Location selection takes on different approaches depending on the situation and the experience of the project team. However, in the end it is a process of elimination that takes place in two phases.
The process begins with either an initial list of preferred locations or specific criteria for which to build a list. Location lists are frequently based on counties for manufacturing and distribution projects and on cities (metropolitan statistical areas or MSA’s) for headquarters, back office and R&D projects. The county-level analysis allows for more defined geography that can be better differentiated (e.g., locations near Interstates).
It is important to note that the local economic development agencies are usually not contacted until Phase II for site visits unless the project team does not have experience in data collection. Also note that real estate-related information is required at several points in the process.
When making real estate decisions, many companies will first seek the availability of existing buildings (unless the building they need is highly specialized) and then consider potential sites in an attempt to reduce startup time, minimize risks and reduce cost.
When a prospective company views an area and its real estate options, there are four levels of evaluation (as outlined below) that frequently drive the decision. Having identified a particular site or building, the search team conducts a quick evaluation of access to an airport (if air travel is important) and the labor force within 30 minutes of the site.
The evaluation team then reviews the local amenities and interstate access that are within a few miles of the site. Lastly, the team focuses on the overall site and the details of the building(s), if present. In the final analysis, it is the site with the best access to resources and manageable risk at the lowest cost that will most likely be selected.
Size of Development Site and Lot Sizes
Company requirements will range from large (100+ acre) standalone sites for single users down to 5-10 acre sites within a multi-user park. Many companies will scan the real estate options for the size lot they need but also check the potential for expansion on contiguous land or adjacent sites.
The configuration of a site and its individual lots is also a key determinant of the size and configuration of the building that can be placed on the site, particularly when considering any minimum offset distances required to property lines.
Level of Site Visibility and Security;
Some companies want to have visual access from an interstate or a primary highway and have their name on the building. Other companies are more concerned with security and want to be located in an office or industrial park that has controlled access, a perimeter fence and lighting throughout. Also important is the location and distance to fire, police and hospital services that are the closest to the site.
Level of Site Readiness
As previously discussed, companies seek out real estate options that minimize startup time and limit potential risks. If the type of facility required is relatively generic, the company will first screen the real estate listings for buildings then for building sites. If the building requirements are fairly unique (extra large site or building size, very specialized space layouts, need for high-end architectural features), the company will seek a building site. Different companies and types of operations will be attracted to different levels of readiness – from a developed site to a shell building in place to a move-in quality building.
There is a multi-level scale for determining the level of site readiness (see below). The scale ranges from raw land currently zoned agriculture up to a fully developed site with a building in place. Each level indicates an incremental amount of effort that reduces the time to startup for the prospective company. When a community is considering the development and marketing of a particular site, make an effort to determine what level of readiness will be needed to assure that certain types of businesses will be attracted to the site.
Readiness is ultimately defined by prospective companies as the time required to obtain occupancy in a building on a site.
Level 1
Developed site, new building needing finish and minor modifications (paint and floor finishes).
Level 2
Developed site, building shell in place or existing building needing modest renovation.
Level 3
Developed site with virtual permitted building (based on pre-designed building and defined conditions).
Level 4
Developed site ready for building construction
Lots defined and graded
Roads and utilities in place with service to lots
Some permits secured and covenants defined
Level 5
Undeveloped site
Ownership/title cleared and ready for sale
Proper zoning in place
Surveys/studies completed
Permitting agencies poised for approvals
Infrastructure within reasonable access
Compatible adjacent land use
Conceptual site plan and general covenants
Level 6
Zoned land in hands of original owner
Level 7
Land zoned agriculture but is to be zoned industrial or O/I based on the Comprehensive Land Use Plan
Soil conditions and on-site water management can be a major issue for a prospective company. The results of soil boring tests provide the following critical information:
Types of soils at different depths impact site drainage potential and structural soundness.
The overall uniformity of the soil conditions across the site is also important. Rock outcrops, presence of peat deposits or changes in soil type may lead to difficult excavations, stability issues or differential settling of structures.
Any presence of fill material can produce unknown foundation conditions as well as indicate potential contamination of the site.
Depth to bedrock and type of bedrock will determine the extent (and cost) of the foundation required.
Depth to groundwater and the fluctuation of the groundwater can impact foundation integrity. Access to high quality groundwater with a relatively high draw rate can be a differentiating asset for the site.
Another critical site issue is the existence of wetlands and the regulations that impact land use and encroachment near wetlands. In addition, the existence and location of the 100-year flood plain can have a significant impact on buildable acres and access within the site.
Access to utilities and their cost and capacity can be a driving factor for a site decision. It is important to know the details related to cost and capacity when having discussions with prospective companies.
Demand for particular utilities will vary by type of operation from food processors that need substantial water and wastewater treatment, electric power and gas (for drying operations) to data centers that need highly reliable power, telecommunications services and water for cooling.
