Site Attributes: Unlocking Value Drivers

Site Attributes: Unlocking Value Drivers

Introduction
Site attributes are the inherent characteristics of a land parcel that significantly influence its value and potential use. Understanding these attributes and their impact on market perception is crucial for effective site analysis in real estate. This chapter delves into various site attributes, exploring their scientific underpinnings, practical implications, and methods for quantifying their influence on value.

1. Size and Shape

1.1. Impact of Size
Size significantly impacts the utility and value of a site. Economies of scale dictate that, generally, as size increases, the unit price (price per square foot or acre) decreases. This is due to factors such as reduced development costs per unit and the ability to accommodate larger-scale developments.
Conversely, smaller sites typically command higher unit prices due to scarcity and their suitability for niche developments. The ideal size varies depending on the intended use; residential, commercial, and industrial projects have distinct size requirements.

1.2. Impact of Shape
The shape of a site influences its functional utility and development potential. Regular shapes (e.g., rectangles, squares) are generally more desirable as they allow for efficient layout and construction. Irregularly shaped sites may present challenges for development, leading to lower value unless mitigated by specific advantages (e.g., unique views, waterfront access).

1.3. Mathematical Considerations
The relationship between size and unit price can be modeled using regression analysis. A simple linear model can be expressed as:

UP = a - bS

Where:

UP = Unit Price
S = Site Size
a = Intercept (theoretical unit price for a site of zero size)
b = Slope (rate of decrease in unit price as size increases)

This model can be refined using more complex functions (e.g., logarithmic, exponential) to better represent market behavior.

1.4. Practical Application
Consider two comparable industrial sites:

Site A: 1 acre, selling for $20 per square foot.
Site B: 5 acres, selling for $15 per square foot.

The lower unit price of Site B reflects the economies of scale associated with larger sites in that particular market.

1.5. Experiment
Analyze sales data for similar sites in a defined market area. Plot unit prices against site sizes. Perform a regression analysis to determine the relationship between size and unit price. This will provide a quantifiable measure of the size-value relationship in that market.

2. Frontage

2.1. Definition
Frontage is the linear measurement of a site that abuts a street, lake, river, or other feature recognized by the market. It directly influences accessibility, visibility, and exposure, all of which are value drivers.

2.2. Influence on Value
Greater frontage generally enhances value, particularly for commercial properties where visibility and access are paramount. Residential properties also benefit from adequate frontage for curb appeal and access. However, excessive frontage can sometimes be detrimental due to increased maintenance costs and potential security concerns.

2.3. Corner Influence

2.3.1. Positive Aspects
Corner lots offer enhanced visibility and accessibility from multiple directions. This is particularly advantageous for retail businesses, gas stations, banks, and drug stores located near intersections of major thoroughfares. Traffic lights, combined with high traffic volume, amplify the value of corner locations for commercial uses. The increased flexibility in building layout and subdivision of larger plots is also a benefit.

2.3.2. Negative Aspects
Residential corner locations can suffer from increased traffic noise, reduced privacy, and higher maintenance costs due to sidewalk maintenance and larger landscaped areas. Side street setback requirements may also limit the buildable area.

2.4. Practical Application
A gas station on a corner lot at the intersection of two major thoroughfares with traffic lights will likely have a higher value than a similar gas station on an interior lot due to increased visibility and ease of access.

2.5. Experiment
Compare sales data of corner lots versus interior lots for similar commercial uses. Analyze the price differentials to determine the market’s perception of the value of corner influence. Control for other variables, such as size and location.

3. Plottage

3.1. Definition
Plottage is the increment of value that results when two or more sites are combined to create a larger site with greater utility and a potentially different highest and best use.

3.2. Scientific Principle
Plottage value arises from the principle of synergy. The combined utility of the assembled parcels exceeds the sum of their individual utilities. This can occur when the larger site enables a development that was not feasible on the smaller individual parcels.

3.3. Mathematical Representation
Plottage value can be calculated as:

PV = (AVc - AVi)

Where:

PV = Plottage Value
AVc = Assembled Value (value of the combined site)
AVi = Individual Value (sum of the values of the individual sites)

3.4. Practical Application
Two adjacent half-acre lots, each worth $1.00 per square foot individually, might be worth $1.50 per square foot when combined into a single one-acre lot suitable for a larger industrial building. The plottage value is the difference in value between the assembled and individual properties.

