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A Master Plan for the Golden State Rush

A new driver in California’s housing market brings up challenges for homebuilders sizing up master-plan opportunities

By John Stanek

A curious thing happened on the way through a pandemic: Fear has turned over a new leaf and become a residential catalyst in California. That is, the widespread concern over COVID-19 and more dense, exposed environments have led to a housing market frenzy, especially in suburban and secondary markets that can offer newer, bigger living spaces at a better price point. As a result, homebuilders face fresh questions — wrapped in familiar challenges — when selecting masterplans in which to purchase lots.  

Let’s start with the fundamentals. Builders know the current market conditions, what buyers want, and what kind of housing product they want to build. Building in a master-planned community (MPC) brings with it synergies. Amenities are shared, but home offerings are segmented such that they generally don’t compete with one another. Additionally, complement this time-tested strategy with great partners, including a fiscally responsible and collaborative developer, as well as the best land planners and architects around. Developers should be willing to make changes and take the time to provide what homeowners will want. They are the ultimate customer after all. 

 Developers should be willing to make changes and take the time to provide what homeowners will want. They are the ultimate customer after all.”

The high demand and high barriers to entry of California real estate require a high level of expertise. We can all agree it’s significantly harder to build in California versus Texas. Where there’s demand, there’s opportunity to be profitable. And where innovative design and proven expertise are employed, development challenges can be overcome, competitive separation will be achieved, and outstanding MPCs will become a reality.

Integral Communities sources land only in California, and obviously not every parcel has San Francisco’s views, LA’s prominence or San Diego’s climate. Each property has its challenges, but with Integral’s successful 30-year track record as a homebuilder and developer, completing the entitlement process is possible. We initially focused on infill opportunities and over time have expanded our target areas. Integral has always taken a cautious approach to underwriting properties, and we are fortunate to be able to acquire land in locations where we believe today’s homebuilders want to build, such as our Tracy Hills community in Tracy, California.

Located 30 minutes east of the Bay Area in the rolling foothills of San Joaquin County, Tracy Hills offers advantageous connections for both builder and buyer. The 1,850-acre resort-style master-planned community allows easy commuter and easier work-from-home access while allowing residents to enjoy greater value and variety including a long list of luxury amenities.  In Phase 1, 1,203 lots have been completed to date with homes in Tracy Hills’ first villages being built and finished by homebuilders Lennar, Meritage Homes and Shea Homes. The move toward larger lots and more room resulted in 401 home sales in 2020. There are approximately 5,150 additional lots remaining that will be developed in future phases. 

To appeal to a wide range of buyers, builders know it’s all about location, but variety is another important criterion as well. Both Tracy Hills and Northlake, Integral’s new 577-acre master-planned community located just a short drive from downtown Sacramento, are strategically located near major markets. For variety, the latter will deliver approximately 2,175 single-family homes, 331 multifamily residences and senior affordable apartments, all in a lakeside setting.

The pandemic should also remind everyone of the importance of versatility. What a difference a year makes with the shift from commute-conscious homebuying priorities and close-in communities to work-from-home flexibility and more open space. However, there’s no masterplan development equivalent to virtually connecting with the office in your pajamas 20 minutes after getting out of bed. Big work must still be done. Design, infrastructure and meeting obligations set by the city are a daily battle for developers. Call it Development 101: Despite everything you study about a site, until the digging starts, you don’t truly know what you’re going to encounter. There’s always risk — and changes in plans. 

There continues to be great development opportunities in California, even with adversity. Integral Communities has been very fortunate to acquire, design and develop high-quality MPCs in the Golden State while collaborating with outstanding builders. Our plan is to continue to build on this success in the future.

John Stanek is principal at Integral Communities, a privately held diversified real estate development company.