Transcript Land 101

Site Selection
A program brought to you by the REALTORS®
Land Institute
About RLI
 An affiliate of the NATIONAL ASSOCIATION
OF REALTORS® (NAR)
 ALC Designation
 RLI Land University Courses
 RLI Website (www.rliland.com)
RLI - Land 101
1-2
ALC Designation
 Candidacy
Members become candidates following the
successful completion of their first RLI Course
 Knowledge Requirements
120 credits
Required courses – Land 101, 1 Tax course,
Land Investment Analysis
Land University Courses = 20 credits each (over
two days in length)
RLI - Land 101
1-3
ALC Designation
 Experience Requirements
$5,000,000 in land transactions or 25 land
transactions within 5 yrs of application date
 ALC Application
Submit all documentation and processing fee
 ALC Designation
Awarded by the RLI B.O.D.
ALC Designees must maintain membership in
RLI and NAR
RLI - Land 101
1-4
Land Brokerage
 Focuses on land transactions of specialized
types:
farms and ranches
undeveloped tracts of land
transitional and development land
subdivision and wholesaling of lots
site selection and assemblage of land parcels
RLI - Land 101
1-5
RLI Courses
Agricultural Land
Brokerage and Marketing
 Creative Land Planning
for Profit
 Land Brokerage 101
 Land Development

RLI - Land 101
Land Investment
 Site Selection
 Taxation of Real Estate
 Tax Deferred
 Transitional Land

1-6
Site Selection - Introduction
Objective:
 The objective of this course is to provide
the tools for a land broker to better identify
and present all of the competing sites in a
market and select the site most likely to
succeed.
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1-7
Topics
1. Analyze demographic growth trends.
 Employment and growth.
 Land supply/demand.
 Data resources.
2. Analyze resources to determine the best site for a specific
use.
 Single family, hotel, retail, offices, and industrial.
3. Apply principles to specific property types or segments.
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1-8
Background Info and Where to Get It
Economic Development
Council (EDC
 Chamber of Commerce
 Planning Commission
 Building/Zoning
 Utilities
 Bankers
 Metropolitan Planning Org

Board of Realtors
 Newspapers
 Engineers
 Appraisers
 Software Programs
 Online Resources
 Environ. Prot. Agencies
 Universities

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Obtaining Ownership Information
On-Line Tax Service
Courthouse/Property
Appraiser
 Utilities
 Water and sewer line
locations
 Planning Department
 Department of
Transportation
 Building Inspector


Neighbors
Local/Regional
Publications/Reporters
 Other Brokers, RLI
Members
 Small Town Coffee Shop
 Municipal Engineering
Department
 Soils Maps
 Army Corp of Engineers
 Dodge Report


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Reference List
 Data & Maps
 Organizations
 Websites
 Demographics
 Contamination Site Reports
 Publications
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SINGLE FAMILY
 Buyer criteria checklist
What is the profile of the buyer?
What product they need for that buyer?
Where does the buyer want to live?
When will the buyer be ready to make a buying
decision?
How will the buyer pay for the product?
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Questions from Developer
1. Utilities
a. Sewer, water, power, cable, phone, fiber
b. Are they available and capacity adequate
c. Are there fees (impact, pioneer, capacity
reservations, etc?)?
d. Proximity, easements, Right of way issues
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Questions from Developer
2.Site constraints
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
Access
Traffic controls,-Who pays?
Median, curb cuts
Drainage
Retention & Detention of water
Visibility
Noise (traffic, industry, airports, sirens)
Odors (pig farms, chickens, bakeries, chemical plant?)
Trees-none, too many, cost to remove, mitigate?
Configuration of site, natural barriers
Surrounding neighborhood-need walls, gates?
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Home-sites/Lots
Minimum width
the infrastructure is the most
expensive expenditure in
developing a lot
A "rule of thumb" for width: 110'
for each lot plus 60' right-of-way
for a total of 280'.
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Home-sites/Lots
Valuing the site
Price per Acre, Price per Unit, or
Ratio of Finished Lot to
Home/Lot Package
# of potential units that can
placed (on the net acreage) is
key
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Home-sites/Lots
Pipeline of Lots in Submarket
of a Major Market
Identify “absorption” in submarkets
Quality and quantity are equally
important
Research the # of submitted lots for
platting and/or site-plan approval
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Cash or Terms
Developers’ goal – Absorb
land in 18-36 months
Rolling option basis is preferred
(no legal obligation to close on
the next parcel).
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Takedown Schedule
 Buyer/Builder
Prefers:
 Landowner
Prefers:
Market Driven
(# lots sold)
Frontage
exposure
By Contract
(date)
Begin
development in
the back and
move forward
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Statistical Analysis – Single Family
A. Analyzing the res. marketplace
WHAT will happen?
WHEN will it occur?
HOW much will it change?
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Statistical Analysis – Single Family
B. Decisions people make about real
estate include:
1.
2.
3.
4.
5.
To buy or sell.
To expand or downsize a business.
To lease rather than own.
To build, remodel or convert an existing use.
To change zoning, move to another location.
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Statistical Analysis – Single Family
C. Market driven decision.
1.
2.
3.
4.
5.
6.
7.
8.
Overview of the market.
Review demand.
Review supply.
Opportunities in market.
Risks in the market.
Locations and sites available.
Financial Analysis of opportunity.
Decisions.
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Statistical Analysis – Single Family
D. Market Overview for Single-Family
1.
Product Types – Single Family