3.5. Experiment
Identify instances where adjacent properties have been assembled. Compare the pre-assembly values of the individual properties with the post-assembly value of the combined property. Calculate the plottage value to quantify the market’s recognition of assemblage benefits.

4. Excess Land and surplus land❓❓

4.1. Definitions

4.1.1. Excess Land:
Land that is not needed to support the existing or planned use of a property and has the potential to be sold separately for its own highest and best use. It represents a divisible portion of the property with independent utility.

4.1.2. Surplus Land:
Land that is not needed to support the existing or planned use of a property but cannot be sold separately due to its shape, location, or other factors. It lacks independent utility❓❓ but may contribute value to the primary site by allowing for expansion or additional amenities.

4.2. Determining Excess vs. Surplus

4.2.1. Market Standards:
Analyze prevailing land-to-building ratios and parcel sizes for similar properties in the area to determine the optimal land area needed to support the existing or planned use.

4.2.2. Legal Considerations:
Examine zoning regulations, subdivision ordinances, and other legal restrictions to determine if the excess land can be legally subdivided and sold separately.

4.3. Valuation Implications

4.3.1. Excess Land:
Valued based on its independent highest and best use, considering the costs and time required to legally separate the parcel. The value of the excess land is added to the value of the remainder of the property.

4.3.2. Surplus Land:
Valued based on its contribution to the overall property value, considering potential uses such as expansion, parking, or storage. It is not valued as a separate, independent parcel.

4.4. Practical Application

Residential Example:
A house sits on two standard-size lots in a neighborhood where the typical lot size is one. The second lot is excess land if it can be legally subdivided and sold separately.
Industrial Example:
A 20,000 sq. ft. warehouse sits on a 100,000 sq. ft. site (5:1 land-to-building ratio), while the market standard is 3:1. The additional land at the back of the site, lacking street access, is surplus land because it cannot be sold separately.

4.5. Experiment
Analyze sales of properties with excess land that has been subsequently subdivided and sold. Compare the sum of the values of the original property and the subdivided parcel to the value of similar properties without excess land to quantify the market’s perception of excess land value.

5. Topography

5.1. Definition
Topography refers to the surface features of a site, including its elevation, slope, and contour. These features influence the site’s suitability for development, drainage characteristics, and aesthetic appeal.

5.2. Influence on Value

5.2.1. Slope:
Steep slopes can increase construction costs due to the need for grading, retaining walls, and specialized foundation systems. However, slopes can also provide desirable views and unique architectural opportunities.

5.2.2. Drainage:
Sites with good natural drainage are generally more desirable as they reduce the risk of flooding and water damage. Poorly drained sites may require costly drainage improvements.

5.2.3. Geological Characteristics:
The underlying geology and soil composition influence the bearing capacity of the soil and the suitability for various types of construction. Unstable soil conditions can necessitate costly foundation treatments.

5.3. Topographical Data

5.3.1. Topographic Maps:
Maps prepared by the US Geological Survey (USGS) provide detailed information about land elevations, contour lines, rivers, lakes, and other topographical features.

5.3.2. Geodetic Survey Program:
This program provides a framework for accurate land surveying and mapping, enabling precise determination of elevations and slopes.

5.4. Practical Application

A site with a steep slope overlooking a scenic valley might command a premium price despite higher construction costs due to the desirable view. A site located in a floodplain would likely have a lower value due to the increased risk of flooding.

5.5. Experiment
Compare the sales prices of similar sites with varying topographical features (slope, drainage, soil composition). Control for other variables, such as size and location, to isolate the impact of topography on value.

6. Geology and Soil Analysis

6.1. Importance

6.1.1. Structural Integrity: The geological conditions of a site, including soil composition and subsurface strata, play a pivotal role in the structural integrity of buildings. Suitable soil is vital for supporting structures and preventing issues like subsidence.

6.1.2. Construction Costs: Geological conditions can significantly affect construction costs. The presence of rock, unstable soils, or groundwater can increase the costs associated with excavation, foundation work, and drainage.

6.1.3. Environmental Considerations: Geological and soil conditions are crucial for assessing environmental risks, such as soil contamination, groundwater pollution, and the potential for landslides.

6.2. Soil Properties and Their Significance

6.2.1. Soil Composition:

Sand: Provides good drainage and aeration but has low water retention and nutrient-holding capacity.

