“Location, location, location,” perhaps the most overused real estate term to date, still rings true during the site selection process today, even if the business and technology have changed. Other factors, such as site engineering, are examined in the site investigation report (SIR). Still, several others are frequently overlooked when attempting to make the best decision.
As site selection criteria become more stringent and competition remains fierce, here are five key questions you should ask to ensure efficiency and prevent unforeseen costs.
1. What metrics are being used to narrow down the search?
By prioritizing a thorough selection process with your development team over a shorter timeline, you can avoid prematurely ruling out prospective sites before fully vetting the possibilities. It is critical to have an agreed-upon elimination process in place first to understand the criteria being used and to keep options with seemingly equal pros and cons available until further research is completed to avoid making rash decisions.
2. What zoning, permitted uses, and improvements are required for the site?
The seemingly straightforward query is not always as simple as it appears. The goal is to plan for the property’s current and future uses while ensuring municipal regulations comply. When you dig into the zoning details, you should know the appropriate uses and any outstanding code violations, setbacks and height requirements, and parking and sizing requirements.
Then, you’ll need to become acquainted with any necessary improvements, such as access, setbacks, utilities, earthwork, and any other unexpected site work that may impact feasibility.
3. Are there any title issues to be up to date?
The title should be reviewed during the diligence period and reveal any liens, unpaid taxes, outstanding mortgages, easements, or restrictions that may affect the property’s use. Although issues can be difficult to detect, purchasing title insurance will help protect you against any mistakes that may have occurred, such as unnamed successors or filing errors.
4. Is an environmental report in the works?
The threat of environmental issues is critical and could result in the project being paused or even canceled entirely. The development of Tempe Marketplace, the largest Brownfield land cleanup in Arizona, is an infamous example of a Superfund site. Six landfills and 50 buried gallon drums of chemicals were discovered across its approximately 200 acres, resulting in a total cost of contamination cleanup of more than $40 million.
The Comprehensive Environmental Response, Compensation, & Liability Act (CERCLA) states that the property owner is liable for contamination. Ordering a Phase 1 Environmental Study will significantly reduce the risk of unexpected costs and delays.
5. What municipal design requirements and fees should we be up to date?
Municipal design standards are constantly changing, but they can still shape your entire project, so it’s a topic to keep an eye on. A predetermined budget should be established within the design and fees as the first step so that any financial constraints are clear to the design-builders before the service and image are tailored. If the overall vision is not aligned with the budget, the architecture alone can break it. Permits and municipal fees differ across the country and are subject to change, so keep this in mind to avoid financial surprises.
Pro Tip: Many cities have handy building permit fee calculators online that you can use to get an idea of the breakdown to expect. Here is an example for the City of Chicago.
As the developer responds to the above questions, the site selection process will become more in-depth, along with ongoing due diligence and examination to determine the best course of action.
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