In construction, big dollar signs are associated with both successes and failures. Minor improvements can save thousands of dollars at scale. At the same time, unforeseen expenses could cost millions of dollars.
Nowhere is this better illustrated than during the site selection process. Choosing a property for a new building or a renovation project is the first step in the construction process, and all other decisions and expenses are tied to it. In other words, a good or bad site could determine the ultimate success of the project.
Too often, sites are purchased before a proper evaluation is conducted. Some owners are shocked to discover issues connected to financing, real estate or legal problems because they didn’t bring experts to the table early enough in the process. These are real—and avoidable—risks.
1. FOLLOW A LOGICAL PROCESS
Each construction project begins on the client side with a business need (e.g., the company is moving to a new market or producing a new product, or it has outgrown its current facility).
Then, it’s time to establish the primary needs of the project, such as:
- budget;
- desired move date;
- preferred geographic location;
- workforce demographics;
- number and size of rooms/offices needed;
- industry-specific design standards;
- workflow/material flow;
- specialty equipment needs;
- utility needs, such as water, sewer, gas or electric service;
- parking requirements;
- clear span requirements;
- expansion opportunities;
- security requirements;
- production space; and
- warehouse space.
When establishing these high-level project needs, it’s important to engage key team members within the organization, including operations, production, logistics, finance and human resources. The resulting summary of needs will come in handy later when establishing a Program of Requirements (POR) with the help of the architect or engineer.
2. FORM THE RIGHT TEAM
The key to forming a good team is to find true experts to fill each role.
Design Team
The inclusion of architects and engineers in the early project work will increase confidence in final decisions. These professionals are skilled at uncovering specific current and future needs in the POR and translating them into quantified space requirements, such as building height, square footage, acres, etc. Throughout their process, they will identify required space adjacencies, MEP and utility requirements.
The design team also will provide key information on local building and zoning codes that impact the project, as well as information on the permitting and approval process—including the timeline for approvals.
There are two ways to engage designers and contractors at this stage, including the following.
- Hire a design-build firm that provides a single source of responsibility for design and construction.
- Hire a designer (architect/engineer) and hire a construction manager at risk (CMR).
Real Estate
Also known as the site selector, this role can be filled by a local commercial real estate firm, a national real estate firm or a site selection company. Whoever takes on this role needs to have the local experience that will help the team understand the intricacies of the market from a real estate standpoint.
They should provide detailed analytics to assist in the decision-making process. This might include the available workforce within a 25-mile radius of the facility, the distance to target clients and transportation, the availability of suppliers and/or raw materials and the tax/business climate.
They are often also skilled at identifying state and local incentives that can help with the costs of relocating because they have deep connections with both state and local economic development. For this reason, they should also work closely with the legal team to help with negotiations and contracts.
Building Contractor
A good design-builder or CMR provide the site-specific insights and strategies to avoid faulty properties and identify sites where the project will be delivered within the designated schedule and budget. The contractor should contribute cost, schedule and constructability feedback during the selection process along with information on the local subcontractor, labor and materials markets. The right builder also will identify long lead time items and other potential risks to the project and provide a cost-benefit analysis for different properties or construction types.
Legal
The pre-site selection team should include an attorney (or attorneys) with deep experience in real estate and construction who understand how to write a protective contract that isn’t so cumbersome that progress constantly stalls. Consider writing a need for transparency into the contracts early on to encourage proper collaboration.
Financial Advisors
By offering perspective from a purely financial standpoint, these experts are incredibly valuable in the process. They will let the team know whether a site makes sense from a financial standpoint.
Specialty Equipment Suppliers
Don’t overlook the importance of specialty equipment suppliers. Their equipment can dictate crucial building specs such as building height, slab thickness, foundations, utility needs and mechanical requirements. For example, does the site or building have the appropriate water, sewer, gas and electrical service to support the proposed equipment? Keep in mind that supplier lead times can be longer than the building construction.
3. FINISH STRONG
After the team members evaluate a potential site, they make a recommendation to stay or go, to lease or to own. They can estimate, with increased confidence, the total cost and timing requirements of the project. Then, it’s time to make a decision.
Don’t wait too long to engage the design team (via CMR or design-build) with the hope of negotiating the “best deal” after selecting the property. In reality, the best deals occur when negotiating a fair fee structure with the team of experts upfront, and then leveraging everything they know from beginning to end of the decision-making process.
It’s hard to be an expert at everything required in projects, from real estate to design and construction to incentive negations. Bringing in outside help prevents blind spots.
By far the biggest way this process can go wrong is hesitation. Many project owners make big decisions without proper input because they cringe at the thought of hiring help before a site is even selected. Keep in mind, a fair design-builder’s, CMR’s or designer’s fee will be negligible compared to what will be lost by making the wrong decisions early on in your process.
