How Does Commercial Real Estate Site Selection Work?

Commercial real estate site selection is the process of researching potential locations and commercial properties and identifying which ones provide the best opportunity for your business. Sounds simple enough, but putting this process into practice is far more complex than that definition lets on. When we help clients with site selection, we research and compare across many different variables. These analytics are critical to helping us identify which sites are best optimized for their business success.

In this article, we’ll provide a detailed breakdown of what commercial real estate site selection entails. We’ll outline the process, step by step. But first, let’s look at some of the information that is used to guide that process.

Considerations that Guide the Commercial Real Estate Site Selection

The site selection process starts with a discussion of the client’s specific needs and wants. During this phase, the commercial real estate broker will gather information to help focus the search and pursue the most lucrative and desirable incentives. Some of the specific information that needs to be defined upfront includes:

Location Preferences

One of the most basic pieces of information for any real estate search is the desired location, if any. In a market like the Twin Cities, there can be multiple municipalities residing in different counties with the right type of commercial property available, so knowing if there’s a clear preference up front helps narrow our efforts immediately. On the other hand, if there is no hard and fast location preference, labor and other analytics as described below may be used to drive a search instead. When there is no strict location in mind, a search can easily stretch across multiple states or regions.

Total Costs

Many clients have a budget in mind when they begin their commercial real estate search. However, the planning process we help guide clients through helps better define potential costs through different scenarios.

Knowing the realistic budget and potential costs is important for narrowing the search, but that information needs to be considered with nuance. Several categories of costs must be taken into account to definitively determine if a site is within budget, including:

• Real estate costs – Cost to purchase/rent

• Development costs – Construction, renovation, furnishing, etc.

• Operating costs – Utilities, labor, logistics, etc.

Proximity to Customers, Suppliers, and Labor

Many businesses need to be situated within a reasonable distance of specific services, suppliers, potential labor, and/or customers. Particularly when a specific location is not predetermined by the client, demographic and resource assessments are fundamental tools for determining the right locations to focus on.

A Step-by-Step Guide to Commercial and Business Site Selection

With key information gathered, it’s time for the real work to begin. While the site selection process can vary somewhat, it will generally follow these three basic steps.

Step 1: Identify Potential Markets

Your broker will use considerations like those outlined above to conduct a detailed comparison of potential markets. Important factors to compare across markets include:

• Existing supply chain

• Access to site

• Cost and availability of labor

• Electricity availability and stability

• Local and regional taxes

• Local and regional regulations

• Road conditions and other critical infrastructure

• Site prep, construction, and renovation costs

• Permitting and zoning requirements

Step 2: Site Evaluation

Once your optimal markets have been identified, all the potential sites therein will be evaluated. Once again, considerations like those outlined at the top of this article will help determine the suitability of each property. Other evaluation tools may also be leveraged during this process, including lease vs. buy analysis and tax structure review.

Step 3: Negotiate Incentive Packages

Once the sites best suited for the client’s business have been identified, it’s time to refine and negotiate incentive packages for potential sites. Note that this step should be started in tandem with initial location review, to ensure there is a competitive environment amongst states or municipalities. Your commercial real estate broker and site selection team will be key in coordinating these steps in the pursuit of the most favorable outcome possible. Incentive packages can include:

• Discounts on utilities, including:

  • Water

  • Electric

• Tax credits and incentives, such as:

  • Job creation tax credits

  • Job retention tax credits

  • Labor training tax credits

  • Capital investment tax credits

  • Tax Increment Financing incentives

  • New Markets Tax Credits (NMTC)

  • Historic tax credits

• Low-cost loans, including:

  • SBA 7(a) loans

  • SBA 504 loans

  • Commercial PACE financing

  • Other low-interest loans offered through state or municipality

Find the Right Site for Your Business with Modern CRE

At Modern CRE, we’re dedicated to helping our clients get the most out of the corporate site selection process. We’ve built our practice around supporting the growth of businesses like yours, and you can trust us to prioritize your long-term success above all else. Interested in hearing more? Contact us today to start your commercial real estate site selection journey.