Monday, February 6, 2017

How real estate professionals transform overlooked spaces into profitable businesses

by Alexander Martonik, Esri

The economic landscape is rapidly changing, creating a new demand for commercial property in smaller suburban cities.

Rapidly increasing property values in major cities are causing large traditional companies and start-ups alike to move out of metropolitan areas and into the suburbs. However, in many cases, these smaller towns aren’t prepared for the impact of the new businesses.

In California, small towns are being developed into larger suburban cities, and it’s spreading. Similar trends are emerging around the country including in Oregon, Washington, Texas, and North Carolina.

As the demand for space in these hot areas exceeds the available land, commercial real estate professionals must serve traditional real estate needs and creatively repurpose overlooked spaces for new development.

Are you ready to meet these new real estate needs? Do you know your neighborhood?

The perfect fit
In some of California’s small historic towns, the demand for land and the desire for quant suburban living has had to cope with finite space and historical preservation initiatives. Developers have had to get creative with nontraditional spaces to create unique and vibrant experiences for consumers.

Real estate developers and business owners are defying conventional notions of value by occupying small misshaped lots, creating successful businesses out of what would otherwise have been wasted space. In these towns, it’s common to see people shopping and dining at what was once a back room, a parking space, or even an alleyway. These spaces are not only cheap; they also create a unique ambiance.

Developers are working with cities seeking to revitalize downtowns to support their growing populations, while preserving the historical atmosphere. Alleyways are being converted to public seating areas to support local food vendors, abandoned rail lines are developed into safe walking/biking trails, and small “parklets” are being built in parking spaces to provide more room for pedestrians in impacted downtowns.

Something out of nothing
I work in a medium-sized city an hour outside of Los Angeles. What makes this town unique is that when the housing boom of the 80s and 90s hit the area, several private citrus grove owners on the fringe of the city limits sold their properties to developers for housing and outdoor lifestyle centers. However, within the downtown area, the number of new construction projects remained low.

This initially prevented new businesses from entering the market, and local residents took their business to neighboring cities. Recently, a group of creative developers began seeing hidden opportunities with the help of spatial statistics.

I worked with one of the developers last month, and I asked what it was like working in such a unique environment. She told me that the main challenge is convincing investors that their particular business or industry will be successful, and that she cannot rely on intuition alone to answer their questions.

As we talked, she explained that many of her colleagues put too much emphasis on conventional wisdom and historic trends, without looking at the bigger picture or the changing consumer base. I learned that software like Esri’s Business Analyst Online enabled her to see the surrounding area’s cultural trends and economic indicators. Because of this software, she can find an odd location, like an alleyway or 10-foot-by-50-foot lot, and justify why its valuable to a potential investor, buyer, or tenant.

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