2.
Subdivision lots
Zero lot line
Townhouses
Condominiums
Apartments
 Garden Style
 High-rise
3.
4.
Mobile Homes
Ownership vs. Leased Units
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Statistical Analysis – Single Family
E. Measure Total Supply
1.
2.
EOY Supply – BOY Supply = Absorption Units
Analyze Sub markets
 Geographic
 Price Point
 Product Type
3.
4.
Total Supply Absorption = period to absorb supply.
Existing Supply. Measured by:
 Add “pipeline” (planned and under construction)
 Deduct current absorption.
 Equals available supply at a particular time.
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Statistical Analysis – Single Family
F. Key to development
1.
2.
3.
4.
5.
Supply
Demand
Pricing at market
Costs and returns
Location
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Supply and Demand
Price
Supply: The quantity that
producers are wiling to sell
at a given price:
Demand: The quantity of
goods consumers would (and
could) buy at a given price:
Quantity
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Supply and Demand

Supply and demand curves meet, the market is in
balance
Supply
Price
The point where demand
equals supply
Demand
Quantity
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Supply and Demand

Supply and demand curves meet, the market is in
balance
Supply
Price
If developers raise prices,
demand drops and supply will
exceed demand ( “quantity”).
Demand
Quantity
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Supply and Demand

Supply and demand curves meet, the market is in
balance
Supply
Price
Demand
If the prices
Buyers are willing
to pay drops,
developers will not
be willing to
supply lots and a
shortage (supply)
will develop.
Quantity
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Statistical Analysis – Single Family
H. Pricing Offers Balance
1. Negotiation of the deal




Knowledge of the market and product
Initial price
Bargaining power (terms, cash)
Creating Demand
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Statistical Analysis – Single Family
I. Employment
– Employment in an area is critical to
creating demand for office, retail,
industrial or more sophisticated
housing.
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Statistical Analysis – Single Family
I. Employment
– 1. Basic Employment
– 2. Non-Basic Employment
– 3. Forecasting total employment
–1.
–2.
–3.
Collect market information
Determine Economic Base
Forecast total Population
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MULTI-FAMILY RENTAL - GARDEN STYLE

Site Selection Criteria

Rents
rent per square foot
# of bedrooms

Occupancy
Vacancy below 90% is tough to build into


Vacancy Trends/Rent increases - Past Two
Years
Concessions - Free Rent
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MULTI-FAMILY RENTAL - GARDEN STYLE

Grocery Location –
How Far from Site
Upper End Grocer?



Employment Centers
Visibility – visibility or “quality of life’
Pipeline of Planned Units
What is the absorption rate (less than two years is
typically acceptable)


Barriers to Entry
Price per Unit Includes Impact Fees
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MULTI-FAMILY RENTAL - GARDEN STYLE

Type of Product
–
–
–
–
–
–
–
Upscale
Yuppies
Family Unit
Empty Nesters and Retirees
Tax Credit
Moderate
Density
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MULTI-FAMILY RENTAL - GARDEN STYLE

Amenities in the Submarket
–
Niche - Missing Products
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MULTI-FAMILY RENTAL - GARDEN STYLE

Statistical Analysis, Determining GAP
–
inventory the marketplace
–
–
calculate each complex on the rents per
square foot per month.
Demand Analysis – Apartments
–
–
Determine range of price/sq ft.
Determine median (middle)

