Buying land is one of the first major commitments in a Flex Space development—and one of the easiest places to make an expensive mistake.
A site can look ideal from the road. The acreage may appear sufficient. The zoning may seem right. Utilities may be nearby. The asking price may fit the initial pro forma. But none of those things, by themselves, tell you whether the property can actually support the project you intend to build.
That is the purpose of due diligence.
The period between putting a property under contract and allowing earnest money to become nonrefundable gives a developer an important window to test assumptions. Before going hard on the land, the goal should be to understand not only whether the property is technically developable, but whether the right amount and type of Flex Space can be developed economically.
As discussed in The 5 First Steps in Flex Space Development, site selection is only one piece of the early development process. Market demand, project feasibility, site characteristics, design, permitting, and financial assumptions all begin interacting very early.
The questions below can help developers identify some of the most important issues before the land commitment becomes difficult—or impossible—to unwind.
Is the Intended Use Actually Allowed?
One of the first questions is also one of the most misunderstood: Can you actually build and operate the type of Flex Space you are planning on this property?
Knowing the zoning designation is a starting point, not the end of the analysis.
A municipality may classify a property as commercial, industrial, light industrial, or mixed-use, but the specific activities permitted within that district may vary considerably. Flex Space can include combinations of warehouse, office, showroom, contractor use, storage, light manufacturing, service businesses, and other uses.
The development team should understand whether those uses are permitted by right, conditionally permitted, or prohibited. There may also be overlays, architectural standards, landscaping requirements, parking ratios, building-height limitations, setbacks, screening requirements, or restrictions on outdoor storage.
The Flex Space Construction and Zoning Guide provides a broader look at how zoning and development requirements can influence the design and construction of a Flex project.
Do not stop at, “The property is zoned industrial.” Ask what that zoning actually allows you—and your future tenants—to do.
How Much of the Property Is Truly Developable?
A ten-acre parcel does not necessarily provide ten acres of usable development area.
The difference between gross acreage and developable acreage can dramatically affect the economics of a project.
Setbacks, utility easements, access easements, drainage areas, floodplain, wetlands, steep grades, detention requirements, rights-of-way, and other constraints can consume significant portions of a property.
This is why preliminary site planning should begin before the land is purchased. A conceptual layout does not need to answer every design question. Its purpose during due diligence is to determine whether the property can reasonably accommodate the anticipated buildings, parking, drives, fire access, stormwater facilities, landscaping, and other required improvements.
Selecting the Best Site for Flex Space Property Development: Insights from Developers and Owners takes a deeper look at the relationship between site characteristics, infrastructure, market demand, and overall development feasibility.
The important number is rarely the acreage advertised in the listing. It is the acreage you can actually use.
Are Utilities Available—and Do They Have Enough Capacity?
“Utilities nearby” should never automatically be interpreted as “utilities available to serve the project.”
During due diligence, developers should understand the location, capacity, connection requirements, and potential cost associated with water, sanitary sewer, electric service, gas, and telecommunications.
For example, a sewer main may exist near the property but lack the elevation or capacity necessary for the proposed project. Water may be available but require upgrades to meet fire-flow requirements. Electrical infrastructure may need to be extended or upgraded.
Those differences can turn what initially appeared to be a relatively simple development into a much more expensive project. Developers should be asking where the utilities are located, who owns them, whether they have sufficient capacity, what improvements will be required, and who will pay for those improvements.
What Will Stormwater Require?
Stormwater is one of the most common examples of a site requirement that can materially change a preliminary development concept.
Depending on the jurisdiction and the existing condition of the property, developers may need detention or retention facilities, underground systems, water-quality treatment, drainage improvements, or other infrastructure. These requirements can affect both cost and land utilization.
A concept that initially appears capable of supporting several buildings may change substantially once adequate stormwater facilities are incorporated into the layout. This is another reason site feasibility should not be evaluated from acreage alone.
Does the Site Have Adequate Access?
Access affects nearly every Flex Space project.
Developers should understand whether the property has legal access, where curb cuts may be located, whether additional access points are permitted, and whether roadway improvements may be required. The development team should also consider how future tenants will actually use the site.
