What to do with empty land next to apartment buildings

Question

So we have a 48 unit complex with two buildings facing each other.  Next to them is a large decent amount of land, in southwest Ohio, filled with trees and such.  There is enough land to build another building easily but this is not our world so looking to figure out what to do with this land and having it sit there empty doesn't make sense to me.  So basic questions like any ideas, who to contact to work out development, where to even start, etc, etc.  Appreciate any thoughts.

Greg Dickerson · Answer

@Christian Beebe it all depends on the size of the property, zoning, utilities, vehicle access and demand in the market. Best use could be either more apartments or possibly self storage.

You can either hire experts to help you with development or partner with a developer.

Ryan Muzzillo · Answer

I agree with @Kris Bennett - the site itself, and the surrounding area, is very important in determining what can physically fit and what the best use is.  Maybe it's not another apartment building like you already have, but some sort of mixed used development.  Lots of potential ideas and a quality market study would go a long way in helping you discover the potential of that lot.

The one item I'd like to add - an engineer is a great source if you're need to discuss their particular field.  A good local architect can give you a lot of information over a variety of different fields within a 10-15 minute phone call.  Architects have a good handle on the local construction market, costs, permitting, zoning requirements, etc and can even give you a preliminary project cost per SF that is directly based off what they are seeing in the industry for your type of project.  Generally speaking, you can get most of the information you need to figure out whether the project is even worth pursuing (in terms of cost for the building and permitting) from an architect.

Personally, zoning is something I generally don't worry about too much as an Architect.  Reason being - as long as you are not trying to rezone a parcel to industrial and it's next to single family housing, you're probably going to be ok.  Parking regulations, and drainage requirements are the two things I see kill projects more than anything else.  Every jurisdiction has different building codes which is why talking to an architect and getting a handle on everything required would be really beneficial - at the very least you would know what you're getting into prior to making any commitments.

Good Luck!

Scott Mac · Answer

@Christian Beebe

Hi Christian,

If you begin construction next to existing units, you may have increased turnover and increased vacancy rates (Noise issues).

Also, know that construction schedules are not always hit on time, and increased time will lengthen those two above mentioned. Schedules can be missed by several months for a variety of reasons.

Just something to keep in mind.

Good Luck!

Kris Bennett · Answer

What you do depends on a few things: the site itself, what surrounds the site, and your experience, among other considerations. Here's a brief description of each that might help you figure it out.

The site considerations are zoning (what's allowed, what you have in mind to build, and if you need to rezone, etc.), access to water/sewer/utilities (I assume there is access considering there are apartments next door), size and shape of the parcel, and topography. If you have to get the site rezoned, you will want to check with the Planning and Zoning Dept. to see what the rezoning process is like. You will need to talk with an engineer to estimate the cost of the plans and get a survey done if you don't already have one. You'll have to talk with an architect as well to estimate costs of renderings in case you need to present your project for rezoning.

What surrounds your site is important because that will help determine what will be the highest and best use for the land. Is there retail nearby, more homes, access to a highway or main road. Are there new homes being built? What does the area need, and will your site make sense for that?

If you have experience developing, you pretty much know all of this. If you don't have experience developing, no matter what you do, you will need to budget for a feasibility study performed by a third-party with no skin in the game--in other words, they won't make or lose money based on what happens at the site. That way they can give you an objective opinion if what you're planning to build is a good idea or not. The lender will typically require a feasibility study for a loan anyway. It's like an appraisal, but on a proposed project versus existing.

If you're thinking this is expensive, it is. There's no guarantee your project will be approved at the city level if you have to rezone. That's why development is risky and requires the highest return.

If you don't want to do all of that, get it entitled for an existing use by right and flip the land to a developer, or list it for sale as-is. Then take your profits, and find another deal. :) This isn't all you should consider, but I hope it helps.

Scott Morongell · Answer

@Christian Beebe if you had a general contractor for your 48 units assuming you did a value-add play that GC may have recommendations for a good developer.

Ryan Evans · Answer

Maybe you could work a deal with a developer where your contribution is the value of the land, and that determines your split. It will probably be the smaller piece of the pie, but if you factor in the competition and everything else then there has to be some number that makes sense. All that said while assuming it's in a place where development makes sense.

Tony Lin · Answer

I had this situation before and ultimately passed on the land. It's great to build on it but in a way you're creating direct competition for your existing properties. You'll most likely be building class-A buildings as well and that may not be in a class that you want to be competing in when you're buying b/c properties.

Remington Lyman · Answer

@Christian Beebe Join Urban Land Institute to network with more developers and find out what they think. It is a great professional global organization that consists of a lot of architects, developers, and city officials. I joined the Columbus chapter to get more comfortable with the commercial real estate sector.

It also led to more referrals which was an added bonus.

What to do with empty land next to apartment buildings

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