–
30 samples should be obtained
Determine mean (average)
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MULTI-FAMILY RENTAL - GARDEN STYLE

Reliability of Data
Relative range qualifies a distribution
Standard deviation calculation
determines variance to mean
Rent per sq. ft. factors into land cost
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MULTI-FAMILY RENTAL - GARDEN STYLE

Trends in Multi-Family Design
Traditional – renters prefer cars close
Neo-traditional prefers cars out-of-site
Renters by choice – (do not want
responsibilities of ownership or may
want the amenities of renting)
Downtown resurgence (industrial
space conversions or “tear-downs”)
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Site Considerations
Corner vs. Inline
Level of Service on Street
Traffic Light
Demographics
What Side of the Street
Configuration Front vs. Depth
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Cross Easements
Parking
Drainage
Utility
Land lease
Excess Land
Competition Map
GPS / One-Hour Photo / Modem to
Demographics Source
Build to Suit
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Retail Analysis Key Factors
Retail Sales by Types of
Goods/Services
Sales in a Trade Area
Sales Volume for a Specific Site or
Store
Sales per sq. ft.
Sales per Customer/Transaction (per
ticket)
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Retail Analysis
Sales/ S.F. Comparisons
–
Varies by type of retail
Leakage
–
Sales lost outside of trade area
Displaced Sales
–
Sales gained from outside of trade
area
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Retail Analysis
Retail Gap
–
–
–
Total Potential Sales ÷ Ave. Sales per
sq. ft
Supply = Total existing sq. ft.
Gap = Demand Minus Supply
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RETAIL CASE STUDY 1
Total Income =
Population
X Per Capita Income
Total Income
=
Retail Expenditures
Total Retail
X
=
Less Leakage
Leakage
X
Net Retail
/ $400 SF Sales
=
=
Less Supply
GAP
=
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RETAIL CASE STUDY 1
Total Income =
212,809.00
$17,426.00
$ 3,708,409.00
Population
X Per Capita Income
Total Income
=
Retail Expenditures
Total Retail
X 22%
= $ 815,850,119.00
Less Leakage
Leakage
X 35%
285,547,541.00
Net Retail
/ $400 SF Sales
=
=
Less Supply
GAP
=
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530,302,578.00
1,325,756
S.F
(DEMAND)
1,205,000.00
120,756 S.F
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RETAIL CASE STUDY 2
1.
What is the average per square foot sales for the
grocery (food) stores?

$473.52
 Avg. store 35,600 SF x 7 stores = 249,200 SF
 $118 mil sales ÷ 249,200 SF = $473.52
2.
What is the estimated total income based on the
population projections and using this year’s
median per capita income?

$1,310,527,550
–
Per capita income $20,005 x 65,510 projected population
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RETAIL CASE STUDY 2
3.
If the per capita income is $20,005 and the population is
62,268, what is the total income for the trade area?
 $1,245,671,340
 Per capita income of $20,005 x 62,268 population
4.
In the trade area the total spent on retail is $761,000,000.
What is the percentage of total income that is spent on
retail?
a)
b)
c)
d)
e)
10.5%
95.8%
61.09%
39.01%
None of the above
61.09%
$761,000,000 ÷ $1,245,671,340 =
61.09%
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RETAIL CASE STUDY 2
5.
If the two smaller grocery stores close, how many
square feet of food sales space will be available to
serve the trade area?


6.
7 stores x 35,600 S = 249,200 SF
249,200 S.F. Less 24,400 & 28,100 = 196,700 SF
This year the total demand for food sales is
$118,000,000. Based on the estimated population,
what is the average sale per capita?

Food Sales of $ 118,000,000 ÷ 62,268 pop. =
$1,895.03/capita
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RETAIL CASE STUDY 2
7.
If the same sales per capita are consistent in five
years for food sales, what will be the total
expenditures for food in that year?

8.
$1,895.03 x 65,510 pop. = $124,143,415 food sales
Assuming that the per-square-foot sales for food
are constant through the next five year, what is
the demand for space (in square feet) in five
years?

Total sales $124,143,415 ÷ $473.52/SF = 262,171 SF
demand
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RETAIL CASE STUDY 2
9.
If no stores are built and none taken out of service,
will there be a gap, and if so, how much (in square
feet) in five years?


10.
Yes
Demand is 262,171; supply is 249,200; GAP is 12,971 SF
If the 2 small food stores close and if there is an
existing gap, how much will be the total gap for food
stores in five years?