Can trucks maneuver comfortably? Can customers enter and exit safely? Is there enough room for fire apparatus? Will delivery vehicles conflict with parking? Could a median, turn restriction, or future roadway project affect access?
Flex Space often serves a wide range of businesses, which makes functional site circulation particularly important. Evaluating the Viability of Flex Space Projects explores how location, market demand, financial feasibility, and the physical characteristics of the property must work together.
Are There Environmental, Soil, Floodplain, or Topographic Concerns?
Some site conditions are visible immediately. Others require investigation.
Environmental assessments, geotechnical information, surveys, floodplain maps, wetland information, and topographic data can reveal conditions that significantly affect development.
Poor soils can increase foundation or pavement costs. Significant elevation changes may require retaining walls or extensive grading. Environmental conditions may require additional investigation or remediation. Floodplain or wetlands may restrict portions of the property entirely.
These issues do not always mean a site should be abandoned. They do mean the developer needs to understand them before establishing the project’s land basis and development budget.
For a broader look at the investigative process, A Comprehensive Guide to Flex Space Due Diligence: Key Steps & Market Trends covers additional considerations investors and developers should evaluate when assessing Flex Space real estate.
Will the Municipality Require Off-Site Improvements?
One of the easiest costs to miss in an early land evaluation is work that may be required outside the property itself.
A municipality or utility provider may require road widening, turn lanes, sidewalks, utility extensions, drainage improvements, traffic improvements, new fire hydrants, or upgraded water and sewer infrastructure. These costs can materially change the feasibility of a development.
Developers should ask early what improvements may be triggered by the proposed use and whether those requirements are already known or will be determined later during entitlement and plan review.
What Does the Approval Process Look Like?
Even a physically developable site may face a difficult entitlement process.
Before purchasing land, understand the path between today’s property condition and an actual building permit. Will the project require rezoning, a conditional-use permit, planning commission approval, city council approval, a traffic study, public hearings, subdivision or platting, or design review?
The approval path affects not only risk but also schedule and carrying cost. If a project requires twelve months of approvals before construction can begin, that needs to be reflected in both the development strategy and financial assumptions.
Does the Site Work for the Market?
Physical feasibility is only half of the equation. A property can be perfectly developable and still be the wrong location for the intended product.
Before committing to land, developers should understand the competitive market, achievable rents or sales prices, local business base, supply pipeline, tenant demand, and the type of Flex product the market appears capable of supporting.
The Importance of Conducting a Quality Market Analysis Before Developing Flex Space Facilities explains why market research should occur before major development dollars are committed.
Likewise, Conducting a Comprehensive Market Analysis for Successful Flex Space Property Investment provides additional guidance on evaluating the competitive environment before purchasing or developing Flex real estate.
A great site in the wrong market is still the wrong site.
What Does the Site Do to the Project Economics?
Ultimately, most due diligence questions lead back to the same place: the financial model.
If site constraints reduce the building area, does the project still work? If utility extensions add significant cost, does the project still work? If stormwater consumes additional land, does the project still work? If entitlement takes six months longer than anticipated, does the project still work?
Early financial projections should change as better information becomes available. Creating Sound Financial Projections for Flex Space Acquisitions in 8 Steps discusses the importance of testing revenue, expenses, NOI, and risk when evaluating a Flex Space investment.
Construction assumptions matter as well. Understanding Flex Space Construction Costs explains several of the design and construction decisions that can affect project cost and long-term return.
Due diligence should make the financial model more accurate—not simply confirm the assumptions that were made when the property was first identified.
Know What You Are Buying Before You Own It
Due diligence is not about trying to eliminate every possible project risk. That is rarely realistic. It is about replacing assumptions with better information while there is still time to make decisions.
Sometimes due diligence confirms that the site is exactly what the developer hoped it would be. Sometimes it leads to a revised site plan, different phasing strategy, lower purchase price, contract extension, or additional investigation.
And sometimes the best development decision is to walk away.
That is not a failed deal. Discovering that a property does not support the intended project before the earnest money becomes nonrefundable may be one of the most valuable outcomes the due diligence process can provide.
Before going hard on land, the development team should be able to answer a much more meaningful question than, “Can we build something here?”
Can we build the right project here, at the right scale, for a cost the market can support?
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