Critical Site Selection Factor #3: Available Land Becoming Scarcer
Market conditions are tight, but some states are certifying large sites as shovel-ready in order to make sure they have an inventory on hand.
Available land is an important part of any selection decision. Has it been prepared? Is it shovel-ready? Is it close to critical transportation infrastructure? What incentives are available for keeping the costs down?
Available land, in a good location with infrastructure and incentives in place, can be a critical factor in deciding whether to build a new facility or not especially when the cost of retrofitting an existing building, and the move-in date, is comparable to building a new one. Another major consideration with a land purchase is being sure there is enough additional space for future expansion.
When you talk about the availability of land, it really depends on the type of project, says Eric Stavriotis, senior vice president for CBREs Location Incentives practice in Chicago. For many office projects, such as technology companies or financial institutions, the availability of land is not even on the radar because they want to locate in a market with available office space that they can lease or purchase. Clients with larger projects over 150,000 square feet start to look at development sites and available land as an option for a build-to-suit.
Not Much Inventory
Many of the best land sites for big projects in major markets, however, have already been developed or acquired by developers creating tight market conditions for land. For example, Atlanta, Chicago, Los Angeles, San Francisco, and Washington, D.C., have very few prime land sites remaining that can be developed for office buildings.
For industrial projects, land is a much larger factor in the overall decision process. In terms of manufacturing or distribution to major markets, land sites and their readiness for development are a critical factor when examining a given market. Eric Stavriotis, senior vice president for CBREs Location Incentives For industrial projects, land is a much larger factor in the overall decision process. In terms of manufacturing or distribution to major markets, land sites and their readiness for development are a critical factor when examining a given market, says Stavriotis. Given the massive spike in distribution to support same-day deliveries and omni-channel retail strategies, land sites in most major metros have been gobbled up by industrial developers in the past five years. As a result, corporate users continue to lease property that is already under control of developers, as opposed to self-development or owning their own real estate.
To provide a high-quality inventory of attractive sites for building, many states are investing to certify sites that are shovel-ready. This key documentation allows timely project evaluation, which helps companies make informed property-acquisition decisions under short deadlines. Most certified sites have already been vetted for minimum acreage, ownership security, zoning, road and rail accessibility, utilities, and archeological/environmental studies.
Because many of the best land sites in major markets are controlled by developers, we will continue to see infill re-development as the catalyst for office growth in the future, Stavriotis notes. But we will also need to see the flexibility for re-zoning on the part of local government in order to support further office development and job growth. Given today’s current trend toward re-migration into urban areas, one could predict that we are nearing the top of the development cycle in terms of the availability of land sites for office. Creativity will be key to keep up momentum, or a counter-trend back to the suburbs may begin as companies face steepening pricing in urban areas.
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