When developers and investors are considering commercial real estate purchases, their broker is often called upon to render an opinion on site feasibility. As Barry and I would both tell you, we are not engineers or architects but we do have a pretty good idea of what is most commonly requested in our market.
Sharing some of our market insight can be important to the development of a site when it comes to tenants’ current expectations and achieving an expedient lease process on the property.
What is the site being used for?
Each commercial property requires a vision. Is its intended use to be retail, industrial, or office? Each of these sectors have different site needs that need be considered.
For example, a retail site will require ample parking and good access to main roads. Shorting the site of parking can spell heartache down the road when desired retailers move onto other sites with real, or even perceived, better parking ratios.
The same can be said of office users. Though downtown office tenants typically have a different expectation of of parking compared to their suburban counterparts.
Parking concerns are not as often a factor for industrial tenancies. A developer does needs to consider large truck access, for example, which can have a huge impact on the number of users who can utilize a site.
Return expectations
Another item to consider when developing a site is comparable lease rates in the area for the type of building that is proposed to be constructed.
We encourage developers to spend some time on design. Design does impact cost, however, and there does come a time and limit to what certain areas can bear for lease rates.
Putting up a “Taj Mahal” in the centre of a heavily populated industrial area, for example, is a risky move. It’s difficult to attain market cap rates when a property has priced itself out of the market.
Long term plans
One of the most important considerations when considering site development, be it for rental or use as an owner, is the long range plan.
Will this investment place the property in a good position for ten or fifteen years down the road should the current tenancy or business leave the site?
We often get tenants asking for buildings that may suit their immediate use well but really handcuff the landlord’s options for future tenants.
Spending the time on the plan now can really pay off down the road. Talk to your commercial real estate broker about what you’re thinking about before the shovel hits the dirt.
Posted by Kelly Macsymic
