Developer Survey Results 120

Forty developers with previous experience in Mecklenburg County were

identified and approached and of these, twelve were surveyed about their approach to the site selection and land acquisition processes. A majority of respondents were affiliated with limited liability companies that were relatively small in size. A total of four of these firms

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have fewer than five employees, four have between five and 24 employees, one has between 25 and 99 employees, one has between 300 and 499 employees, and two firms have more than 500 employees. When asked to describe their firms’ typical project four respondents chose “Single-Family Residential”, one chose “Multi-Family Residential”, three chose “Urban Village”, and the remaining four chose “Infill Development”. Three-quarters of respondents identified the Charlotte area as their firm’s primary market the number of units built in a typical year ranged from 20 to 1000, for the eight respondents who provided an answer and the size of residential projects also exhibited considerable variation. Only one firm completes more than five projects in a typical year and nearly all respondents explained that the strength or weakness of the market coupled with the size of the project often means that no residential projects are completed in a given year. The consensus is that this number ebbs and flows based on a variety of factors. It is important to note the diversity of the local development community. In addition to variations in the size and legal status (e.g.,

partnership versus corporation), the type of projects undertaken by local firms and range of services also tends to vary. Some firms engage only in land development, while others are also home-builders and therefore, take a more integrated and comprehensive approach to residential development.

The survey was designed to provide basic insight into the site selection process and when asked for a general description of their approach, respondents offered a range of responses from the specific:

“Use Polaris [local online GIS] to identify potential sites in attractive infill areas. Also keep open lines of communication with brokers and other developers so that you can "hear" about a good opportunity. We look for close in in-fill development sites just on the edge between "good" and "bad" areas because you have the potential for lower land costs while still borrowing from the energy of a "good" area.”

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“Identify demographic trends in an area. Field research to understand site, accessibility. Competitive review and operational review to understand rent expectations. Letter of Intent to a buyer with 90 to 120 days of due diligence. Conduct due diligence tests. Present to Board of Directors. Upon approval, land takedown occurs.”

to the very general:

“Look for A+ sites only with good visibility and access.”

“Gut instinct.”

Several themes emerged from the responses to this question including a need to balance access to high growth areas with a desire to maintain and promote livability and some respondents mentioned transit-oriented development, sustainability, urban sprawl. Of course the standard considerations of accessibility, land price, schools, and taxes were also well- represented. In fact, a desire for “high visibility” sites that are “one or two turns off the freeway” were recurrent themes. A particularly interesting question asked respondents to identify a residential project they considered successful and to explain what factors led them to chose that particular project as an example of success. All of the responses were either high-profile mixed use projects (e.g., Birkdale, The Ardsley, Eastfield Village, Morrison), high-density downtown projects (e.g., Camden Dilworth, Dilworth Walk, Trademark), or luxury neighborhoods (e.g., Heydon Hall). Common themes that emerged in the reasons respondents gave for choosing these projects included: walkability (3), profitability (3), proximity to shopping (2), and location.

When asked how they typically learn about available land, most respondents

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important avenue. Other sources of information included “windshield surveys,” the Charlotte-Mecklenburg online GIS (POLARIS), Metrostudy reports, and word-of-mouth. Once identified, candidate parcels are typically optioned rather than purchased, and the time between initial option or purchase and development can range from six months to three years, according to respondents.

In terms of specific factors, the size of the parcel is an important consideration, but the minimum acreage that firms consider naturally depends on the nature of the project. For the high-density and multi-family firms, this threshold ranged from ¾ acre to one acre, but for firms specializing in single-family projects, the threshold ranged from eight acres to 100 acres. This is another example of how the diversity of firms operating within the local residential market has implications for observed development patterns. Another key consideration is zoning and practically all respondents agreed that it is better to purchase properly zoned land than to enter the rezoning process, which can range between five and sixteen months in Charlotte-Mecklenburg. However, a trade-off to consider is that large tracts in the path of growth usually need to be rezoned and more affordable land tends to be located on the periphery. The rezoning process in Huntersville, Davidson, Matthews, and Mint Hill were rated most demanding by the respondents, with Mecklenburg County deemed more difficult than the City of Charlotte for rezoning petitions. However, despite the

challenges of rezoning, 70% of respondents request rezoning more often than they purchase properly zoned land. In terms of required permits, respondents rated Huntersville, Cornelius, Davidson, and Matthews the most difficult jurisdictions in which to operate.

As one respondent noted during a phone interview, “everyone’s development costs are similar and everyone’s returns are similar,” so the key to profitability is cost-cutting. This

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observation is reflected in responses that indicated that holding labor, land, and capital costs constant, slope and topography were overwhelmingly chosen as the factors exerting the most influence on the profitability of a residential project. When asked if their firms have a

specific policy or strategy in terms of pioneering new locations or allowing others to “prove the market” and follow, only two respondents unequivocally stated that they aim to lead. Based on the responses most firms either do not have a set policy or prefer to follow established projects or key retailers like grocery stores.

Although the sample size is small, the responses to the survey questions shed some light on the decision process of land developers operating within Mecklenburg County. The site selection process is market-driven, which means that different types of projects (e.g., downtown condos, large-lot single-family) have very different needs in terms of acreage, location, and amenities. The development community is close-knit and information spillovers are key to successfully identifying and acquiring available land for proposed projects.

Relationships between brokers, developers, and builders are also very important as cooperation is essential to each party’s long-term success. Perhaps the most enduring and fundamental characteristic is that land development is a business and profit-maximization is a necessary consideration throughout the planning and development process. An awareness of the preferences of the target market for a particular project as well as the competition within a geographic area are also key. Responsiveness to the market can lead to mixed-use projects or subdivisions with a range of products (price range) as developers seek to minimize uncertainty regarding sales and limit the financial exposure inherent in undertaking such a large investment. These responses also help to corroborate the theory and literature from which the independent variables in the hedonic regression and discrete-time hazard models

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