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Deal Incubators: Finding the Next Development, Investment & Activity Magnet

Dec 17, 2015

What makes a great location? Scratch that, what makes a great NEW location?  

It’s not a stretch to say that real estate in Manhattan Beach (LA), Streeterville (Chicago), Georgetown (DC) or Cherry Creek (Denver) is an investment that will likely perform. If you spend your time hunting for opportunities in these neighborhoods, what’s your probability of landing one? If you make an effort to tell your clients about what makes these places great, how much value are you really adding? These are known commodities in their respective urban landscapes, and for good reason. They’ve been discovered and developedand are priced accordingly.

But your resumé is not built on deals where you told clients what they already knew. It’s built on deals where you brought insight and shed light on real estate opportunities that had potential for payoff.

Such opportunities can be found in areas we’ll call “deal incubators.” These zones are the result of a single complex project that’s been in the works for years, often decades. Each phase of planning and approval leads it closer to reality, incubating the real property in and around them.

So what makes a deal incubator? Capital investment by pioneering organizations that aim to add value to urban landscapes—either by repurposing obsolete land uses, stretching outwards or upwards, or laying claim to a single location with a vision to start a ripple effect that will have an impact well beyond its four walls.  

The effects of such events create an incubation zone that is ripe for economic development—often producing commercial real estate opportunities that top producers will pounce on.

Here are a few examples of notable deal incubators:

The 606

Chicago’s green space darling that runs east to west through Bucktown, Wicker Park, Logan Square and Humboldt Park.

What is it?: A 2.7-mile, multi-use recreational trail, park and alternative transportation corridor, a living work of art and a new green space for all.

The 606Starting out as a former elevated train line, the 606 once served a small manufacturing district across Chicago’s Northwest side. After being decommissioned in the 1990s, local residents discovered that nature had reclaimed the once busy line and subsequently created an impromptu nature trail with incredible views of the city’s famed skyline. A 2004 open space plan called for an ambitious reuse of the line, which gained the strong support of local groups and the Trust for Public Land, resulting in a coalition of city and civic organizations that moved the project forward.

Notable real estate development: Centrum 606, a six-story residential building with 100 dwelling units, holds the Milwaukee and Leavitt corner, bringing Aldi back in as a first-floor retail tenant and providing a café across the street from a primary entrance to the 606.  

Market impact: According to the public record closing documents on LandVision™, the area saw a 50% increase in the number of homes sold over $800K from the same six-month period year over year at the time of writing this blog. Real estate listings now proudly and prominently display “The 606,” boasting proximity and accessibility.

Plus, the formation of higher income households will no doubt increase the demand for more retail and other service providers, so expect to see more opportunities spring up.

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The Grand Parkway & ExxonMobil Campus

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Houston’s third transportation beltway (yes, third) and the sprawling campus of the energy giant.

What is it?: The Grand Parkway is a 180-mile circumferential scenic highway traversing seven counties and encircling the Greater Houston region. Several segments are already open, including a section connecting George Bush Intercontinental Airport, the ExxonMobil campus and the popular Woodlands community to Houston’s energy corridor along I-10, west of downtown.

The ExxonMobil Campus is state-of-the-art, and will house its upstream, downstream and chemical companies as well as associated service groups. The ultra-sustainable office buildings are designed to harvest daylight and minimize water use, and are designed to be 40% more energy efficient than a typical office building. The 385-acre site will be home to 10,000 employees.

exxon.pngNotable developments: More than 10,000 acres of master-planned communities are bringing thousands of new residents to the area. Elyson by Newland Communities is notable at 3,642 acres, 6,200 homes and a significant commercial core. Six office parks and technology parks are adding offices, R&D facilities and hotels. Several mixed-use developments are being added, including Grand Crossing by Kansas City-based Price Development.

Real estate impact: Like everything in Houstonhuge. More than 15 major new developments will bring thousands of jobs and thousands of housing units for the new or transplanted workforce.

The Whole Foods Effect

This one is a bit different since it’s not one specific location. But sometimes it seems like Whole Foods has an almost magical effect on real estate. If you build it, they will come…

What is it?: The subsequent positive impact on real estate and businesses surrounding the location of a Whole Foods store. Not to say that Whole Foods is the only catalyst, but numerous studies have attributed their presence as a major contributor to growth. In urban locations, the hundreds of property owners surrounding the Whole Foods have been direct benefactors by way of new leases and rising rents.

Notable locations: Benjamin Miller from Fundrise puts it best: “There is little question that Whole Foods has consistently been able to identify neighborhoods undergoing rapid upswings — Logan Circle, Washington DC; Harlem, New York; Jamaica Plains, Boston; South Hills, Pittsburgh; Central West End, St. Louis; and soon Midtown, Detroit. The retailer’s uncanny ability to open new locations just at a neighborhood’s inflection point is a testament to their market due diligence and an envy of most companies, investors, and governments.

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Real estate impact: In one detailed analysis, researchers found that property values increase an average of 17.5%, with a minimum gain of 5.8% and a maximum of 29.3%.

How to find more deal incubators

So clearly these things are out there, but how do you find them early and get ahead of the curve? Again, deal incubators are often created when people recognize an innovative way to use space, when development spreads out or up, or when an important industry or company lays claim to a new area.  

To find them, it takes a keen eye for what’s going on around youand a lot of patience. Incubators by nature take time to develop, but the payoff can be big.

These websites can help you stay abreast of what’s happening in your area.

The Trust for Public Land  
The Trust for Public Land works to protect the places people care about and create close-to-home parks—particularly in and near cities, where 80% of Americans live. The goal is to ensure that children and adults have easy access to a safe place to play in nature. They conserve working farms, ranches, and forests; lands of historical and cultural importance; rivers, streams, coasts, and watersheds, and more.

This is the organization that helped establish the 606, so it’s worth noting if they’re working in your area.

City and county websites
The process of land use change starts and ends with the governing bodies that approve plans and grant entitlements. Their websites are a bit hit or miss, but they can offer constituents a wealth of knowledge about active and upcoming projects. Usually the Planning & Zoning and Community Development pages offer lots of great info, but my favorites are the GIS and data pages.  

For an example, take a look at the Howard County, MD website. They provide mapping tools that show new building permits, green infrastructure, healthy restaurants and maybe most importantly, a map for development plans and public meetings.  

Regional planning websites
Similar to government websites, regional planning websites (such as coalition of governments and regional planning commissions) provide access to data and maps that can help you understand what’s happening in the region. Moreover, they provide long-term studies and reports that highlight the region’s vision for economic development, transportation and planning.  

A few examples include CAPCOG, Austin’s Capital Area council of governments, and SCAG, Southern California’s association of governments.

Trade sites, blogs and a trusty search engine
You likely have your own sources for market happenings, and we all trust Google and Bing to help us find what we need. These toolscombined with a little curiositycan be your greatest asset in finding these incubation zones.

In fact, you can take advantage of some of the simple alert functions in Google or Bing: Google Alerts and Bing Interest Manager will let you know you as soon as news hits the wire.  

There are plenty of blogs and trade sites out there, too. Find the ones you like and subscribe to receive updates.

Happy hunting!

 

Sources:

Topics: Industry News

Russ Duncan

Written by Russ Duncan

Russ is Apto's Director of Product Marketing and helps drive product direction through customer discovery, consulting, research and advocacy. Russ is a CRE tech industry veteran and has held several positions at Digital Map Products, including Product Manager, Customer Success Manager, & Solution Engineer. He's a serial observationalist interested in understanding the built and natural environments, systems of engagement and movement of information; and moreover how people use and interact with them.

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