Posted by: Jim Normile, CRB, E.MBA, J.Y. Monk Real Estate Instructor
August 20, 2015
This is the fifth in a series of articles detailing a North Carolina real estate broker’s perspective on saving our towns, making a difference, and creating a profit.
In Part I of the series we learned that urban infill development is the strategic and channeled process of developing vacant parcels of land, and repurposing existing real estate or under-used parcels, within existing urban areas that are now largely developed. Part II of the series, Smart Growth, presents a foundation for a remarkable opportunity aimed at progress. Communities, developers, and real estate practitioners are looking for techniques to acquire the most out of new development and to maximize their Return on Investment. Part III of the series, Broker First Steps, will discuss getting involved in the process, and present a very basic overview and commentary on analysis.
Revitalization projects can be the beginning of community renewal and a pathway for Broker niche marketing and personal economic success. The long-term benefits of revitalization can also include the creation of more jobs, a Broker’s improvement in stature / community relations, and enhancement of the quality of life in the neighborhood.
Revitalization (projects) can be facilitated and enhanced by finding out what the community needs by way of conducting a community assessment / market analysis. Identify community needs, e.g., housing projects, retail space, commercial or industrial space, open space, etc. Start the communication process by fostering a dialogue, seeking community interest and support, and listening / analyzing potential revitalization project opportunities.
Step #1: Get involved!
Support your hometown. Know that you are providing your time and expertise to your community and neighbors who need you.
Make a difference. Be part of the solution to an economic transformation of the community.
Make a profit! I have an axiom; “It’s OK to be a happy capitalist.”
You must be present to win!
Think of urban infill and revitalization projects as a team effort; community stakeholders, bankers, elected officials, municipal staff, developers, and real estate brokers all serve a keen purpose and combine their expertise to achieve a common goal. After the site selection, most revitalization projects will likely warrant an integrated approach from the team that requires a combined market, economic, cost, and fiscal impact analyses.
Opportunity for revitalization and infill development vary depending on location and characteristics of the market center. Although the process of preparing a market analysis for a particular revitalization project may present a challenge, it is nevertheless one of the critical first steps in the process. A market analysis can help focus decisions about the type, size, and scale of a proposed revitalization or infill development project. It may even be used to overcome perceptions that there is a weak or nonexistent market for a particular type of project in a particular infill area.
A fundamental part of any market analysis, including analyses of revitalization and infill developments, is an assessment of the demand for a particular type of project.
In preparing the market analyses, supply and demand are evaluated for the specific type(s) of uses proposed, such as residential, mixed-use, business, or commercial, and the specific product types to be developed, such as revitalization of an abandoned building to high-end residential rental units, conversion to commercial space, or middle-low end market rate residential condominium units. Depending on the type of use and product proposed, factors considered in analyzing demand could include employment and income trends, population and household trends, age, and income distribution within a specific submarket.
Supply is evaluated by analyzing the product(s) that would compete with the proposed project in the market center. For example, in preparing a market analysis for a proposed condominium development, factors considered in analyzing supply would include the price, size, location, availability, and absorption rates of existing and planned developments that would compete for buyers in the market. Based on the analysis of supply and demand, the market analysis assesses the performance of the project and the portion of the target market that the property would capture.
When an infill development or specific revitalization project is selected as a tool for revitalizing an area, the traditional approaches to market analysis may be difficult to apply. In areas where no comparable residential or commercial projects have been constructed or planned, it is more difficult to evaluate supply and demand. Even qualitative information about buyers in the market, what they are looking for and where they want to move, can lend support for a conclusion that a project can be positioned to capture a large share of a certain market segment. For example, data regarding recent sales to young single professionals may show that such buyers are likely to be attracted to an infill development project because of more competitive pricing or a lack of supply of a desired type of new or different product in other markets. The first real estate broker and developer of a project in previously stagnant areas may face greater risks than later market participants. If the project is properly positioned, there is an opportunity to capitalize on the absence of competitive projects by capturing a large segment of the targeted market and by having the units quickly absorbed.
Short of hiring a full-time economist, there are computer models available for estimating economic impacts; RIMS II, IMPLAN, and REMI to name a few. A simple Internet search of the program acronyms will lead you to the modeling centers.
The result of any economic impact model will only be as accurate and realistic as the assumptions and data used to produce them. Always consult with appropriate legal counsel and financial specialists prior to investing.
Jim Normile has worked as a broker, sales manager, real estate instructor, and co-owner of two franchise offices. He has listed and/or sold over 4,000 homes. Jim holds a Bachelor of Science, Real Estate, Summa Cum Laude, and Executive Master of Business Administration diplomas. He has been recognized as a Realtor of the Year, featured in Top Agent Magazine, nationally ranked in The Wall Street Journal Top Agents in America, inducted into the RE/MAX Hall of Fame, and is the author of Responsible Influence in New Home Sales.