Transcript Land 101
Site Selection A program brought to you by the REALTORS® Land Institute About RLI An affiliate of the NATIONAL ASSOCIATION OF REALTORS® (NAR) ALC Designation RLI Land University Courses RLI Website (www.rliland.com) RLI - Land 101 1-2 ALC Designation Candidacy Members become candidates following the successful completion of their first RLI Course Knowledge Requirements 120 credits Required courses – Land 101, 1 Tax course, Land Investment Analysis Land University Courses = 20 credits each (over two days in length) RLI - Land 101 1-3 ALC Designation Experience Requirements $5,000,000 in land transactions or 25 land transactions within 5 yrs of application date ALC Application Submit all documentation and processing fee ALC Designation Awarded by the RLI B.O.D. ALC Designees must maintain membership in RLI and NAR RLI - Land 101 1-4 Land Brokerage Focuses on land transactions of specialized types: farms and ranches undeveloped tracts of land transitional and development land subdivision and wholesaling of lots site selection and assemblage of land parcels RLI - Land 101 1-5 RLI Courses Agricultural Land Brokerage and Marketing Creative Land Planning for Profit Land Brokerage 101 Land Development RLI - Land 101 Land Investment Site Selection Taxation of Real Estate Tax Deferred Transitional Land 1-6 Site Selection - Introduction Objective: The objective of this course is to provide the tools for a land broker to better identify and present all of the competing sites in a market and select the site most likely to succeed. RLI - Land 101 1-7 Topics 1. Analyze demographic growth trends. Employment and growth. Land supply/demand. Data resources. 2. Analyze resources to determine the best site for a specific use. Single family, hotel, retail, offices, and industrial. 3. Apply principles to specific property types or segments. RLI - Land 101 1-8 Background Info and Where to Get It Economic Development Council (EDC Chamber of Commerce Planning Commission Building/Zoning Utilities Bankers Metropolitan Planning Org Board of Realtors Newspapers Engineers Appraisers Software Programs Online Resources Environ. Prot. Agencies Universities RLI - Land 101 1-9 Obtaining Ownership Information On-Line Tax Service Courthouse/Property Appraiser Utilities Water and sewer line locations Planning Department Department of Transportation Building Inspector Neighbors Local/Regional Publications/Reporters Other Brokers, RLI Members Small Town Coffee Shop Municipal Engineering Department Soils Maps Army Corp of Engineers Dodge Report RLI - Land 101 1-10 Reference List Data & Maps Organizations Websites Demographics Contamination Site Reports Publications RLI - Land 101 1-11 SINGLE FAMILY Buyer criteria checklist What is the profile of the buyer? What product they need for that buyer? Where does the buyer want to live? When will the buyer be ready to make a buying decision? How will the buyer pay for the product? RLI - Site Selection 1-12 Questions from Developer 1. Utilities a. Sewer, water, power, cable, phone, fiber b. Are they available and capacity adequate c. Are there fees (impact, pioneer, capacity reservations, etc?)? d. Proximity, easements, Right of way issues RLI - Site Selection 1-13 Questions from Developer 2.Site constraints a. b. c. d. e. f. g. h. i. j. k. Access Traffic controls,-Who pays? Median, curb cuts Drainage Retention & Detention of water Visibility Noise (traffic, industry, airports, sirens) Odors (pig farms, chickens, bakeries, chemical plant?) Trees-none, too many, cost to remove, mitigate? Configuration of site, natural barriers Surrounding neighborhood-need walls, gates? RLI - Site Selection 1-14 Home-sites/Lots Minimum width the infrastructure is the most expensive expenditure in developing a lot A "rule of thumb" for width: 110' for each lot plus 60' right-of-way for a total of 280'. RLI - Site Selection 1-15 Home-sites/Lots Valuing the site Price per Acre, Price per Unit, or Ratio of Finished Lot to Home/Lot Package # of potential units that can placed (on the net acreage) is key RLI - Site Selection 1-16 Home-sites/Lots Pipeline of Lots in Submarket of a Major Market Identify “absorption” in submarkets Quality and quantity are equally important Research the # of submitted lots for platting and/or site-plan approval RLI - Site Selection 1-17 Cash or Terms Developers’ goal – Absorb land in 18-36 months Rolling option basis is preferred (no legal obligation to close on the next parcel). RLI - Site Selection 1-18 Takedown Schedule Buyer/Builder Prefers: Landowner Prefers: Market Driven (# lots sold) Frontage exposure By Contract (date) Begin development in the back and move forward RLI - Site Selection 1-19 Statistical Analysis – Single Family A. Analyzing the res. marketplace WHAT will happen? WHEN will it occur? HOW much will it change? RLI - Site Selection 1-20 Statistical Analysis – Single Family B. Decisions people make about real estate include: 1. 