Los Cabos Real Estate Market Interpretation
When Developers Say Your Home Is “Only Worth the Land
In today’s Los Cabos market, value is not determined by the age or emotional significance of a home, but by its highest and best economic use. When redevelopment potential produces stronger financial returns than maintaining the existing structure, land economics dominate — but that does not automatically mean the home itself lacks value.
Los Cabos has evolved from a primarily lifestyle-driven residential market into a layered capital environment. It now includes global developers, private equity-backed builders, income-focused investors, and long-term lifestyle buyers operating within the same geographic footprint.
As zoning flexibility expands in transitional districts — including marina-adjacent parcels, corridor frontage, Pedregal positioning, and emerging vertical zones — density potential increasingly shapes valuation logic.
At the same time:
Construction costs in Baja California Sur have risen.
Developer financing has become more disciplined.
Exit pricing per square meter must justify acquisition risk.
Land scarcity near core districts is tightening.
This creates a structural shift. Older homes in key locations are no longer evaluated solely as residences — they are evaluated as redevelopment opportunities.
If a seller misunderstands how their asset is being underwritten, pricing decisions become misaligned with the buyer pool.
Anchoring to renovation cost or long-term ownership history does not influence a developer’s spreadsheet. Conversely, automatically accepting land value without analyzing alternative buyer profiles may suppress stronger valuation potential.
Understanding the framework being applied to your property determines whether you negotiate from strength or from assumption.
Many long-term homeowners assume:
Renovations should directly increase resale value.
Years of ownership justify premium pricing.
Developers are intentionally undervaluing the structure.
If the home will be demolished, it should be compensated separately from the land.
These reactions are understandable. They are rooted in personal investment and experience. However, redevelopment capital does not evaluate assets emotionally. It evaluates them through financial modeling.
When a developer evaluates a property, they are underwriting projected returns, not finishes.
Their analysis typically centers on:
Zoning allowances and vertical height permissions
Density potential and buildable square meters
Demolition and site preparation costs
Construction cost per m²
Projected exit value per m²
Absorption timeline
Required Internal Rate of Return (IRR)
If redevelopment only works financially at land-value acquisition pricing, that becomes the offer. The kitchen renovation, design upgrades, or personal attachment do not materially alter their return model.
This does not mean the home has no value. It means the buyer type defines the framework.
Several structural signals are currently shaping this dynamic:
In Los Cabos, properties are generally evaluated through three parallel valuation frameworks:
Lifestyle Value
Driven by views, privacy, walkability, scarcity, architectural character, and turnkey livability.
Income Value
Driven by net operating income, occupancy performance, ADR strength, and defensible yield.
Development Value
Driven by density allowances, build potential, projected exit pricing, and return modeling.
The strategic mistake is pricing within only one framework.
A property with strong rental performance should defend its income value.
A property with zoning upside should quantify its development potential.
A property with true scarcity positioning should emphasize lifestyle premiums.
The most defensible price emerges from understanding which framework creates the strongest economic case in the current cycle.
If your property is being approached by developers, the real decision is not whether their offer feels fair. The real decision is whether development value truly represents the highest and best use of the asset.
Before accepting land value logic, a seller should evaluate:
Is rental income strong enough to defend an income-based premium?
Does the location carry scarcity that lifestyle buyers would pay for?
Has zoning capacity been fully analyzed?
Are multiple buyer types being exposed to the asset?
If you only market the land, you will receive land pricing.
If you layer value and expand the buyer pool, negotiation leverage increases.