Electric Power
Listing of providers and whether they are municipals, co-ops or large investor owned
Estimate unit cost (cents/kilowatt-hour) for industrial users
Dual-feed power capabilities
Voltage and power ratings of feed lines
Access to locally generated renewable power (hydro, wind, solar, biofuel-based)
Water Treatment/Distribution System
Source of area water (groundwater vs. surface)
Results of water quality tests
Any history of supply shortages
Excess capacity of system for incremental users
Line size and pressure in the vicinity of the site
Wastewater Treatment/Sewer System
Available capacity of the treatment plant
Collection line size and incremental capacity
Pretreatment requirements for certain discharges
Municipal Storm Water Sewer
Size of line and incremental capacity
Need for runoff retention pond/chamber
Telecommunications and Broadband
Listing of providers
Speed/bandwidth capabilities and type(s) of cable
Redundancy of system with dual-feed capabilities
Gas Distribution System
Listing of local providers
Line size that feeds the site and delivery capacity
Companies seeking to acquire land are typically concerned over the potential restrictions on use or the establishment of non-compatible land uses (residential developments, schools, public parks, hospitals or high density retail) near the site.
There is also concern over past uses of the site and any potential environmental contamination that may be present on surface soils or in the groundwater from on-site or off-site sources.
Site Zoning Classification/Description
Identify the current zoning classification and the designated uses and restrictions of the classification. It is also important to review the zoning classification for contiguous and nearby land parcels that are not part of the site to determine the types of activities that may be planned for the future.
Land Use
Identify the current and past land uses for the site and adjacent sites.
Environmental Assessments
The Federal Environmental Protection Agency (EPA) requires a Level 1 (Phase I) Environmental Assessment to be completed as part of the due diligence process for commercial and industrial property transactions. The requirements for the assessments follow ASTM procedures along with some additional actions defined by the EPA.
The assessment is performed by a certified professional engineer and requires a thorough review of older maps, aerial photos, published reports, interviews with key people knowledgeable of the site, and other sources. The engineer will also walk the site (and observe adjacent sites) seeking any indications of past activities that may have been sources of contamination.
If a potential for contamination is identified, a Level 2 (Phase 2) site testing procedure must be completed to either verify of refute the potential presence of contamination.
Covenants and Other Restrictions
If the site is within an industrial park, the company will want to review all covenants and restrictions that are imposed on the park residents.
Having access to different modes of transportation are criteria factors in site selection. It is important to place the site in context with its access to interstate, rail, air access and ports.
Access to Interstate
The company will often review the route from the site to the nearest interstate interchange and determine the width and quality of the secondary highway (number of lanes, shoulders, turn lanes, etc.) as well as the number of lights, and the existence of sensitive receptors (schools, hospitals, parks, major retail areas and residential areas) that may be impacted by truck traffic. If any traffic studies have been completed, they may want to review the projected traffic patterns near the site.
Rail Access
Certain manufacturing and energy-related operations require rail access. It is important to note the available rail freight carriers that serve the area, frequency of operations, pricing structure, and other companies served. Also note the distance to the main line and the cost of bringing access to the site and the building.
Air Access
Identify the travel distance to the local county general aviation service as well as to the regional airport with commercial service. Details on air freight service, direct flight destinations and other information will be of importance to certain companies.
Port Access
Define the travel distance and modes of transport from the site to a particular port facility and the types of cargo that can be handled.
There are other resource factors that a company may review in selecting a site that go beyond the site itself. These are very critical needs for certain types of companies and operations and the community should be aware of them.
Size and Quality (Skill Levels) of Labor Force
In the location screening process the project team normally profiles the county or MSA for current population levels, five year growth trends, education levels of residents, unemployment rates, and employment levels for specific industries. Frequently, the company or its consultant will interview existing employers to determine labor quality and supply issues as well as length of average commute distance and time. After a site is selected, the company may plot and quantify the labor resources within the stated commute distance.
Quality of Life Factors
For operations that require a significant relocation of staff (e.g., R&D facility, IT support center, headquarters, etc.), the community quality of life attributes will be a serious consideration and include: cost/availability of housing, quality of K-12 education, access to universities, health care facilities and cost, recreation/cultural options, social organizations and meeting places (coffee shops, unique restaurants, etc.) and other factors.
Access to Certain Amenities and Support Services
Some companies will want to have local access to amenities and services such as a health club/gym/walking trail, restaurants and hotels for guests, business service providers, and others.
The site certification program demonstrates to prospective companies that the community or owner of the site has made a significant investment to prepare the site prior to marketing. This investment relates to lower cost and risk for the company.
The consistency of what is defined as certified will determine the credibility of the program and buy-in by prospective companies.
Companies don’t acquire just a site but the access to a package of resources – that will vary in scope by company, by type of operation, and by life cycle stage of company.
Not all companies are seeking dirt. Many will be attracted to a site that has a spec building, frequently a flex building.
It is very important for communities to realistically define what types of industries and companies would be most appropriate for a given site. Without this realistic expectation, the community may be waiting for the bus that just never comes.