2. 3. 4. 5. To buy or sell. To expand or downsize a business. To lease rather than own. To build, remodel or convert an existing use. To change zoning, move to another location. RLI - Site Selection 1-21 Statistical Analysis – Single Family C. Market driven decision. 1. 2. 3. 4. 5. 6. 7. 8. Overview of the market. Review demand. Review supply. Opportunities in market. Risks in the market. Locations and sites available. Financial Analysis of opportunity. Decisions. RLI - Site Selection 1-22 Statistical Analysis – Single Family D. Market Overview for Single-Family 1. Product Types – Single Family 2. Subdivision lots Zero lot line Townhouses Condominiums Apartments Garden Style High-rise 3. 4. Mobile Homes Ownership vs. Leased Units RLI - Site Selection 1-23 Statistical Analysis – Single Family E. Measure Total Supply 1. 2. EOY Supply – BOY Supply = Absorption Units Analyze Sub markets Geographic Price Point Product Type 3. 4. Total Supply Absorption = period to absorb supply. Existing Supply. Measured by: Add “pipeline” (planned and under construction) Deduct current absorption. Equals available supply at a particular time. RLI - Site Selection 1-24 Statistical Analysis – Single Family F. Key to development 1. 2. 3. 4. 5. Supply Demand Pricing at market Costs and returns Location RLI - Site Selection 1-25 Supply and Demand Price Supply: The quantity that producers are wiling to sell at a given price: Demand: The quantity of goods consumers would (and could) buy at a given price: Quantity RLI - Site Selection 1-26 Supply and Demand Supply and demand curves meet, the market is in balance Supply Price The point where demand equals supply Demand Quantity RLI - Site Selection 1-27 Supply and Demand Supply and demand curves meet, the market is in balance Supply Price If developers raise prices, demand drops and supply will exceed demand ( “quantity”). Demand Quantity RLI - Site Selection 1-28 Supply and Demand Supply and demand curves meet, the market is in balance Supply Price Demand If the prices Buyers are willing to pay drops, developers will not be willing to supply lots and a shortage (supply) will develop. Quantity RLI - Site Selection 1-29 Statistical Analysis – Single Family H. Pricing Offers Balance 1. Negotiation of the deal Knowledge of the market and product Initial price Bargaining power (terms, cash) Creating Demand RLI - Site Selection 1-30 Statistical Analysis – Single Family I. Employment – Employment in an area is critical to creating demand for office, retail, industrial or more sophisticated housing. RLI - Site Selection 1-31 Statistical Analysis – Single Family I. Employment – 1. Basic Employment – 2. Non-Basic Employment – 3. Forecasting total employment –1. –2. –3. Collect market information Determine Economic Base Forecast total Population RLI - Site Selection 1-32 MULTI-FAMILY RENTAL - GARDEN STYLE Site Selection Criteria Rents rent per square foot # of bedrooms Occupancy Vacancy below 90% is tough to build into Vacancy Trends/Rent increases - Past Two Years Concessions - Free Rent RLI - Site Selection 1-33 MULTI-FAMILY RENTAL - GARDEN STYLE Grocery Location – How Far from Site Upper End Grocer? Employment Centers Visibility – visibility or “quality of life’ Pipeline of Planned Units What is the absorption rate (less than two years is typically acceptable) Barriers to Entry Price per Unit Includes Impact Fees RLI - Site Selection 1-34 MULTI-FAMILY RENTAL - GARDEN STYLE Type of Product – – – – – – – Upscale Yuppies Family Unit Empty Nesters and Retirees Tax Credit Moderate Density RLI - Site Selection 1-35 MULTI-FAMILY RENTAL - GARDEN STYLE Amenities in the Submarket – Niche - Missing Products RLI - Site Selection 1-36 MULTI-FAMILY RENTAL - GARDEN STYLE Statistical Analysis, Determining GAP – inventory the marketplace – – calculate each complex on the rents per square foot per month. Demand Analysis – Apartments – – Determine range of price/sq ft. Determine median (middle) – 30 samples should be obtained Determine mean (average) RLI - Site Selection 1-37 