Interest rates, planners, developers

Real estate developers talk endlessly about interest rates, but they don't matter in a planning context. Developers make their living at the margin--they make money when they can land before the owners become aware that an interest rate reduction has raised the value of their land. (When rates rise, development locks up until inflation reprices sticky land-values to match their fundamental value). But in planning context, the average over time generates an equilibrium where interest rates don't matter. Temporary dis-equilbria just average out over time. And if it doesn't, who cares? Development that didn't happen isn't going to get you fired. But if you are a developer, it's an existential issue--can you get planners to permit your development in that window between when rates move and when the ground gets repriced?

Development is a market with imperfect information, with a lot of independent developers responding to the same market signal--rising rents. However, developers have limited information about how much competing supply (new units) are coming on the market. While its possible to know about permits pulled, or development applications, or zoning changes, (and believe me, developers pay attention to that) it's impossible to know how many competing projects are in earlier stages of development.

It takes a while for a long, multi-actor process (involving land-owner, developer, lender, city planner, development review, city council, etc.) to play out, so development tends to happen in booms (minimal supply meeting huge demand) followed by busts (excess supply meeting slackening demand). Early in a development cycle, few recognize or respond to the market signals, and there is a lot of money to be made, and late in the cycle, much to be lost. So once the cycle starts, every developer wants to get their development into production/sale as fast as possible.