Background
A real estate development company is planning several mixed-use developments in a medium-sized city. An analyst for the company undertook an initial analysis that showed that there are several areas within the city potentially suitable for development.
The company's officers presented the results of the earlier study to potential private and public partners. As a result, several local banks have indicated they will help finance at least two of the projects, contingent on the developer finding specific sites and obtaining the necessary agency approvals.
Read the case study about the development company's initial analysis.
In addition, the regional economic development commission, which is particularly interested in promoting mixed-use development, has offered to support the project and help with obtaining planning permissions and zoning changes if needed. In exchange, the development company has agreed to participate in the commission's business and workforce equity programs, which promote the use of minority and woman-owned small businesses on construction projects and bringing diversity to the construction trades through job training.
Looking for a few good lots
The developers have enough support to move forward. The next step is finding suitable lots. The earlier analysis identified general areas that were near light rail and commercial areas. To find viable specific sites, the developers realize they'll need to focus on key elements of the projects. The target market for the projects will be young urbanites, so they want to make sure the projects are located in areas with a relatively large contingent of this demographic. In addition, a major selling point will be the proximity of the projects to light rail stops.
Higher priority will be given to sites already zoned for mixed-use development, but the company will also pursue sites outside these zones. Given the results of their initial study, which showed many areas potentially suitable for a mixed-use project and the relative dearth of existing mixed-use zoning, they are confident that if they find a particularly suitable site at a good price, they'll be able to make the argument for a zoning change to the city council, especially with the weight of the economic development commission behind them.
Their initial study also mapped the locations of gas stations in relation to their proposed development area. The managers decide to continue to look at gas stations as potential sites—they think they might be able to get a good deal from a gas station owner who wants to get out of the business and is highly motivated to sell. Plus, lots with gas stations are likely to be on major streets, which will help increase visibility for the ground floor businesses. To expand the number of potential sites, though, they decide to also include lots that are currently vacant. The developers know that competition is increasing for these sites, and many of the owners are hanging on to maximize profits. However, the greater demolition and cleanup costs associated with the lots containing gas stations will tend to offset the higher land costs for the vacant lots. To support the type of developments the company is planning, suitable sites should be between ¼ acre and ½ acre.
With the company's officers having decided what they're looking for in a suitable site, the analyst who did the original study starts the search. She starts by listing the criteria:
- In an area with many young urbanites
- Near a light rail stop
- Currently vacant or occupied by a gas station
- Between ¼ and ½ acre in size
- Preferably already zoned to allow mixed-use development
After reviewing her existing data, the analyst sees that she already has most of the layers she needs and can get the rest from the regional planning agency's online GIS database.
The first decision the analyst will have to make is what constitutes "near" a light rail stop. She knows that much of the research on this indicates that people will walk about one-half mile to a stop. But other research has found that in some locales, people will walk farther than this. Plus, given the target demographic, some of the future tenants are likely to ride a bike to a stop, so that will increase the distance a bit more. She settles on three-quarters of a mile over streets and sidewalks as a reasonable maximum distance. The company's sales people will be able to advertise the units as being a short walk or bike ride to a light rail stop.
Now, through a series of queries, the analyst identifies the sites that are vacant or contain a gas station, are a quarter- to a half-acre in size, and are within three-quarters of a mile of a light rail stop.
There are 80 lots that meet the minimum requirements, out of over 23,000 in the city.
In the zone
The company's officers placed a high priority on lots that are within an area already zoned for mixed-use development, but they also want to consider sites outside these zones as well, as they may be able to get the zoning changed for a particular lot.
To get a better sense of how she can incorporate the zoning criteria into her analysis, the analyst meets with her contact at the Planning Department. The first thing the planner does is pull up a zoning map with detailed categories. He points out that many of the mixed-use zones are actually zoned for residential or office/residential and not for the ground floor retail businesses the developers are proposing. He says the best chance to get quick approvals of the projects would be to limit the sites to those in mixed-use areas zoned as Downtown Transit (DT) or Central Urban Core (CUC), which do allow for retail businesses, including stores, cafes, and bars.
