Wednesday, January 14, 2015

VIEW FROM THE TOP: Doing Your Diligence – Foregoing Assumptions, by Courtney Dunbar

Economic Development Leader, Industrial Site Consulting Team
One of the hottest economic development trends right now involves site certification. Site certification involves identifying a list of diligence factors, assessing a site for assets and deficiencies, curing deficiencies, and then preparing the site to accommodate prospective users.

While site certification programs are helpful in quickly identifying site attributes, these programs were never intended to be all-encompassing. The programs just weren't designed to replace thoroughly assessing a site for suitability to specific, individual users. That responsibility resides with the site selector and the company to make the decision on the location for the business' new home. Site selection decisions are optimally made following a thorough site diligence investigation.

Why Diligence Matters
The average American will state that the largest capital investment they will make in their lifetime will be their homes. Now, if you own a home, consider all of the diligence you underwent in making the decision to purchase. You likely checked the school district, the transportation routes to areas of personal significance, the home's condition, the property's suitability, the property tax rates, and the proximity to services. Diligence matters.

Now, consider the site selection process for an industry. Company representatives are making multimillion- if not multibillion-dollar capital investments when they invest in a site. The products they produce require significant infrastructure support and capacity.

Labor matters. Roads matter. Rail matters. Zoning matters. Other analytical site preparedness items matter. Timeliness to market is paramount. An underestimation of a site's ability to serve specific industrial needs can result in catastrophic outcomes, including closures, layoffs, or worse. Diligence matters.

It is critical for companies to thoroughly perform the due diligence and planning of industrial sites as part of the location decision-making process. Companies simply cannot afford to take a risk on a "maybe this site can serve" or "we think we can obtain property control. Absolutely, without a doubt, risk avoidance in the form of site preparedness is crucial to site selection decisions.

No Shortcuts
Site selection has evolved considerably over the last few decades. As companies have become more efficient in their processes, the timelines for selecting new sites have become shorter. The shortened duration of time to vet sites under consideration can lead site selectors and company decision-makers toward a path of least resistance, creating an environment where important site attributes are missed prior to selecting the final site for development. This mistake can lead to costly development delays and missed opportunities. As many as 75 different site and community attributes may be needed to provide an in-depth analysis of a company's ability to function at optimum efficiency. Identifying the risk-to-development factors is not only wise, but also assists the site selector and company in playing the selection game intelligently.

Additionally, thorough site diligence provides site selectors and companies with the ability to save critical resources by limiting the amount of land purchased to the amount of land needed; the means to determine how their sites will serve their facilities and if the sites are zoned properly to protect them from adjacent users; as well as the ability to negotiate incentives that provide the most impact. Foregoing assumptions on site preparedness and practicing thorough site diligence is crucial to successful development.

Courtney Dunbar has 17+ years of combined career experiences in economic development and project funding. In her current role as economic development leader, she is actively engaged in industrial site planning, community planning, economic analysis, and identification of project funding options.

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