Facilities Check List
Practical, step-by-step guides for the busy FM
August 2001
Site Evaluation Is Key To Determining Project Feasibility
A site evaluation examines a real estate project’s physical site and improvements to determine if they can meet the objectives of the owner. In financial and economic terms, a property’s site must be considered separate from any improvements (construction) to it. Land is considered to have enduring value (it does not depreciate). Thus, for tax purposes, it is considered separately.
Site evaluation consists of examining several factors, including:
Site improvements and property value. Improvements made to a property do not automatically contribute to its overall value. Examples of this might be extensive landscaping or a soil drainage installation on a site which otherwise has naturally wet conditions. While such improvements may alleviate serious problems or make the site more pleasant, they may not assist in commanding higher rents than normal in the marketplace and may not contribute to market value if the property is sold.
The contribution of off-site improvements. In many recent development projects, city governments have required developers to install off-site improvements. These may include paving half the width of adjacent streets or installing a storm water runoff, sewer, curbs and sidewalks. In all likelihood, such improvements do not contribute property value equal to the cost of their installation. However, since they are located adjacent to the real estate, it is logical to assume that they do enhance land value.
Site survey. One of the most helpful items when inspecting a property is a civil engineer’s or land surveyor’s scaled survey drawing of the site and improvements. The drawing should indicate where the land and improvements are and what they include. By using such a made-to-scale drawing, the analyst can estimate the correct land-to-building ratio and make a judgment about the adequacy of the land use. From a financial viewpoint, the most compelling reason for a site survey is the federal tax structure, which allows for depreciation of existing improvements included in a site acquisition.
Climate. Climate and solar considerations are important. Is the site in constant shade or exposed to unusual wind and other weather conditions? What impact will the sun have on building orientation and heat gain? The shadow that might be cast by a high-rise office building over neighboring properties may be considered detrimental to market value by their owners.
Topographic features. These include slope, elevation, surface contours, water table, soil structure, soil bearing capacity, septic leaching capacity, and other matters that affect the function of a site. Certain types of trees indicate dry and sandy soils; others may indicate damp soil. Vegetation is important if significant cost to clear a site is involved, or if natural growth is to be retained and protected during construction. Certain soil conditions, such as peat bogs, may require piles for foundations, thus causing significant site engineering costs.
Drainage and flooding. Many communities have requirements for newly developed sites, dictating that the rate of storm water runoff cannot exceed what it was prior to development. This potential expense of installing and maintaining retention facilities must be a consideration of site market value. Flood plain maps are available from the Federal Emergency Management Agency through local planning agencies. If there have been slides, flooding, subsidence or even a history of earthquake problems, future use will obviously be affected.
Land/soil contaminants. Former industrial sites are particularly subject to these conditions because they may contain chemical wastes, nuclear materials, asbestos, PCBs, or other contaminants. The presence of air, soil or water contaminants might be discovered only by investigation of the site history. At a minimum, a Phase I Environmental Impact Study may be required simply to assure a prospective owner that there is no environmental liability attached to a site.
Site utilities. The presence and adequacy of utilities serving a site must be carefully cataloged and investigated. These would normally include sanitary sewer, domestic water supply, manufactured or natural gas, telephone, cable television, and electric power.
Street analysis. Carefully consider existing street improvements or those which may be required if raw land is to be developed. The roadbed under the surface, as well as the construction of the road, determines it load-bearing capacity. Cost differences among roadbed specifications are significant. The history of street use can be important. A through title search will reveal the existence of easements, rights-of-way, or improperly vacated roads and alleys that may affect the intended use of the site.
Zoning ordinances and private covenants. Zoning may specify the height and types of buildings – as well as their shape and bulk – which may be constructed on a site, and the side, back, and front yard setbacks from property lines. Sometimes there is overlapping of different zoning imposed by government. For example, building department and city zoning requirements may be overlaid by official historic district requirements. Private covenants and restrictions may apply if imposed by an original subdivider or any subsequent property owner. Such restrictions may directly affect the density of the site’s building coverage and the amount of rentable area.
This installment of FM Check List is adapted from BOMI Institute’s Real Estate Investment and Finance (www.bomi-edu.org/19062.html), a course in BOMI Institute’s Facilities Management Administrator (FMA) program.
