Due Diligence for Industrial Site Selection: What You Need to Know

Due diligence is a critical component in the selection of an industrial or business site. A property with unanticipated liabilities can lose value, generate less-than-expected profits, and become difficult to sell or lease for lack of a clear title or other problems. Due diligence in site selection can circumvent such issues and many more.

Visiting the Location

Site selection decisions tend to be made by determining a location where the company’s operational and production costs to produce are low to increase profits. However, measuring previous opinions of on-site conditions and practicing thorough site diligence is crucial to successful development. Certain laws applicable/specific to that area could also affect the cost of doing business, such as a required business license or wage laws for employees. Visiting the site also highlights the surrounding area, the conditions of the property, and potential nearby tenants.

A trip to the site may also be the first indication of environmental issues surrounding the potential location. A site with any sort of pollution or contamination could be harmful to employees and customers. Avoid potential dangers and pitfalls by having a professional conduct their environmental due diligence.

Consider All Cost Calculations

The products and services produced at a business’ new site may require significant infrastructure support and capacity. The cost of labor will play a significant role, as will the availability of adequate transportation, the time to market, and zoning rules, as well as analytical and site readiness items. Any miscalculation of the site’s capabilities to serve specific needs could cause layoffs, closures, or even impact future attempts to sell the property altogether.

Zoning Laws and Private Use Restrictions

Make sure to investigate the zoning laws for the selected site, for there may be restrictions for the type of businesses, if any at all, which can be conducted on the property. Zoning in city areas is generally divided into five categories: commercial, mixed-residential commercial, industrial, and special, which includes airports, malls, power plants, and more. Familiarize with the zoning laws around the potential site to ensure commercial business or manufacturing can be conducted there. This is where having an experienced attorney who concentrates in land use and environmental and site selection can be of benefit to you and your business.

Another component to due diligence is confirming any private use restrictions in the chain of title associated with the property. The chain of title refers to all of the previous owners of the site. If past owners placed restrictions on the site regarding use or maintenance, those restrictions remain even when the property is sold to another. The seller can enforce these restrictions as long as they do not violate local, state, or federal law. An attorney will review any private restrictions in the chain of title to confirm they will not affect the construction or business plans intended for your potential site.

Beware the Path of Least Resistance

As companies have streamlined their evaluation processes, the time devoted to selecting new sites has shrunk. This luxury, however, has brought to site evaluators and corporate decision makers a tendency to take the path of least resistance in site selection. As a result, essential site attributes are overlooked, leading to expensive delays in development and missed opportunities.

The Details and Legalities

Today, up to 75 different location and community factors may be required to provide a complete evaluation of a company’s ability to develop a new site efficiently. Applying due diligence to identify potential development issues helps make site selection smarter and more productive in the long run. Legal assistance to determine if the property is suitable for the proposed use is a vital step; a lawyer can help with documents, various decisions, and legal ramifications.

Evaluating a viable site is among the most critical aspects of any new commercial or residential development project. At Jacobowitz & Gubits, LLP, we use an innovative, comprehensive approach to due diligence in site selection and evaluation based on decades of experience involving projects from subdivisions and condominiums to industrial facilities, retail centers, and regional medical centers. Call us at 845-778-2121 or fill out our contact form for a consultation.