Land Values: Size Matters

Summary:  View help for Summary Using Clark County, Nevada land auction data from the Bureau of Land Management, we find evidence that the price paid per acre of land initially increases, and then decreases with parcel size and find the price paid per acre to be maximized at approximately 14 acres.  We also find that convexity exists on the value-size curve up to approximately 8 acres.  We attribute this phenomenon partially to the fact that larger parcels are better suited towards commercial and mixed-use developments.  A similar pattern is found for residential land, and can be attributed to the economies of scale developers would need when building tract housing.  We also find some evidence that for large lot sizes (over 25 acres), price-per-acre seems relatively constant.  Finally, we use this data to approximate difference in price between purchasing smaller contiguous lots and larger lots.  In this setting, we find that the value of plottage (assembly) is about $60,000/acre which is the difference between assembling contiguous parcels versus purchasing the equivalent size parcel outright.