Site analysis for real estate development is one the basic prerequisite for the feasibility study and development analysis. Real estate development is a wide term which might include activities ranging from the restoration and re-sale of existing buildings to the purchase and development of new buildings on vacant lands.
In this post we will be exploring how to do site analysis of a vacant land for the feasibility study and development analysis, however; the concepts remain same for any real asset acquisition and development. Site analysis is a preliminary phase in real-estate development that encompasses study of the climatic, topographical, legal, and infrastructural characteristics of a specific site.
A well-conducted site analysis allows real-estate developers to improve a project, by ensuring that they purchase the land at the right price and the resources are effectively utilized.
When doing a site analysis for real estate developments, below are the various factors which should be explored, and answered:
Zoning Regulations
Perhaps, the first and most important factor in doing a site analysis is making ourselves sure of the the zoning regulations. Zoning regulations specify what type of real estate development could be done on the said site - residential, commercial, or industrial. Zoning regulations also dedicates the limit of the size and bulk of structures that can be developed on a piece of land. Building height, setbacks, easement, density, and other development parameters are usually controlled by the zoning regulation.
Zoning is controlled by the local government bodies, and the base idea is to separate residential real estate from other property uses, like industrial. A simple way of getting the zoning regulations for a piece of real estate is to simply check the zoning map of the district.
Usually, development parameters are provided with the land title but should be always checked with the local authorities. Basic zoning information could also be found online, like for Toronto, you can check this zoning by-law map, while in Vancouver, you can check this zoning by-law map.
Have a look at below zoning map for the city of Vancouver.
Accessibility and Visibility
The value of a land is primarily driven by what could be built on that site, which is mostly governed by the zoning regulations. However, there are other factors which are also equally important.
The accessibility and visibility of a site is another major factor to consider when doing a site analysis for real estate development. It becomes rather important for commercial real estate developments. Accessibility refers to how convenient it is to get to the site, while visibility refers to how easy it is to be seen from a major highway or other landmark structures.
Sometimes for mega mixed-use real estate developments, accessibility and visibility might not be as important. However, for stand-alone real estate developments, choosing a suitable location with easy access and visibility makes a huge difference.
If a site is accessible though more than one major highway, it becomes more valuable.
Context and Characteristics
The context and characteristics of a site are another important factor to be considered while doing site analysis for real estate development.
The context and characteristics of a site refer to its properties, relative to its urban and natural environment - the topography of the area. Certain physical factors might affect the desired end products in real-estate development. Runoffs and flooding hazards are examples of a poorly conducted site context analysis.
Factors like the climate of an area, available natural resources, proximity to the city center, and soil conditions are just a few of the external factors to consider when conducting a site context analysis.
In real estate development, the intended purpose of a piece of land might change solely based on the context of the site. A factor like poor soil condition, could see an intended site developed into something else, or devalue the land due to increased construction cost (various forms of ground improvements could be required).
The context and characteristics of a site also include proximity to natural resources or views. The proximity of Toronto and Vancouver to the sea is one of the factors that have influenced the surge in real estate development in both cities. Tourist attractions like the Toronto Islands and Stanley Park respectively, have consequently led to immigrants settling and acquiring real estate.
Surrounding Land Use and Competition
Another factor to consider while doing a site analysis is to study the surrounding land use, and to understand the competition for the land and for a particular type of real estate asset in the vicinity. Land use refers to the modification of the natural environment into built environments, while land competition is said to occur when multiple real estate companies compete to acquire a land.
Land competition could occur for countless reasons, but most of the time, it is greatly influenced by the natural resources found in the land, location, and surrounding land use. The surrounding environment of a real estate greatly affects it. A piece of land with multiple uses and geographical advantage tends to come at a very steep price. Carrying out an analysis of the surrounding land use will better help understand the value of the land and its development potential.
If the said site is surrounded by lands which are zoned for multi-family housing, it does not make much sense to acquire such land for same use. Whereas a land zoned for multi-family development located at a mixed-use development would be highly desirable.
