On todays show we’re answering a listener question that is a very common question. On today’s show rather than answering the question directly, this is the synopsis of a conversation that I had with this developer. I’m often approached by people who own land they would like to develop, or by those who want to operate a highly specialized event space for hosting wellness retreats.

This listener is looking at developing a large acreage North of Palm Desert California. This is the place that has become famous for the massive Coachella music festival that in recent years has attracted close to 250,000 people for those few days a year.

The developer I spoke with this past weekend desires to develop a wellness retreat on the acreage. The proposed project would consist of high quality amenities and the short term rentals would be made from factory built structures and assembled onsite.  Part of the concept is to have short term rentals on the property. Short term rentals are typically not branded properties. This means that you are going to likely rely upon a platform like VRBO or AirBnB to market your property on a nightly basis. As the name implies, this area is a desert. The average rainfall in Palm Desert is about 6” of rainfall per year. This can range from a low of 3” per year to 10” of rainfall per year in a record year. All of the moisture from the pacific gets deposited in the mountains before reaching the far side of the mountains, which is why we have a desert on the inland side of the mountains .

When I am presented with any concept for a new project, I always ask the same questions. It doesn’t matter whether the project is located in the core of a high demand high density city, or in a rural location. All real estate has to follow the laws of supply and demand. There are examples of properties that have been developed in remote locations that have been successful. But there are even more examples of those that have failed. I’m simply not a believer in taking those types of speculative risks. I want to see demonstrable demand. That means examples of comparable properties.

The problem with property in this location is the lack of municipal services. Specifically we’re talking about water and sewer. The lack of services is probably enough to kill any opportunity of developing anything of substance in this location. The area doesn’t get enough annual rainfall to develop a sustainable reliance on an underground aquifer. In recent years, the sustainability calculations for using groundwater have become much more conservative. Calculations that were commonplace 30-40 years ago have been shows to deplete the water table and many locations have run dry.