MULTI-FAMILY RENTAL - GARDEN STYLE Reliability of Data Relative range qualifies a distribution Standard deviation calculation determines variance to mean Rent per sq. ft. factors into land cost RLI - Site Selection 1-38 MULTI-FAMILY RENTAL - GARDEN STYLE Trends in Multi-Family Design Traditional – renters prefer cars close Neo-traditional prefers cars out-of-site Renters by choice – (do not want responsibilities of ownership or may want the amenities of renting) Downtown resurgence (industrial space conversions or “tear-downs”) RLI - Site Selection 1-39 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Site Considerations Corner vs. Inline Level of Service on Street Traffic Light Demographics What Side of the Street Configuration Front vs. Depth RLI - Site Selection 1-40 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Cross Easements Parking Drainage Utility Land lease Excess Land Competition Map GPS / One-Hour Photo / Modem to Demographics Source Build to Suit RLI - Site Selection 1-41 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Retail Analysis Key Factors Retail Sales by Types of Goods/Services Sales in a Trade Area Sales Volume for a Specific Site or Store Sales per sq. ft. Sales per Customer/Transaction (per ticket) RLI - Site Selection 1-42 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Retail Analysis Sales/ S.F. Comparisons – Varies by type of retail Leakage – Sales lost outside of trade area Displaced Sales – Sales gained from outside of trade area RLI - Site Selection 1-43 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Retail Analysis Retail Gap – – – Total Potential Sales ÷ Ave. Sales per sq. ft Supply = Total existing sq. ft. Gap = Demand Minus Supply RLI - Site Selection 1-44 RETAIL CASE STUDY 1 Total Income = Population X Per Capita Income Total Income = Retail Expenditures Total Retail X = Less Leakage Leakage X Net Retail / $400 SF Sales = = Less Supply GAP = RLI - Site Selection 1-45 RETAIL CASE STUDY 1 Total Income = 212,809.00 $17,426.00 $ 3,708,409.00 Population X Per Capita Income Total Income = Retail Expenditures Total Retail X 22% = $ 815,850,119.00 Less Leakage Leakage X 35% 285,547,541.00 Net Retail / $400 SF Sales = = Less Supply GAP = RLI - Site Selection 530,302,578.00 1,325,756 S.F (DEMAND) 1,205,000.00 120,756 S.F 1-46 RETAIL CASE STUDY 2 1. What is the average per square foot sales for the grocery (food) stores? $473.52 Avg. store 35,600 SF x 7 stores = 249,200 SF $118 mil sales ÷ 249,200 SF = $473.52 2. What is the estimated total income based on the population projections and using this year’s median per capita income? $1,310,527,550 – Per capita income $20,005 x 65,510 projected population RLI - Site Selection 1-47 RETAIL CASE STUDY 2 3. If the per capita income is $20,005 and the population is 62,268, what is the total income for the trade area? $1,245,671,340 Per capita income of $20,005 x 62,268 population 4. In the trade area the total spent on retail is $761,000,000. What is the percentage of total income that is spent on retail? a) b) c) d) e) 10.5% 95.8% 61.09% 39.01% None of the above 61.09% $761,000,000 ÷ $1,245,671,340 = 61.09% RLI - Site Selection 1-48 RETAIL CASE STUDY 2 5. If the two smaller grocery stores close, how many square feet of food sales space will be available to serve the trade area? 6. 7 stores x 35,600 S = 249,200 SF 249,200 S.F. Less 24,400 & 28,100 = 196,700 SF This year the total demand for food sales is $118,000,000. Based on the estimated population, what is the average sale per capita? Food Sales of $ 118,000,000 ÷ 62,268 pop. = $1,895.03/capita RLI - Site Selection 1-49 RETAIL CASE STUDY 2 7. If the same sales per capita are consistent in five years for food sales, what will be the total expenditures for food in that year? 8. $1,895.03 x 65,510 pop. = $124,143,415 food sales Assuming that the per-square-foot sales for food are constant through the next five year, what is the demand for space (in square feet) in five years? Total sales $124,143,415 ÷ $473.52/SF = 262,171 SF demand RLI - Site Selection 1-50 RETAIL CASE STUDY 2 9. If no stores are built and none taken out of service, will there be a gap, and if so, how much (in square feet) in five years? 