Location. Location. Location. We know that it can make or break a development project. But there is more to it when it comes to real estate development site selection.
Oftentimes there’s this notion that finding a location in a highly desirable area is all that matters. Finding the right trade AREA is important, but finding a great SITE is critical. A successful commercial real estate development process begins with finding a site that meets market demand and satisfies tenant requirements but is also significantly viable from a number of aspects.
Site selection is often filled with loads of challenges. As you approach the process, one of the most important things to remember is:
Every site is different. Every market is different. Every client is different.
There is no one answer to what makes a site the “right” site. Variables may change from project to project, and it takes constant maneuvering to find the right site(s).
But setting clear objectives and maintaining a diligent approach leads to successful selection and ultimately a successful real estate development.
Setting the requirements
Whether they come from a tenant or they’re established by the developer itself, every commercial real estate development starts with a set of requirements. They can be market/demographics or property requirements. In essence, you need to know what you’re looking for in order to find it.
Some typical questions to ask about the physical site are:
What’s the property size?
Is there proper access?
Is there enough frontage?
Is there enough visibility?
Is the site on a hard-corner?
What’s the surrounding infrastructure?
Creating, and then following specific criteria will help determine the starting point of any site selection process.
Identifying the right properties
With the initial site requirements determined, the next step is identifying sites within the market that fit those criteria. Finding the right properties starts with a broad search. There are many obstacles to face during the selection process, so you want to make sure all options are explored.
Site selection may involve properties that aren't the highest and best use.
This means looking at:
This is where a hefty dose of research comes into play. This will narrow the search and determine if sites are even viable.
When working to identify and narrow down prospective sites, you’ll want to know:
Can we get the access we want?
What are the setbacks?
What are the zoning requirements?
What kind of sitework is going to come up?
What kind of demo needs to be performed?
What needs to be done with utilities?
What kind of earthwork and grading is involved?
In some cases, properties that fit your criteria may not be actively for sale, but the property owner may be interested if approached. It may even be necessary to try to combine properties to get the size and space needed.
Focusing on the sites that work
Now that properties are being narrowed down, it’s time to take a deeper dive into the specifics of each site. Simply put, this means getting rid of the sites that don’t work and focusing on the sites that do work.
It also means focusing attention on the parameters of the site. You begin looking at what the cost of the site is and what types of improvements you’ll be looking at, what the timeframes for those improvements might be, and so on.
Most of this will be done while working to negotiate with property owners and determine if a deal can even be made. All of which will help to further narrow down the search.
Narrowing it down to one
All of the research, all of the weighing of options, and the examining of specifics leads to narrowing down to the site that will work best. Looking at price, feasibility, overall budget, and much more, you’ll decide if it’s time to push forward.
This is where the development process begins to take a much more in-depth approach. Continued due diligence and site investigation reports will provide a thorough examination of the site and the proposed project to determine if the project is feasible.
The site selection process can be lengthy and involve unique maneuvering. But the value of a tireless, strategic approach ultimately means finding not just a good site for a future development, but the right site.