurricanes, floods, wildfires, or earthquakes - may have lower value due to the associated risks. These risks include potential damage to structures, increased insurance costs, and the possible interruption of business operations.

  • Solar or Wind Energy Development

The immediate physical damage caused by disasters such as hurricanes, earthquakes, or floods can destroy existing infrastructure — including solar panels or wind turbines — leading to expensive repairs or replacements. This can disrupt operations, impacting the profitability and long-term sustainability of these projects.

Moreover, the increased insurance costs due to the heightened risk in disaster-prone areas can make renewable energy projects less economically viable. On the other hand, natural disasters can stimulate interest and investment in renewable energy. After a disaster, areas may seek to rebuild with a stronger focus on sustainability and resilience, and renewable energy often plays a key role in this.

  • Agricultural Development

Catastrophes such as floods, droughts, hurricanes, and wildfires can lead to soil erosion, destroy crops, and harm livestock, thereby lowering the value of the land. Extended periods of drought can degrade the soil quality and reduce water availability, making the land less suitable for farming. On the other hand, excessive rainfall can lead to waterlogged fields, which can damage crops and make the land unusable for a time. Additionally, the risk of future natural disasters can deter investment in agricultural land development.

Supply and Demand

As with any market, the supply and demand of land play a significant role in determining its value. When there is high demand for land, prices tend to increase. On the other hand, if there is an oversupply of land in a particular area, its value may decrease. It's essential to research the market trends and demand for land in a specific location before making any buying or selling decisions.

  • Building and Commercial Development

Changes in demand can significantly impact land prices. If demand for commercial land in a specific area increases due to factors like economic growth, population increase, or infrastructure developments, prices tend to rise. This is because more businesses are competing for the same amount of land, driving up its value. Conversely, if demand decreases because of economic slowdown, population decline, or unfavorable business conditions, land prices may fall.

  • Solar or Wind Energy Development

In locations where there are high renewable energy incentives with little land available, the value of land increases for renewable energy development. This creates competition among energy developers to find land in those areas for new projects, which drives up the price for land.

  • Agricultural Development

Location and availability plays the largest role in determining the value of farmland across the United States. For example, Rhode Island has a very limited amount of undeveloped/ agricultural land available, so the value of agricultural land in Rhode Island is extremely high (averaging $18,300 per acre in 2023).

How Can I Market Land for Development Purposes?

When it comes to developing land for different purposes, there are many factors that affect its potential value for lease or for sale. Marketing land effectively involves a strategic combination of research, positioning, and outreach. Understanding the distinctive features of your land can help determine its potential uses and identify the ideal buyer profile. Is the land suitable for farming, construction, renewable energy development, or perhaps leisure activities?

Landowners can receive a free detailed report for their land detailing lease and sale estimates for their parcel along with data for the soil types, proximity to electrical infrastructure, and more. This information helps landowners determine the best use case for their land and therefore market it properly. From there, landowners can list their land for free on LandGate's marketplace:

Land brokers can generate the same report for any of their client’s parcels using LandGate’s LandApp. Help your clients get the most value for their land by providing them a full and detailed analysis of their property that will streamline your marketing efforts.


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