10. Yes Demand is 262,171; supply is 249,200; GAP is 12,971 SF If the 2 small food stores close and if there is an existing gap, how much will be the total gap for food stores in five years? GAP 12,972 SF + replacement for closed site 52,500 = 65,472 SF GAP RLI - Site Selection 1-51 RETAIL CASE STUDY 2 11. What are the average sales for restaurant and bar establishments for the current year? 12. $1,500,000 ($ 78,000,000 ÷ 52 stores). This year eating and drinking establishments had total projected sales of $78,000,000 or 10.25% of the total retail sales, what will be the total dollars for eating and drinking establishments in five years? total income of $ 1,310,527,500 x 61.09% spent on retail x 10.25% on food and drink or $1,310,527,550 x 61.09% = $800,601,249,750 x 10.25% = $82,061,628 for eating and drinking establishment. RLI - Site Selection 1-52 RETAIL CASE STUDY 2 13. The drive time area shows $28 million in drug store sales. Based on the population, what were the average sales per capita for drug store sales? $449.67 $28,000,000 ÷ 62,268 pop. = $449.67 14. This year 11 drug stores served the trade area. What were the average drug store sales per store? $2,545,455 $28 million ÷ 11 stores RLI - Site Selection 1-53 RETAIL CASE STUDY 2 15. The average drug store this year was 8,000 square feet. What were the sales per sqr ft. this year? $318.18 16. 11 stores x 8,000 SF/store = 88,000SF $28,000,000 ÷ 88,000 SF = $ 318.18/SF Experience shows the drug store owner that if they close in-line stores and open a larger freestanding store of 14,000 sqr ft., they can double their sale per outlet. Using the current year sales per store, what will be the gross sales for a new store? What will the sales per square feet be for the new stores using total sales information? $363.63 $318.18 sales/SF in existing stores x 8,000 SF store = $2,545,440 sales/store x 2 = $5,909,880/new store ÷ 14,000 SF in new store = $363.64 sales/SF RLI - Site Selection 1-54 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Drive Time Method of Analysis 1. 2. 3. 4. 5. 6. 7. Determine the boundaries of the trade area Determine total income for trade area Determine total retail sales dollars available Determine adjusted retail sales dollars available Determine sales per sq. ft. Determine GAP Determine impact of retailer’s planned project RLI - Site Selection 1-55 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Traffic Count Method of Analysis Vehicles – Counts avail from hwy depts. Pedestrian – 1. 2. 3. 4. Counts available from prospective retailers Total Sales needed at this site Customers in the door Projected sales Potential /sq. ft. sales RLI - Site Selection 1-56 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Marketplace Dynamics A. B. Trade Area economic and demographic factors. Intangibles 1. Cultural 2. Political 3. Tax Structures 4. Quality of Life 5. Transportation and Infrastructure 6. Racial Mix and Structure 7. Recreation factors RLI - Site Selection 1-57 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Marketplace Dynamics C. Minimum Threshold Factors 1. SIC Codes 2. Comparable Sites – How did they do? 3. Economic Base 4. Population/Employment Ratio RLI - Site Selection 1-58 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Trends in Retail E-Commerce (Internet) What’s included in gross receipts fro rent calculations? – – – – ATM’s? airline, event tickets, and lottery tickets? Undercutting other tenants from online sales? Other? RLI - Site Selection 1-59 RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT Trends in Retail Retailer considerations 1. 2. 3. 4. 5. 6. 7. 8. 9. People Safety Environment Focal point -- what is the draw? The Market Demographics Parking/public transportation Regional dominance Special Events & Promotion Carol Todreas of Todreas Hanley Associates (617/482-7008) RLI - Site Selection 1-60 OFFICE SITE SELECTION Site Variables 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Timing Size, expansion Site dimensions Parking requirement Cost vs. image HQ or back office Visibility Housing employees or decision makers Own, lease, JV, capital lease Sale lease back RLI - Site Selection 1-61 OFFICE SITE SELECTION Site Variables 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Timing Size, expansion Site dimensions Parking requirement Cost vs. image HQ or back office Visibility Housing employees or decision makers Own, lease, JV, capital lease Sale lease back RLI - Site Selection 1-62 OFFICE SITE SELECTION Other Variables 1. Demographic 2. Business climate 3. Site specific Image Size of Site Parking Expansion Plans Floor Area Ratio Rule of thumb 1. .2 - .25 FAR single story surface parking 2. .25 - .4 FAR 2-4 story with surface parking 3. .4 - .9 FAR 3-4 story with 2-3 story parking deck 4. .9 - 2 FAR 4-15 story with 3-6 story parking deck RLI - Site Selection 1-63 OFFICE SITE SELECTION Other Variables Parking Hotels, Restaurants, Retail Know Shell and Tenant Finish Costs Impact Fees Relocation Timing for Permitting Fiber Optics Build-to-Suit Incentives RLI - Site Selection 1-64 OFFICE SITE SELECTION Trends Crucial items for future office development: 1. Monuments are out -- smaller lobbies, more efficient 2. Campuses are in; need to be accessible, nature friendly, Higher ceilings, bigger hallways, timeless colors, higher and more windows. 