Silt: Retains more water and nutrients than sand but is prone to compaction and erosion.

Clay: Has high water retention and nutrient-holding capacity but can become waterlogged and poorly aerated.

Loam: A balanced mixture of sand, silt, and clay, providing optimal conditions for plant growth and structural stability.

6.2.2. Soil Texture:
Refers to the proportion of sand, silt, and clay in a soil sample. It affects water infiltration, drainage, aeration, and nutrient availability.

6.2.3. Soil Structure:
The arrangement of soil particles into aggregates. Good soil structure enhances water infiltration, aeration, and root penetration.

6.3. Geological Surveys

6.3.1. Purpose:
Geological surveys are conducted to assess the subsurface conditions of a site, including soil type, depth to bedrock, groundwater levels, and the presence of geological hazards.

6.3.2. Methods:
Common methods include soil borings, test pits, geophysical surveys (e.g., seismic refraction, ground-penetrating radar), and geological mapping.

6.4. Implications for Development

6.4.1. Foundation Design:
Soil type and bearing capacity dictate the type of foundation required for a building. Unstable soils may necessitate the use of deep foundations (e.g., piles, caissons) or soil stabilization techniques.

6.4.2. Drainage Systems:
Soil permeability affects the design of drainage systems. Impermeable soils may require extensive drainage infrastructure to prevent waterlogging.

6.4.3. Landscaping:
Soil fertility and drainage characteristics influence the types of plants that can be successfully grown on a site.

6.5. Practical Application
Example: A site with expansive clay soils may require a reinforced concrete slab-on-grade foundation to resist movement caused by soil swelling and shrinking.

Example: A site with high groundwater levels may necessitate the installation of a dewatering system to prevent water damage to underground structures.

6.6. Experiment
Conduct a soil survey on two contrasting sites: one with well-drained sandy loam soil and one with poorly drained clay soil. Compare the cost of developing each site, considering the need for soil stabilization, drainage improvements, and specialized foundation systems.

7. Floodplain and Wetlands Analysis

7.1. Floodplain Analysis

7.1.1. Floodplain Definition: Areas susceptible to flooding during periods of heavy rainfall or snowmelt. Typically delineated by the Federal Emergency Management Agency (FEMA) on Flood Insurance Rate Maps (FIRMs).

7.1.2. FEMA Flood Zones:

Zone A: Areas subject to inundation by the 100-year flood (1% annual chance of flooding).

Zone AE: Detailed studies have determined base flood elevations.

Zone X: Areas with minimal flood hazard.

7.1.3. Implications for Value:
Properties located in floodplains are subject to increased risk of damage and may require flood insurance. Development restrictions may also apply, limiting the potential uses of the site.

7.2. Wetlands Analysis

7.2.1. Wetlands Definition:
Areas inundated or saturated by surface or groundwater at a frequency and duration sufficient to support a prevalence of vegetation typically adapted for life in saturated soil conditions (e.g., swamps, marshes, bogs).

7.2.2. Regulatory Protection:
Wetlands are protected by federal, state, and local regulations, including Section 404 of the Clean Water Act. Development activities in wetlands may require permits and mitigation measures.

7.2.3. Implications for Value:
Wetland regulations can significantly restrict the development potential of a site. Mitigation costs (e.g., creating or restoring wetlands elsewhere) can be substantial. However, wetlands can also provide valuable ecological services, such as flood control and water quality improvement.

7.3. Practical Application

A property located in a FEMA Zone AE may require flood insurance and be subject to restrictions on building height and design.

A site containing wetlands may require a permit from the US Army Corps of Engineers before any development activities can be undertaken.

7.4. Experiment

Compare the sales prices of similar properties, one located in a floodplain and one located outside the floodplain. Analyze the price differential to quantify the market’s perception of flood risk. Similarly, compare the sales prices of properties with and without wetlands, considering the potential development restrictions and mitigation costs associated with wetlands.

Conclusion

Site attributes are critical determinants of real estate value. A thorough understanding of these attributes, their scientific underpinnings, and their practical implications is essential for effective site analysis and informed decision-making in real estate investment and development. By systematically evaluating size, shape, frontage, topography, geology, and environmental considerations, appraisers and real estate professionals can unlock the value drivers inherent in a site and maximize its potential.