Commercial Real Estate News / Buying / A Business Owner's Guide to Land Acquisition and Development

A Business Owner's Guide to Land Acquisition and Development

Published: 04-16-24 Category: Buying

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

As a business owner, building your own commercial space can be especially rewarding. You'll be able to design a unique building that will strongly appeal to your future client base, whether they're customers, clients, or tenants.

A custom build can be a major factor in differentiating you and your business from the competition. Building on land you've chosen can also be equally important for you and any financial backer's satisfaction, together with the business' success.

No matter how stunning your business may appear on paper, it's imperative that it's in an ideal location. While your main goal is for your business to be easily accessible by potential clients or customers, you'll control costs if your location already has access to utilities like electricity and water.

The value of preparation is familiar to experienced business owners. A higher return on investment (ROI) and a trouble-free building procedure are rewards for thorough planning and execution during the land acquisition and development phase.

Before you take the first step towards acquiring and developing land, your business plan should include the tasks required for a successful build, from site selection to project management.

Let's start from the ground up and look at the factors involved in locating the ideal location.

Where Will Your New Business Thrive?

When choosing a site for your commercial development, several factors must be considered before you begin your search.

Each of the following should be included in your preliminary plans.

Zoning Regulations

Ensure that the land is zoned for your intended use. Zoning laws dictate the types of businesses and structures allowed in specific areas.

Applying for a change in zoning may be possible, but this doesn't mean it won't be a lengthy and perhaps expensive process.

Since zoning laws are typically controlled at the local level, check with your department of city planning or similar office to learn about the laws and codes that apply to your preferred area.

Generally, land is zoned for residential, commercial, or a mixture of both. This is usually described as “mixed-use.”

Confirmed Access to Utilities

When compiling a shortlist of potential land sites for acquisition, be sure that each one offers access to mandatory building utilities such as water, electricity, and sewage.

While you may find a bargain-priced plot of land for your business that's off the beaten path (without utility access), the cost of extending utilities to your site can significantly impact your budget.

Be sure to obtain accurate estimates for each utility before proceeding with this type of acquisition.

Market Demographics

Select a location that will provide your future clients, customers, and/or tenants with easy, convenient access. Depending on the type of business planned, you may want to seek land near other businesses that complement your own.

Be prepared to review demographic data for the land you plan to acquire, comparing data if you're considering several plots of land or areas.

Depending on the type of business planned, you may need to access demographics of local populations that include details of income, education and other factors that correspond with your business.

For example, if you're building a car wash, data with details of local families' size, vehicles, drivers, and income are important.

After you complete these tasks, you'll be closer to your land purchase. Now it's time to conduct due diligence, as it will ensure the smooth development of your new commercial project after you complete land acquisition.

Investigating the Land

Before committing to a purchase, it's crucial to conduct thorough due diligence on the property.

The following steps should be followed:

Environmental Assessments: Hire professionals to assess the land for any environmental hazards or contamination. Remediation can be costly and time-consuming.
Title Search: Verify that the seller has a clear and marketable title to the land. Look for any encumbrances, liens, or easements that may affect your use of the land.
Development Restrictions: After you buy, will you be able to build to your blueprint? Be sure to check for existing restrictions, such as height limits, setback requirements, or historical preservation ordinances.

After you've completed your research, be sure to review your financing options, as these can change overnight.

Funding Your Project

Depending on size, location, and other factors, you may have more than one of these options available to you.

Work with a bank to secure a traditional commercial real estate loan. Be prepared to provide a substantial down payment and demonstrate a strong business plan.
The Small Business Administration (SBA) offers loans to business owners for purchasing land and constructing owner-occupied commercial properties.
Consider partnering with one or more investors who can provide capital in exchange for a share of the ownership or profits.

Ready to break ground on your new property? Here are tips on managing the development of the land itself and the construction of your project.

Overseeing the Development Process

Once you've secured the land and financing, it's time to author a plan for managing the development process. This will most certainly include, but not be limited to:

Obtaining all necessary permits and approvals from local and state authorities. This may include building permits, site plan approvals, and environmental clearances.
Developing a construction timeline. Work with architects and contractors to develop detailed construction plans. Establish clear communication channels to ensure the project stays on track.
Discussing build-out requirements with any future tenants.

If this is your first land acquisition and development project, you may want to bring in one or more consultants.

They can ensure your commercial building project is always in compliance with local regulations and help you spot problems before they occur.

Win Commercial Projects & Outperform Your Competitors by Knowing What's Happening in Your Area

MyEListing.com provides commercial vendors looking for new projects with up-to-date market intelligence on which commercial property owners need construction work, when they need it, and where they need it.

Make finding new commercial real estate projects easier than ever with MyEListing's Vendor Client Connection Program.