GAP 12,972 SF + replacement for closed site 52,500 =
65,472 SF GAP
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RETAIL CASE STUDY 2
11.
What are the average sales for restaurant and bar
establishments for the current year?

12.
$1,500,000 ($ 78,000,000 ÷ 52 stores).
This year eating and drinking establishments had
total projected sales of $78,000,000 or 10.25% of
the total retail sales, what will be the total dollars
for eating and drinking establishments in five
years?

total income of $ 1,310,527,500 x 61.09% spent on retail
x 10.25% on food and drink or $1,310,527,550 x 61.09%
= $800,601,249,750 x 10.25% = $82,061,628 for eating
and drinking establishment.
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RETAIL CASE STUDY 2
13.
The drive time area shows $28 million in drug
store sales. Based on the population, what were
the average sales per capita for drug store sales?

$449.67
 $28,000,000 ÷ 62,268 pop. = $449.67
14.
This year 11 drug stores served the trade area.
What were the average drug store sales per
store?

$2,545,455
 $28 million ÷ 11 stores
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RETAIL CASE STUDY 2
15.
The average drug store this year was 8,000 square feet.
What were the sales per sqr ft. this year?

$318.18


16.
11 stores x 8,000 SF/store = 88,000SF
$28,000,000 ÷ 88,000 SF = $ 318.18/SF
Experience shows the drug store owner that if they close
in-line stores and open a larger freestanding store of
14,000 sqr ft., they can double their sale per outlet. Using
the current year sales per store, what will be the gross
sales for a new store? What will the sales per square feet
be for the new stores using total sales information?

$363.63

$318.18 sales/SF in existing stores x 8,000 SF store = $2,545,440
sales/store x 2 = $5,909,880/new store ÷ 14,000 SF in new store =
$363.64 sales/SF
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Drive Time Method of Analysis
1.
2.
3.
4.
5.
6.
7.
Determine the boundaries of the trade area
Determine total income for trade area
Determine total retail sales dollars available
Determine adjusted retail sales dollars
available
Determine sales per sq. ft.
Determine GAP
Determine impact of retailer’s planned
project
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Traffic Count Method of Analysis
Vehicles
–
Counts avail from hwy depts.
Pedestrian
–
1.
2.
3.
4.
Counts available from prospective retailers
Total Sales needed at this site
Customers in the door
Projected sales
Potential /sq. ft. sales
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Marketplace Dynamics
A.
B.
Trade Area economic and demographic factors.
Intangibles
1. Cultural
2. Political
3. Tax Structures
4. Quality of Life
5. Transportation and Infrastructure
6. Racial Mix and Structure
7. Recreation factors
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Marketplace Dynamics
C. Minimum Threshold Factors
1. SIC Codes
2. Comparable Sites – How did they
do?
3. Economic Base
4. Population/Employment Ratio
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT

Trends in Retail
E-Commerce (Internet)
What’s included in gross receipts fro
rent calculations?
–
–
–
–
ATM’s?
airline, event tickets, and lottery
tickets?
Undercutting other tenants from
online sales?
Other?
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RETAIL-FOOD/DRUG, PWR CTR, SINGLE TENANT


Trends in Retail
Retailer considerations
1.
2.
3.
4.
5.
6.
7.
8.
9.
People
Safety
Environment
Focal point -- what is the draw?
The Market
Demographics
Parking/public transportation
Regional dominance
Special Events & Promotion
Carol Todreas of Todreas Hanley Associates (617/482-7008)
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OFFICE SITE SELECTION

Site Variables
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Timing
Size, expansion
Site dimensions
Parking requirement
Cost vs. image
HQ or back office
Visibility
Housing employees or decision makers
Own, lease, JV, capital lease
Sale lease back
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OFFICE SITE SELECTION

Site Variables
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Timing
Size, expansion
Site dimensions
Parking requirement
Cost vs. image
HQ or back office
Visibility
Housing employees or decision makers
Own, lease, JV, capital lease
Sale lease back
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OFFICE SITE SELECTION

Other Variables
1. Demographic
2. Business climate
3. Site specific
 Image
 Size of Site
 Parking
 Expansion Plans
Floor Area Ratio
 Rule of thumb
1. .2 - .25 FAR single story
surface parking
2. .25 - .4 FAR 2-4 story with
surface parking
3. .4 - .9 FAR 3-4 story with
2-3 story parking deck
4. .9 - 2 FAR 4-15 story with
3-6 story parking deck

