Location is one of the most important criteria to consider when choosing commercial real estate for your organization. Every real estate project, to some extent, takes strategy into account when deciding location.
However, site location strategy involves the analysis of demographics and other important data sets. It’s often used to support location decisions for major projects that involve large scale capital investments and require a national decision-making framework. These types of projects include, but are not limited to, data centers, manufacturing facilities, and headquarter relocations.
There are several benefits to an optimized location:
- Proximity to supply chain vendors lowers production costs.
- Proximity to a skilled workforce provides better access to human capital.
- Proximity to major transportation networks results in faster product delivery.
- Access to utility infrastructure provides high capacity, redundancy and lower costs.
- Attainment of lower income and real estate taxes positively impacts revenues.
- Availability of incentives offsets investment costs.
Whenever your organization is evaluating a move to a new market which requires a major capital outlay, it’s important to think through which optimal location will properly support objectives.
Continue reading for the four steps to developing a commercial real estate site location strategy.
4 Steps to Developing a Successful CRE Site Location Strategy
A site location strategy determines where your next commercial real estate asset will be located. The following four-step process ensures the location of your next commercial real estate asset matches ideal criteria for your organization, like an adequate labor market and feasible business costs.
1. Identify Project Success Factors and Milestones
Before conducting market research with your CRE team, it’s important to clarify your strategic, financial, and operational goals for the new project. Ask yourself: What locational needs are critical to support the proposed project?
Consider the project strategies you’ll leverage, the timelines you must adhere to, and the selection criteria you’ll weigh to make the final site location decision.
While these selection criteria vary, they often include:
- Proximity to vendors, suppliers, and customers.
- Labor availability and cost.
- Educational attainment levels of labor pool.
- Real estate availability and cost.
- Access to transportation infrastructure (rail, port, highways).
- Utility infrastructure.
- Tax rates and financial incentives.
- Other cost of business factors.
2. Collect and Analyze Data
After establishing guidelines for your project, the next step is to collect data which will be used to measure the selection criteria identified in the first step. This data will help you align your next CRE location with organizational needs.
Data can be collected from multiple resources. A few examples include:
- Bureau of Labor Statistics.
- U.S. Census Bureau.
- U.S. Energy Information Administration.
- Local and regional water and sewer districts.
After you determine and collect relevant data, work with an experienced commercial real estate broker to score and map markets based on how well they align with each dataset. The highest scored markets will then be shortlisted for further consideration.
3. Map and Score Each Dataset to Eligible Markets
Next, evaluate each shortlisted market, determined in step two by mapping and scoring the key criteria and data collected above. Typically, the majority of this data can be visually mapped and graphed using sophisticated software programs with GIS capabilities. Mapping large data sets helps visualize the strength of markets against others.
Once the markets and their corresponding data sets have been mapped and scored, it is typical to add a second filter which focuses solely on real estate opportunities that support the proposed requirement.
For example, if the project requirement calls for a 40-acre industrial site with rail access, each of the scored markets should be assessed on the amount of vacant land they have that can meet that need.
4. Pursue Preferred Markets
The last step in developing a site location strategy is to determine the top markets to pursue and the availability of real estate options which meet your organizational needs.
Once you’ve selected your preferred markets, it’s time to begin the commercial real estate search in the highest scored markets with available aligned real estate.
Choosing a site location is necessary for all commercial real estate, but choosing the right location can set your organization apart. Use this four-step process to give your organization a competitive advantage. Need help developing your CRE site location strategy? Reach out to an experienced real estate professional at Allegro Real Estate Brokers & Advisors.