When there's a global limitation on what can be done with land, it limits how much use can be achieved by any given bit of land. The demand is still there, but it's met by further and further out parcels of land, causing them to go up drastically in value. In addition, this causes all sorts of urban sprawl. Which is exactly what happened in LA. They had a huge downzoning of the entire metro area 50 years ago, driving up the prices of land everywhere, to the benefit of suburban NIMBYs in sprawl.

TL;DR, when the use of land is broadly limited, on the macro scale, the demand still exists and shifts the price of all land up on the supply-demand curve. The dynamics of limiting individual parcels or small sections of land often have the opposite effect, though.