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5 Questions to Ask During Site Selection & Due Diligence

Perhaps the most overused real estate term to date, “location, location, location” still rings true today during the site selection process, no matter how much the business and technology have evolved. Other factors such as site engineering and history are analyzed in the site investigation report (SIR), but there are still a number of others that are often overlooked when looking to make the right move. 

As site selection criteria continues to become more robust and the competition stays strong, here are 5 specific key questions you should be asking to ensure efficiency and minimize unforeseen costs proactively.

 

1. What specific metrics are being used to narrow the search?

Undergoing a thorough selection process with your development team versus the priority of a quicker timeline will prevent prematurely ruling out prospective sites before fully vetting the possibilities. It’s important to have an agreed-upon elimination process in place first to understand the criteria being used, as well as maintaining the options with seemingly equal pros and cons until further research has been conducted to reduce rash decisions.

 

2. What zoning and permitted uses has the site been approved for and what are the necessary improvements?

What seems to be an obvious inquiry is not always as straight-forward as you may think. The objective is to plan for the property’s current and future use and ensure it will comply with municipal regulations. Diving into the zoning details, you should become aware of not only the appropriate uses, but also any outstanding code violations, setbacks and height, parking and sizing requirements. 

Then, you’ll need to familiarize yourself with any necessary improvements such as access, setbacks, utilities, earthwork, and other potential unexpected site work that can impact feasibility. 

 

3. Are there any potential title issues to anticipate?

Also during the due diligence period, the title review should expose any liens, unpaid taxes, outstanding mortgages, easements and restrictions that can affect the use of the property. Although, at times issues can be difficult to detect, so opting for title insurance will help protect against any errors that may have occurred such as unnamed successors or filing errors. 

 

4. Has an environmental report been conducted?

The threat of environmental issues is a critical one that could end up pausing the project or even aborting the mission altogether. An infamous instance of a Superfund site is the development of Tempe Marketplace, which stands as the largest Brownfield land cleanup in Arizona. Across its approximately 200 acres, six landfills and 50 buried gallon drums of chemicals were found, resulting in the total cost of the contamination cleanup being upwards of $40 million. 

The Comprehensive Environmental Response Compensation and Liability (CERCLA) denotes that the property owner is responsible for any and all contamination. Ordering a Phase I Environmental Study will drastically help protect against unexpected costs and delays. 

 

5. What are the municipal design requirements and applicable fees we should we be looking out for?

Municipal design standards are ever-changing, but nevertheless can shape your entire project -  so it’s a topic worth keeping an eye on. Within the scope of design and fees, a predetermined budget should be set as the first step so any financial limitations are clear to the design-builders before the service and image are tailored. The architecture alone can break a budget if the overall vision isn’t aligned with the allotted cost. Permits and municipal fees vary across the country and are subject to change, so this needs to be taken into account to avoid any surprises in the financial blueprint.   

Pro Tip: Many cities have handy building permit fee calculators you can use to get a rough estimate online of the breakdown to expect. You can find an example for the City of Chicago here.  


As the developer provides insight to the above questions, the site selection endeavor will organically become more in-depth, coupled with continued due diligence and examination to uncover the right move to make.    





Tags: Site Selection Due Diligence

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