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OFFICE SITE SELECTION

Other Variables
 Parking
 Hotels, Restaurants, Retail
 Know Shell and Tenant Finish Costs
 Impact Fees
 Relocation
 Timing for Permitting
 Fiber Optics
 Build-to-Suit
 Incentives
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OFFICE SITE SELECTION


Trends
Crucial items for future office development:
1. Monuments are out -- smaller lobbies, more efficient
2. Campuses are in; need to be accessible, nature
friendly, Higher ceilings, bigger hallways, timeless
colors, higher and more windows.
3. Buildings need to be flexible, make it easy to add
employees.
4. Growing companies demand ease in expanding
space and flexibility.
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OFFICE SITE SELECTION

Office Demand
expressed in sqr ft of space/employee

Efficiency Ratio
Office space is expressed as usable and
rentable.
Efficiency ratio = total usable ÷ total rentable
sq ft.
i.e. Lobbies are rentable sq ft., areas used
exclusively by one tenant are usable sq ft.
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OFFICE SITE SELECTION

Efficiency Ratio
areas that penetrate the floors are excluded
from rentable sq. ft. i.e. elevators, stairwells,
and support columns
Third party should verify measurements

We calculate this efficiency by dividing the
usable sq. ft. by the efficiency factor to get
the forecasted rentable sq.ft.
Forecasted Usable Sq. Ft ÷ Efficiency Factor
= Forecasted Rentable Sq. Ft.
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OFFICE SITE SELECTION
 Building Classifications for Office
Space
Class A
Class B
Class C
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INDUSTRIAL SITE SELECTION
 Considerations
Size
Configuration
Impact Fees
Parking
Location
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INDUSTRIAL SITE SELECTION
 Other Considerations
Rail
Phone-Fiber Optics/Electric
Access
Incentives
Contaminated Sites
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INDUSTRIAL SITE SELECTION
 Industrial Analysis
An industrial market needs to be
segmented to determine the amount of
space utilized for manufacturing,
distribution, office/showroom, and
specialty uses such as cold storage.
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INDUSTRIAL SITE SELECTION

Industrial Analysis - Illustration
Current space/Employment Analysis
Forecasted Space Demand
EXISTING SUPPLY
Less Obsolete
Plus Pipeline
Projected 5 year SUPPLY
DEMAND
Less SUPPLY
G AP
+
=
=
40,000,000 SF
1,500,000 SF
1,000,000 SF
39,500,000 SF
48,000,000 SF
39,500,000 SF
8,500,000 SF
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HOTEL / MOTEL
 Know your Buyer - Create a checklist
1.
2.
3.
4.
5.
6.
Size, configuration.
Price/unit
Units/acre
Amenities-restaurants.
Employment - major employers.
Shopping, nightlife.
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HOTEL / MOTEL
 Key factors of a hospitality facility :
the daily room rate
occupancy factor
constantly seeking a niche (Motel 6
poking fun at perfumed soaps and
workout facilities)
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HOTEL / MOTEL
 Hospitality economics:
governed by the supply and demand
curves
As occupancy rates increase, room
rates increase
As demand increases, supply will
increase
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HOTEL / MOTEL

Hospitality Valuation Services and HVS
International provides the following data:
room rates vs. inflation
value per room of a first class hotel
average room prices
major sales price vs. replacement costs
guidelines for the cap and discount rates
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HOTEL / MOTEL
 As a general rule of thumb, land price
is in the range of 10-15% of the total
room cost.
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HOTEL / MOTEL

Predicting demand in a tourist area
review the forecasts of changes in the
number of tourists that are predicted for the
area.

A number of factors can dramatically
affect tourism.
changes in currency rates
weather patterns
high profile crime at the resort area
other?
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HOTEL / MOTEL
 Case studies
Resort Area Forecasting
–
Calculate future room demand
Business Hospitality
–
Developers will examine the
relationships between existing rooms
and the total square footage of office
space in a given sub-market.
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HOTEL / MOTEL
 Other Products:
Senior Housing
Self Storage
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HOTEL / MOTEL

Summary
The key to solving the marketability to any
site is to determine the GAP.
–
–
–
the inventory or supply must be measured
the pipeline assessed
the demand determined
emphasis on the relationship of new
employment and how it can be used to
project future demand for housing, office,
retail, industrial and hospitality space.
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RLI
www.rliland.com
RLI - Land 101
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