Site Selection | Finding the right location is everything!

Site Selection | Finding the right location is everything!

 

Feasibility Analysis for CRE Investments are critical to any successful venture.  Far too many fail to go beyond the most rudimentary measurements and often get bogged down with an age old question of which comes first “the chicken or the egg”: market analysis vs. financial analysis.  In reality, most rudimentary measurements are just filters or a way to say there is no interest to doing any real analysis.

 

To truly evaluate any venture, analysis needs to be completed almost simultaneously and as quickly as one can do without sacrificing due diligence.  As prolonged procedurals drown opportunities and leave many wishing for what could have been.  As Pat Riley said “There’s no such thing as coulda, shoulda, or woulda. If you shoulda and coulda, you woulda done it.”  To paraphrase a few other points:

 

  • I follow three rules: Do the right thing, do the best you can, and always show people you care. …
  • It ain’t what you don’t know that gets you into trouble. …
  • Small minds are concerned with the extraordinary, great minds with the ordinary. …
  • The cure for anything is salt water: sweat, tears or the sea.

 

Timeless words which summed up mean hard work and looking for ordinary opportunities.  Just like in sports I feel these provide a solid foundation in any business endeavor.  We look to the fundamentals and the truths which are constant rather than flashy to good to be true returns.  As truly extraordinary returns have historically came from the unannounced and frankly often heralded with impending doom rather than with fanfare.  I do believe there are truths hidden in famous quotes precisely because they ring true in the ear of many but often go unrealized in equal measure.  One of my favorites is from Albert Einstein who said “In the middle of difficulty lies opportunity”.  Warren Buffett appears to reference this in saying “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”   Mr. Buffett’s genius was an ability to simplify complex ideas not only into wonderful quotes but proven business analyses which have stood the test of time.  He has spent a life dispensing advice to all who would listen but did they hear it?  Often I think not but believe they chose to dismiss his embracing of fundamental business principals in favor of bestowing mythical powers upon the “Oracle of Omaha”.  To his credit I believe he has pointed this out many times.

 

Surround yourself with competent advisors who focus on these fundamentals and your investment team can accomplish tremendous success.  Your advisory team should also not be prone to always being in agreement with you or each other.  Healthy analysis requires a high degree of vetting and a little common sense does not hurt.  Like the old adage, “If it sounds too good to be true, it probably is”  boasts an element of pessimism and of caution but “it probably isn’t always correct either.  In fact, the suspicion, cynicism, and doubt that are inherent in this belief can and does keep people from taking advantage of excellent opportunities.”  As Richard Carlson pointed out in Don’t Worry, Make Money:  Spiritual and Practical Ways to Create Abundance and More Fun in Your Life.
Personally, I take great inspiration from such quotes but in practical terms we need analysis which is methodical and practical measurements which are tangible.  Contrary to some; gut feelings are not sound business decision making tools.  Therefore we keep up to speed on the latest in market analysis forecasting processes and one example used being CCIM’s Strategic Analysis Model.  We seek to integrate many tools into a decision-making process and discover how to bridge the gap between market analysis and financial analysis.  Successful analysis comes from a mix of metrics and data points.  An example of some points to consider are:

 

  • the delineation of a retail trade area
  • the ability to quantify demand
  • to estimate potential sales
  • an appropirate tenant mix
  • the target market for those appropriate tenants
  • and complete financial feasibility tests

 

An advanced market analysis for commercial real estate is much like a detailed business plan and as such designed to improve your understanding of timing and location.  A through analysis done properly can increase if not ensure your possibilities for success in any market.  Our hands-on approach and experience with market analysis tools will help identify the best locations for specific types of properties. These analyses will help enable you to make better decisions and chart a course for success.  The tools employed often offer the best indicators for success.

 

  • We use supply and demand data to identify property sectors and geographic submarkets that offer the greatest commercial real estate investment opportunity both now and in coming years.
  • We conduct a hands-on analyses of a target market and submarket using the latest software too.
  • We identify the greatest areas for growth depending on your needs and use in each CRE sector in your target market.

 

While ideal for retail these also work on office, industrial and multifamily ventures.  Such analysis often provides an excellent baseline which can be used for future analyses or comparisons.  We believe in learning to be more effective through the process of acquiring existing properties and the ability to maximize the return on investment as being born in such analyses.  While we continuously seek to improve retail investment return using GIS.  Often those who work in other sectors ventures can easily see the benefits of using the latest GIS tools including BAO (Business Analyst Online) and ARCG is in their business.  Some examples these tools provide us with an ability to:

 

  • Delineate primary and secondary trade areas for various retail type stores
  • Perform gap analyses for various retail properties
  • Analyze consumer retail expenditure patterns and lifestyle data
  • Improve maps with traffic counts and annotations
  • Establish minimum demographic benchmarks to measure feasibility
  • Develop before and after tax financial pro formas
  • Price existing improved retail properties

 

These are just some of the tools utilized in our comprehensive development analyses.

 

Our ability to determine what areas need specific focus and tailor our services to fit your specific venture often return unique insights to even the most experienced CRE professionals.

 

Often there is a need to expand upon areas which require special attention and even perhaps spend less time on those areas less critical in the interest of time and expense.  Parking, Transportation and Accessibility or a change in use are often areas requiring special attention.  If planned for incorrectly these often have serious financial  consequences.

 

Such areas in real estate development often require specific expertise.   In moving and dynamic systems that feature human and physical interactions it’s best to consult experts and have members of your team who can help tie all these together not just efficiently but effectively to help ensure the best possible information for decision making and thus improving outcomes.  An ability to identify transportation and accessibility requirements for property is a strong skillset.  Which includes understanding how public and private transportation systems users will access or arrive at the property, determining how space users will move around the property, and which party in the real estate development process is responsible for developing the modes for transportation and accessibility.  This understanding helps to identify and understand how the role of transportation and accessibility in the real estate development process.  Notable items include an ability to:

 

  • differentiate between transportation and accessibility improvements
  • explain the challenges of integrating new transportation systems into existing systems
  • list and define accessibility issues outside and inside buildings
  • describe the importance of life-safety networks and systems
  • articulate how a developer gets paid using various payment and financing structures

 

In the end, we work hard to understand your business and bring our knowledge and experience to help guide a process.  Often communication and our ability to bring many different professions together to resolve such complexities is our best tool.  Despite knowing better, we do our very best to make it appear incredibly easy!  However, we believe commercial real estate truly is a team sport!

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