3. Buildings need to be flexible, make it easy to add employees. 4. Growing companies demand ease in expanding space and flexibility. RLI - Site Selection 1-65 OFFICE SITE SELECTION Office Demand expressed in sqr ft of space/employee Efficiency Ratio Office space is expressed as usable and rentable. Efficiency ratio = total usable ÷ total rentable sq ft. i.e. Lobbies are rentable sq ft., areas used exclusively by one tenant are usable sq ft. RLI - Site Selection 1-66 OFFICE SITE SELECTION Efficiency Ratio areas that penetrate the floors are excluded from rentable sq. ft. i.e. elevators, stairwells, and support columns Third party should verify measurements We calculate this efficiency by dividing the usable sq. ft. by the efficiency factor to get the forecasted rentable sq.ft. Forecasted Usable Sq. Ft ÷ Efficiency Factor = Forecasted Rentable Sq. Ft. RLI - Site Selection 1-67 OFFICE SITE SELECTION Building Classifications for Office Space Class A Class B Class C RLI - Site Selection 1-68 INDUSTRIAL SITE SELECTION Considerations Size Configuration Impact Fees Parking Location RLI - Site Selection 1-69 INDUSTRIAL SITE SELECTION Other Considerations Rail Phone-Fiber Optics/Electric Access Incentives Contaminated Sites RLI - Site Selection 1-70 INDUSTRIAL SITE SELECTION Industrial Analysis An industrial market needs to be segmented to determine the amount of space utilized for manufacturing, distribution, office/showroom, and specialty uses such as cold storage. RLI - Site Selection 1-71 INDUSTRIAL SITE SELECTION Industrial Analysis - Illustration Current space/Employment Analysis Forecasted Space Demand EXISTING SUPPLY Less Obsolete Plus Pipeline Projected 5 year SUPPLY DEMAND Less SUPPLY G AP + = = 40,000,000 SF 1,500,000 SF 1,000,000 SF 39,500,000 SF 48,000,000 SF 39,500,000 SF 8,500,000 SF RLI - Site Selection 1-72 HOTEL / MOTEL Know your Buyer - Create a checklist 1. 2. 3. 4. 5. 6. Size, configuration. Price/unit Units/acre Amenities-restaurants. Employment - major employers. Shopping, nightlife. RLI - Site Selection 1-73 HOTEL / MOTEL Key factors of a hospitality facility : the daily room rate occupancy factor constantly seeking a niche (Motel 6 poking fun at perfumed soaps and workout facilities) RLI - Site Selection 1-74 HOTEL / MOTEL Hospitality economics: governed by the supply and demand curves As occupancy rates increase, room rates increase As demand increases, supply will increase RLI - Site Selection 1-75 HOTEL / MOTEL Hospitality Valuation Services and HVS International provides the following data: room rates vs. inflation value per room of a first class hotel average room prices major sales price vs. replacement costs guidelines for the cap and discount rates RLI - Site Selection 1-76 HOTEL / MOTEL As a general rule of thumb, land price is in the range of 10-15% of the total room cost. RLI - Site Selection 1-77 HOTEL / MOTEL Predicting demand in a tourist area review the forecasts of changes in the number of tourists that are predicted for the area. A number of factors can dramatically affect tourism. changes in currency rates weather patterns high profile crime at the resort area other? RLI - Site Selection 1-78 HOTEL / MOTEL Case studies Resort Area Forecasting – Calculate future room demand Business Hospitality – Developers will examine the relationships between existing rooms and the total square footage of office space in a given sub-market. RLI - Site Selection 1-79 HOTEL / MOTEL Other Products: Senior Housing Self Storage RLI - Site Selection 1-80 HOTEL / MOTEL Summary The key to solving the marketability to any site is to determine the GAP. – – – the inventory or supply must be measured the pipeline assessed the demand determined emphasis on the relationship of new employment and how it can be used to project future demand for housing, office, retail, industrial and hospitality space. RLI - Site Selection 1-81 RLI www.rliland.com RLI - Land 101 1-82