For real estate developers, location selection is the prime consideration. Choosing an ideal location depends on multiple factors, but a poor choice will mean low financial rewards after project completion.
Real estate is very local and the optimal locale depends on the development type. Zoning laws aside, the perfect location for a shopping center would differ from a prime spot for a multi-family unit. In general, a solid location appeals to potential customers and generates profits for the investor.
The right competitive edge
Warren Buffet’s economic moat concept stresses the importance of determining and maintaining a competitive edge over competitors to provide a protective “moat” around the business. In terms of real property development, this means choosing a location that is both in high demand and limited supply.
Developers should consider local government infrastructure and regulations, such as zoning rules and taxes when selecting property. Additionally, consider long-term factors such as expected property growth and the region’s job market history. Appeal factors such as proximity to residences and walkability are also key. Property walkability coordinates to higher property appreciation and stronger price resilience during economic downturns.
Downfalls of the speed-to-market mindset
Before starting to scout locations, the scope of the project needs to be fully defined. The selected property should meet any specialized technical requirements. Understandably, investors want to expedite the process, but sacrificing accuracy in favor of hastiness can lead to an inferior location.
While finding a property capable of modification or retrofitting accelerates the development process, it may mean settling for less than perfect. Another option when searching is to parallelly scout for both existing locations and shovel-ready undeveloped property.
Utilizing economic incentives
A monetary reward for creating jobs or investing capital into a local community can be a nice perk, but the lure of economic incentives should not be the sole factor in decision making. Instead, developers should focus on finding several optimal locations and then consider any applicable economic incentives.
Commercial real estate purchases involve more complicated aspects, such as zoning laws or deed restrictions, construction and easement issues and land title issues for the buyer. When purchasing commercial property, seeking experienced legal guidance can speed along the process while protecting the buyer’s best interests.