Proximity to Demand Generators
Demand generators in real estate are locations or buildings strategically located to draw consumer's attention towards their service. A well-placed office building in the proximity of a residential site or a hotel/school could greatly increase the value of a site in due time.
Similarly, a residential zoned land near a commercial district would also be highly valued. A land zoned for retail development in a residential area with high disposable income would be similarly expensive.
SWOT Analysis
The final step in doing site analysis for real estate development is the SWOT analysis. SWOT, a quite common acronym stands for strengths, weaknesses, opportunities, and threats.
SWOT analysis encompasses the intangibles in acquiring a real estate, and it is required to clearly itemize the weaknesses and the strengths of a land, accounting for factors not previously considered, and also for detecting the threats and opportunities of it.
When conducting the SWOT analysis, the weaknesses and strengths are regarded as the internal factors and characteristics, while the threats and opportunities are the external factors.
We will investigate the SWOT analysis into more detail in some future post.
Case Study
As a case study, we will be doing a site analysis for a land parcel which has been listed for sale. The site is located at located at 799 Gorman Park/Sheppard Ave W 128, Toronto, Ontario.
Before we start the site analysis, just to put things in perspective, we must note that according to Livingin-Canada.com, in the last 10 years, the average price of owning a house in Canada has seen an increase of over 60%, with Vancouver and Toronto seeing the most surge in recent years. Precondo.com estimates the cost of owning a house in Toronto surged from $430,000 in 2010 to $940,000 in 2020, an increase of over 100%.
Zoning Regulations:
Checking the Toronto zoning by-law map we observe that the real estate is designated residential-detached zone (RD) and according to the section 10.20 of the Toronto zonal by-laws, this piece of land can be used for any form of residential development, like a detached house, or low rise condo building; however, with certain conditions it can also be used for commercial real estate development. The listing also says that the land is made up of 6 properties (all detach bungalows) with a total land area of 0.924 acres. Property is recently re-zoned for a 9-story mixed-use building.
The current zoning must be confirmed with the local authorities.
Accessibility and Visibility:
The site is in Clanton Park neighborhood of Toronto with a good road connectivity and is about 15km from the Downtown Toronto. Site is located at the corner of a T-junction and accessible from the Allen Road (1.25km) and the Wilson Height Boulevard (500m). Now defunct Downsview Airport is 8m drive (4.1km). There are school, parks and sport facility within walkable reach.
The site has good accessibility and visibility, for a residential development.
Context and Characteristics:
The site is made up of 6 existing properties, all detached bungalows on a land totaling 3,740 square meters in area. The land is relatively flat and has no extreme topographical disadvantage. Toronto is relatively prone to storms and floods but with about 13km to the nearest shoreline, it is relatively safe. Existing structures needs to be demolished and cleared.
Surrounding Land Use & Competition:
The land is in a residential zone, making it relatively serene and peaceful. There is no existing conflict with regards to the site, and competition is mild, mainly due to its location at a corner. However, the site does not offer much differentiation as compared to the surrounding land use.
Proximity to Demand Generators:
The site is in Clanton Park and is surrounded by two public schools, one private school, and a college. Also, three shopping malls, fifteen entertainment/sport facilities, twenty restaurants, four hotels and two art galleries are also located in the vicinity. However, there is no commercial development in the area.
SWOT analysis:
The below table summarizes the SOWT analysis for the site:
Buying a residential land in a residential neighborhood does not offer much differential; however, it should also be noted that the Covid-19 pandemic has severely impacted the real estate in Canada, and it appears that residential real estate would be the first to recover. The site presents an opportunity for residential real estate development at a right land price.
Conclusion
Site analysis for real estate development is a must for feasibility study, development analysis and valuation. A site analysis covers the study of the climatic, topographical, legal, and infrastructural characteristics of a specific site.
Case study provides an insight into how site analysis can be done for real estate developments.
Hope you enjoyed this post on site analysis for real estate development. If you have any questions, let me know through the comment section below.
