J. Scott Hathaway, PMP, Senior Associate, SSOE Group (2011 Directory)
While it may be difficult to detect, economic growth has returned. According to the Institute for Supply Management, the U.S. manufacturing sector grew for the 15th consecutive month in October. In addition, the U.S. Department of Commerce reported that retail sales grew by 1.2 percent in October, double what analysts had expected.
Barring unforeseen disaster, manufacturers, retailers, and other industries that need real estate to foster growth will likely put their site selection teams back out in the field soon - if they haven't already done so. Some of these teams will be under orders to find sites quickly and to compress development schedules, to ensure that revenue from new manufacturing lines or new retail stores begins to flow to the bottom line in time to buff up the corporate performance reported in a soon-to-arrive quarterly filing.
The Entitlement Process
While it is possible to speed some development tasks, it is also important for a development team to spend enough time on due diligence to avoid nasty surprises during the entitlement process.
That said, three entitlement issues - zoning, infrastructure, and design regulations, along with the respective costs and associated schedules - generally control the decision to recommend a site for development. A development team must examine these issues in enough depth to advise for or against a site acquisition. Once the team recommends an acquisition, relationships developed during the preliminary evaluation with zoning, code, and utility officials - as well as working concurrently on long-lead issues - can help to speed the entitlement process.
Importantly, it takes a local expert to vet the issues efficiently both before and after a site acquisition. That's because the requirements vary greatly from locality to locality. Local zoning regulations, neighborhood groups, city officials, and zoning board preferences all play a part in determining whether or not a project can go forward. Local building codes - often complicated by overlapping city, county, and state jurisdictions - can add prohibitive costs to construction. Likewise, projects that will strain local traffic and utility infrastructure may fall victim to required infrastructure spending.
Calling in the Experts
Relevant and useful due diligence requires that a local expert in zoning, building codes, and the state of the region's infrastructure vet property before it is acquired. Architectural and engineering firms with nationwide networks of local offices can offer such local expertise. Local representatives of these firms should have a role in every real estate development team.
A local consulting engineer, for instance, will likely already know about prohibitive zoning, code, and infrastructure risks connected to a piece of property. If not, then he or she will know whom to contact to develop a preliminary recommendation.
While commercial real estate brokers know what properties are available in properly zoned areas, the consultant engineer augments the design team's knowledge on signature building components that may be critical for brand recognition, costly infrastructure that will require upgrades, or unique design requirements that are encountered in a certain part of town. Also, the development professional can provide guidance and design alternatives - such as challenging flood plain design methodology or alternative building materials - that provide early identification or circumvent deal-breaking development hurdles.
Suitability of the Site
Further, a consulting engineer will be able to make a preliminary assessment of the suitability of the site for an owner's business. A manufacturing company will have goals tied to production volumes and downstream sales. Will that require three production shifts? Do local codes permit 24-hour operations? Does the manufacturing process use any hazardous materials? Can trucks follow a direct route to deliver those materials or will they have to follow an indirect route to avoid certain highways?