Site Selection Analysis

• Purpose: Identify the optimal location for a real estate project based on economic, demographic, and physical factors.

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Key Components

• Demographics: Population density, income levels, age groups, and growth trends.

• Accessibility: Proximity to highways, public transit, and key amenities (schools, hospitals, retail).

• Competition: Nearby competing properties or gaps in the market.

• Zoning/Legal: Permitted land uses, environmental restrictions, and future development plans.

• Infrastructure: Utilities, road networks, and broadband availability.

• Market Demand: Absorption rates, rental/pricing trends, and tenant/buyer preferences.

• Tools: GIS mapping, feasibility studies, and traffic/pedestrian flow analysis.

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Land Residual Value Comparisons

• Purpose: Determine the maximum value a developer can pay for land while still achieving a target profit.

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Method

1. Estimate the Gross Development Value (GDV): Total revenue from sales/rentals of the completed project.

2. Subtract all development costs (construction, fees, financing, marketing, etc.).

3. Subtract the developer’s target profit margin.

4. The remaining value is the residual land value—what the land is worth to the developer.

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Comparison Use

• Compare residual values across multiple sites to prioritize acquisitions.

• Compare site attributes, pros and cons and scoring each site to aid in final decision

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Profit and Revenue Potential Analysis

• Purpose: Forecast financial viability of a project by modeling income and expenses.

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Key Metrics

• Revenue Streams: Sales prices, rental income, ancillary income (e.g., parking, advertising).

• Costs: Hard (construction) + soft costs (design, permits, taxes).

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Profit Metrics

• Net Operating Income (NOI): Revenue minus operating expenses.

• Return on Investment (ROI): (Net Profit / Total Costs) × 100.

• Internal Rate of Return (IRR): Annualized return over the project lifecycle.

• Break-even Analysis: Time/occupancy needed to cover costs.

• Sensitivity Analysis: Tests how changes (e.g., higher vacancy rates or material costs) impact profits.

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How These Analyses Work Together

• Site selection identifies viable locations.

• Land residual analysis ensures the land price justifies future profits.

• Profit/revenue analysis validates the project’s financial feasibility.

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These site selection analysis studies help developers, investors, and urban planners make data-driven decisions to minimize risk and maximize returns.