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Assessing The Unique Features Of Commercial Real Estate Parcels
As commercial real estate development progresses into the 21st century, many of the principles upon which the market was founded remain the same. Whether you are a property owner, developer, or commercial real estate agent, identifying and marketing the unique features of your commercial property will maximize the attractiveness of the site to prospective buyers or tenants.
Depending on the highest and best use for the property, you may be able to attract a wide spectrum of potential buyers to your site. In addition to basics such as price or zoning, experienced buyers – local or national – will consider several key factors of each potential site, including:
• Location and visibility
Let’s explore some of the primary features of commercial land, and how each is interpreted by buyers.
Location, Location, Location
Because real estate is finite, location is a fundamental consideration in the purchase decision formula for buyers. Unless a property is undevelopable, each site has unique benefits that will meet the needs of a buyer seeking a particular criteria. Increasing the number of potential buyers is dependent on efforts to realize and market the full value of a parcel’s location.
Location not only encompasses city and state, but also variables such as traffic arteries and surrounding commerce. Research neighboring parcels to learn what sort of future commerce, residential communities, or roadways are planned for development.
Aerial photos are a great way to showcase a site’s potential. Google’s free satellite mapping service provides detailed aerial images for most of the United States. To view your property, visit: http://maps.google.com.
Existing Physical Improvements
Contrary to popular belief, existing physical structures on a parcel may hinder a property’s value, as opposed to increasing it. If a site has exceptional location, access, and traffic, but includes a functionally obsolescent structure, the cost of razing the structure will be a primary consideration for any prospective buyer.
If your property includes an obsolete or deteriorating structure, consider razing the structure before marketing the site. Incorporating this expense into the asking price is oftentimes easier and more profitable than deducting it from the price during negotiations with the buyer.
Average Daily Traffic Count (ADTC)
The amount of daily traffic traveling on nearby roadways can be an excellent selling point for even the most difficult properties. Many counties maintain Average Daily Traffic Counts (ADTC) records for major roadways. If the property is located near or adjacent to an intersection, acquire the ADTC for both roads. Prospective buyers will appreciate these figures being readily available in the site’s marketing materials.
ADTC is a significant factor particularly for national entities, such as quick- and full-service restaurants, gas/convenience stores, hotels, and other entities that depend heavily on daily traffic patterns to draw patrons.
Site Access Options
Site access – that is, legally permissible access to the site from nearby roadways – can make or break a transaction. Even the best site can become a lemon, depending on access limitations.
Generally speaking, there are two types of access to a site. The first is “full” access, for oncoming traffic from both directions. Depending on a roadway’s existing configuration, this may require the installment of acceleration/deceleration lanes, blisters, or traffic signals.
The second (and less favorable) option is “right in, right out” access, which limits vehicle access to right turns from a single lane of traffic. Because right in, right out limits the site’s access to a single direction, depending on the ADTC of the affected lane, this may limit the interest of certain buyers.
If a site has potential for broader access options, the property owner may want to consider requesting a modification from the applicable municipality. Performing this legwork before placing the site on the market will significantly increase potential for realizing the full asking price.
Although still common practice in many areas, properties that employ well and septic systems are regarded as secondary sites in comparison to those with modern utility infrastructure.
The cost of bringing utilities to a site may be a significant factor to some buyers. If possible, property owners should consider having electric, water, and sewage improvements brought to the site before marketing the property. Again, such a preparative measure can optimize conditions for realizing the site’s full asking price.
With a rapidly growing number of potential environmental issues, buyers have increasingly made environmental site assessments a contingency in their purchase agreements. This is a must in transactions involving properties prone to environmental issues, such as aging gas/convenience stores, as well as parcels adjacent to these entities.
The expense of an environmental assessment can be worth its weight in gold. A seller can be held liable for undetected environmental property defects, even after a transaction is consummated. The key to a successful transaction is full disclosure.
If it is determined your property has environmental issues, such a status does not make the site broadly undesirable. The cost of clean-up can be integrated into the asking price, made the responsibility of the buyer, or even shared between both buyer and seller. Other unrelated factors, such as location or ADTC, may outweigh negative aspects of the property.
Surrounding commerce can play a significant role in the future of any property. Even if physical structures have yet to be developed, knowing the plans for nearby parcels can help determine the highest and best use of your property.
If your site is located within an expansive commercial district, you’ll have little difficulty in identifying surrounding commerce to determine potential uses for your property. Conversely, if the site is located in an area gradually shifting from residential to commercial use, or a tract of vacant land with minimal surrounding commerce, it will be necessary to speak with other property owners as well as the county assessor to determine future development plans for adjacent properties.
Becoming familiar with the unique features of your commercial property is the best way to achieve a maximum ROI on your investment. A competent commercial real estate agent will have to skills and resources necessary to help property owners research these important aspects of their property.
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