4 tips to mitigate risk in the land entitlement process
Considerations for your next industrial development
After a record-breaking 2021, industrial leasing and demand is expected to maintain its velocity through the remainder of 2022. While this is positive news, it could soon expose a challenge that isn’t unique to just one city: land scarcity and lack of speculative buildings.
In many cities, demand is quickly outpacing supply, causing rental rates to rise. The pace at which e-commerce, logistics, and consumer goods continues to grow is unmatched, leading many to wonder, how do we meet the demand?
The immediate solution is to spread out beyond metro areas; however, this comes with the risk of moving into an area that does not have the current infrastructure to support large industrial facilities. How prominent is this concern among industrial occupiers and developers?
According to JLL Research, 43% of industrial occupiers in the logistics sector identify the lack of entitled land as the number one constraint on occupier demand. Developers are struggling to secure suitable development land and planning permission.
The land entitlement process can be lengthy and complex. Whether you’re a landowner looking to sell, or an occupier or developer beginning the entitlement process for a proposed development, there are several considerations to keep in mind.
Components of the entitlement process often include, but aren’t limited to:
- Zoning variances
- Use permits
- Utility permits
- Road approvals
- Land subdivision & recombination
Here is how you can mitigate your risk as you re-evaluate different areas and options.
1. Understand what can be built
Many cities have a greater long-term vision for how they see their municipality expanding. By reviewing all future land use plans, you may be able to bolster your arguments for rezoning or use permits or adjust your proposal to realign with the greater vision.
Be mindful of areas of the development that would require an exception. Exceptions can cause major or minor delays for a project, tacking on months or years in the approval process. Working alongside architects, engineers, and a real estate advisor can help develop a path forward to getting approval for exceptions.
2. Get all required costs and comprehensive timeline
By working with your local planning department, you can obtain the required costs for your entitlement process, which can range from the low thousands to upwards of hundreds of thousands of dollars.
Similarly, creating a master timeline in partnership with a real estate advisor for the city in which your proposed development is for can set expectations, keep you on track for deadlines, and minimize the number of surprises that come up. Working with an expert will help identify potential obstacles that aren’t readily apparent in doing your own research, like a unique utility or environmental approval that may require review from an additional agency outside your planning department.
3. Be aware of new legislation and other political risks
City councils, politicians, and other community groups will consider what their constituents have to say about a project, which could create challenges if your development is not inherently beneficial to them.
Read up on your area’s politicians and community leaders to understand their background and learn how you might work with them to help move your project forward. Also familiarize yourself with recent projects that have been both approved and denied or received pushback from political entities in your area.
4. Leverage the experts
Third party experts like real estate advisors and land consultants, architects, engineers, developers, and land use attorneys are all key members of your ideal project team.
Simply put, don’t go it alone. By partnering with experts, you instantly help mitigate risk and surprises down the line that may either delay your project or stop it from coming to fruition at all.
For more information on the future of industrial development, download our report, The Race for Industrial Space.