The world of commercial real estate is vast and complex, full of opportunities and challenges. One of the most complicated transactions in this market is selling land to a commercial developer. For landowners, especially those new to the commercial real estate market, it can feel like navigating a maze. One wrong step can mean a missed opportunity or even a failed deal. Understanding each nuance is crucial for landowners who want to sell to a commercial developer.
The process of selling land is multi-layered, involves numerous appraisals, negotiations and legal procedures and may seem overwhelming at first. However, with a clear understanding of each stage and its impacts, sellers can move forward with confidence, maximizing gains and minimizing challenges. This type of transaction can be extremely rewarding when aligned with the right partners, armed with the right knowledge.
Understanding the market
Landowners may need to assess the commercial viability of their land before commencing the sale process. Factors such as location, accessibility and nearby developments play a key role in determining the attractiveness of land to developers.
Current market trends can provide a glimpse into potential demand. It's important not only to understand the current situation, but also to predict the future. What developments are planned nearby? Are there any impending infrastructure projects? These factors will greatly affect the profitability of your land – not only its current value, but also its potential for future appreciation.
As a landowner, it is not your absolute responsibility to consider these factors relevant to your property, but developers looking to sell land will consider the following details to determine whether the land is suitable for them and their clients.
Commercial feasibility
Not all land is created equal. Proximity to transportation hubs, existing infrastructure and even neighboring developments can have a big impact on a property's attractiveness to developers.
Market trend
The real estate market is constantly changing. Understanding current trends, like the move towards mixed-use developments and the rise of sustainable building methods, can provide insight into the potential demand in an area.
Profitability forecast
The current value of land is just the tip of the iceberg: factors such as upcoming infrastructure projects, government policies and even the state of the global economy are likely to affect the future value of land.
Land Preparation
Preparation is the foundation of a successful sale, and it starts with a thorough property appraisal to understand the land's value and any potential issues that could prevent a sale.
Legal preparation, starting with an ownership review, ensures that ownership is clear and that there are no underlying issues that could lead to disputes in the future. The gold standard at this stage is to create a site that is “pad-ready”.
Real Estate Appraisal
Before putting a piece of land on the market, it is important to understand its strengths and weaknesses. An assessment can help identify areas for improvement, such as infrastructure and accessibility.
Legal Preparation
A title check is a preventative measure to avoid potential problems and disputes. It checks the title and identifies any liens or encumbrances against the property.
Make your site “pad-friendly”
A “land ready” lot is like a blank canvas for a developer. By making sure the lot is clean, clear, and has a well-maintained foundation, sellers can not only increase the lot's desirability, but also command a better price.
Find the right developer
The next step is perhaps one of the most important: choosing a developer. This involves researching, evaluating, and detailed study of the potential developer's past projects and successes. The developer's portfolio will provide valuable insight into the developer's capabilities, style, and vision. It's important not just to sell the land, but to ensure its future aligns with the seller's vision.
the study
Not all developers are the same. Some specialize in residential projects while others are big commercial players. Researching potential developers, understanding their past projects and even asking for testimonials can give you valuable insights.
Portfolio Assessment
Past performance is often a good predictor of future results, and evaluating a developer's portfolio allows landowners to gauge the developer's capabilities, financial standing and vision.
Developer intent
It is important to understand how the developer intends to use the property. Whether it be a retail hub, mixed-use development or office building, the future use can impact the price of the land and the legacy the seller will leave behind.
due diligence
Once a developer is involved, a rigorous process of due diligence begins. Mandatory assessments such as an ALTA survey are paramount. This comprehensive survey provides a clear picture of boundaries, easements, rights of way and other potential land issues, minimizing the possibility of future legal disputes.
Required Rating
An ALTA survey is a vital tool for commercial real estate, providing a detailed investigation of the property, from boundaries to rights of way, ensuring transparency and minimizing future disputes.
Soil Report
Soil quality determines what type of building can be supported, and tests such as a geotechnical investigation report and a Phase 1 environmental study can help sellers and buyers understand whether the ground is suitable for development.
Rezoning and Traffic Assessment
In some cases, the intended use of a property may not match existing zoning regulations. In such cases, a zoning change is mandatory. A traffic assessment, on the other hand, checks whether the property can handle the expected inflow of vehicles and pedestrians.
Permission Period
A necessary, yet time-consuming step is obtaining the necessary permits. From standard building permits to grading, driveway and sign permits, each plays its own role in shaping the development of a property. While these permits are tedious, they ensure that the development complies with local regulations, environmental standards and safety protocols.
While permits are often seen as bureaucratic hurdles, they are the foundation of any development. Permits ensure that construction complies with local regulations, is environmentally sustainable, and is safe for future residents.
Closing the deal
As the journey culminates, the final steps of the transaction come into focus. During this stage, all previous steps are comprehensively reviewed to ensure all criteria have been met and that the understanding and expectations of both parties are aligned. Legal documents are reviewed, ownership details are clarified, and the transition process begins.
The final stages of this journey require careful attention to detail: legal documents are exchanged, ownership details are sorted out and the land's transformation journey begins.
Selling land to a commercial developer is a complex process, but with the right knowledge and partners it can be navigated effectively. Each stage has significance, and understanding them can make a huge difference in the success of the transaction.
For landowners who dream of transforming their land into a bustling retail space or commercial hub, the choice of developer is crucial – and in this field, SimonCRE stands for expertise and credibility. If you think your land could be the next retail landmark, contact SimonCRE. With our unmatched expertise in development and redevelopment, we can help you turn that vision into a reality.
Austin Gottsacker > Director of Acquisitions and Leasing
Austin Gottsacker joined SimonCRE in 2015 as a Development Associate, was appointed Acquisitions & Leasing Manager in January 2017, and was named Director of Acquisitions & Leasing in 2022. As Director of Acquisitions & Leasing, Austin works with CEOs, tenants, and brokers to execute client requirements as well as managing the internal outreach and due diligence on the company's projects. He is also responsible for site inspections, underwriting, budgeting, site planning, and managing relationships with the company's vendors and consultants. Austin then follows the entitlement process for projects, assisting with various challenges and helping ensure projects stay on schedule and within budget.