Insights

News & views of the industry we love

Site Selection: What are the Key Factors When Identifying a Development Site?

  

Choosing the right location is critical to the success of any business, so it’s important that you are fully prepared and understand what goes into the site selection process for a new development site.

 

An experienced site selection team will be able to review many of the key factors that can positively or negatively impact your development site choice: target market customer profile, market analysis, traffic counts and access, utilities, and fees. 

 

Here’s a few points to know about each.

 

Target Market Customer Profile

At the start of your site selection search, you need to define your business requirements and create a target market customer profile. When making a list of your business requirements, consider the build type and land size you want based on your target market customer. Do you need additional land for drive-thru service, extra parking or outdoor seating? Is it critical to be in close proximity to your customers or are people willing to travel to reach your business? 

 

Creating a target market customer profile will identify who is most likely to frequent your business and what shared characteristics, behaviors, and commonalities they share. Taking the time to identify and understand this information provides you with data that will guide your site selection process.

 

Market Analysis

When evaluating locations, a site selection professional using Geographic Information Systems (GIS) can do a full analysis of the existing and projected population and demographic data for that area. Using a data-driven analysis during the property search for a development site is critical during the initial broad exploration and for when you narrow down the search to a select group of potential development sites. 

 

Thoroughly researching current and future demographics can provide you with a time-series snapshot, looking as far forward as 10 to 20 years in the future, of the market area statistics including: overall population, population by age, residential units, household income, education level, and consumer spending by category. Each of these categories can be broken down further. For example, daytime population would include employees in the area versus resident population or owned and rental residential units. Armed with accurate market research, you can select locations that align with your business model, so you aren’t putting a child care center in a location with a primary population over the age of 60.

  

It’s important to consider current businesses in a trade area and how they impact your site selection decisions. Do you need to be near other businesses that offer a similar product, or do you want to stand out with no competition close by? Do you have requirements that prevent you from being within a certain distance from a competitor

 

Working in concurrence with local city planning offices, you can map out current businesses in the area and learn about proposed new residential and commercial developments that may impact your site selection decision. Obtaining a future use plan from the local planning department helps identify the 10-30-year outlook that the city anticipates. 

 

Traffic Counts & Access

A traffic impact study can serve as a key role in evaluating potential development sites. The traffic study will provide you with current and projected vehicular trip information and identify the impact of a proposed development. The trips portion of the study will contain current and future trip counts by intersection, direction, day of the week, and time of day. You can use this to determine whether more vehicles will be driving by your business in the morning on their way to work or in the evening on their way home, and use that information based on your use. 

 

For example, it would be more advantageous for a grocer to be located on the “evening side” of the road for patrons to stop by on their way home from work. Whereas a coffee user would benefit more from being on the “morning side” of traffic.  

 

Accessibility to a site is critical, especially for retailers that have high daily customer visits. Most want full access, meaning left-in and right-in and left-out and right-out. If the site you are considering doesn’t have full access, is there a cross-access easement with a neighboring property possible (i.e. a shopping center parking lot)? 

 

Local municipalities, a metropolitan planning organization, or a state Department of Transportation can typically provide you with current and projected traffic counts, or turning movements if you are considering a site at a major intersection. They can also share if there are plans for future roadway changes to add capacity or improvements that could potentially impact access to a site. 

 

When making site selection decisions for a new development you need to be aware that you could be held financially responsible for off-site improvements such as partial roadway construction (property side of the street), turn-in lanes in the street, finished sidewalks, or curbs for the property.

 

Utilities

For new development, research must be conducted to determine what must be done in order to bring utilities to the property including water, sewer, storm drainage, power, gas, phone and cable. Site Investigation Reports (SIR) or a Feasibility Study look at all the requirements, potential issues that may arise and costs, which can be extensive as well as time-consuming. 

 

Coordination with utility companies and local municipalities can provide you with maps of existing nearby utility lines, what services are available in the area, or what you must do to bring utilities to the site. Not all locations can hook-up to local utilities; for example if there is no access to sewer you’ll need to determine whether you’d be able to install a septic system. Conversely, if there is no access to city water, are you willing to construct a well? 

 

If power lines are not currently available at the property, it can be extremely challenging and costly to run power to the site. Bringing utilities to your site may require permission from neighboring property owners in the form of an easement.

 

Fees

When planning for new development, the costs of purchasing the land and construction are typically the two largest line items, but there are other fees associated with new development that should be taken into account. Depending on the location of the site, local and state governments often have impact fees for new development, permit and review fees, and utility connection fees. You also need to factor in professional consulting fees from engineers, architects, and surveyors, financing, closing costs, and insurance.


 

Because all this research and information can help determine the feasibility of future development, it’s critical to engage with city planning departments, local utility companies early in the process, as well as have your own team of site selection and real estate development experts that can guide you through the site selection process.

Byline_Template_Andrew_Veatch-01-01

 

ANDREW VEATCH >

Acquisitions & Leasing Manager

Andrew Veatch joined SimonCRE in 2017 as part of the Development Team before transitioning to the Acquisition and Leasing Team in 2018. As Acquisitions and Leasing Manager, Andrew works closely with the Executive Team, brokers, and SimonCRE’s expanding portfolio of national clients on performing due diligence as it pertains to site selection and discovering new opportunities across the country. He prepares and negotiates contracts, builds pro forma budgets to determine project feasibility, evaluates entitlement processes, and works with third-party consultants to conduct preliminary research to assist in the accurate execution of project timelines and budgets.

Leasing & Acquisitions New Development Interest Rates Acquisition Commercial Real Estate Development Commercial Real Estate Development Process Site Selection Finding a Developer Commercial Real Estate Development Planning Site Investigation Site Plan Review Ground Up Development Acquisition Due Diligence