In addition, he tells her, there are two other categories that are not technically zoned for mixed use but that allow for mixed residential/retail development. He suggests the analyst may want to include these Downtown Commercial zones—known as DC1 and DC2—in her analysis. The planner explains that DC1 allows for slightly larger scale developments than DC2, but both will accommodate the mixed-use developments proposed by the company.
As far as requesting zoning changes for lots outside these zones to allow retail businesses, the planner says that is a possibility. He explains that after seeing the analyst's original study, the planning director has been pushing for more mixed-use zoning with retail, but the city council has been reluctant. There has been some opposition from residents on development in the city, and the council members are wary of expanding retail development into residential areas.
His take on the situation is that the council is more likely to accept a zoning change for an entire zone, rather than for an individual lot. In addition, the change to allow retail businesses is unlikely to happen unless the zone is already mixed-use or is a commercial zone adjacent to an existing mixed-use zone. That will allow the council members to reassure their constituents that they are merely modifying or extending an existing mixed-use zone rather than creating an entirely new mixed-use area.
Back at her desk, armed with this additional information and data, the analyst decides to save the lots she's identified so far—those that meet the minimum requirements of land use, size, and proximity to a light rail stop—and screen them further based on zoning.
First, she selects suitable lots within one of the zones that allows for mixed use that includes commercial/retail use (DT, CUC, DC1, or DC2), knowing that projects at these sites have the best chance of being approved by the city.
There are 11 potential sites in these zones. That gives the company a fair number of options, but they were hoping for at least 20 potential sites. Plus, since the selected zones cluster around the city center, there are no potential sites in the northwest area. The company had planned to build here (as well as in the city center) to take advantage of the proximity to light rail in this part of the city.
The analyst needs to find out if there are additional potential sites. The 11 sites she's identified so far would be the best to develop, if they can be purchased at a reasonable price and meet the requirements of the engineers and designers, since they won't require a zoning change.
Next best, according to the Planning Department, would be sites that are in a mixed-use zone other than DT or CUC, or are in a commercial zone adjacent to an existing mixed-use zone. These zones allow either residential or retail uses, but not both, which is what the proposed developments require. It's possible the company could get the use designation for the zone changed if they identify a good site in one or more of these zones (or maybe get a variance for a specific project).
She decides she'll create two sets of potential sites: Priority 1 sites that don't require a zoning change, and Priority 2 sites that meet all the other criteria but would require a zoning change.
She's already selected the sites that fall within a Priority 1 zone, and she assigns them a priority code of 1. Now, she identifies the zoning areas that meet her Priority 2 guidelines. She then identifies which, if any, of the original 82 lots meet the minimum criteria and fall within a Priority 2 zone.
As it turns out, there are 22 lots that fall within a Priority 2 zone, and 12 of them are in the northwest area. She assigns them a priority code of 2.
Altogether there are 33 potential sites for the projects. This should provide more than enough options for the company. The analyst now has two sets of potential sites to present to company management:
- Priority 1—Lots that meet the minimum requirements and do not require a zoning change. These lots are in zones that allow mixed-use residential and retail development. There are 11 lots in this category.
- Priority 2—Lots that meet the minimum requirements but would require a zoning change or variance. These lots are in a mixed-use zone that does not currently allow retail, or in a zone that does allow retail and is adjacent to any of the mixed-use zones. There are 22 lots in this category.
To make it easier to discuss and evaluate the sites going forward and as a final step for this part of the analysis, she assigns the current zoning and description to each site.
The urban tapestry
Now that the analyst has identified potential sites, she'll map the target market for the developments. Management and the sales force will then be able to see if there are potential customers already living nearby. Having young urbanites already living in the vicinity is likely to attract others in that demographic from outside the area, increasing the likelihood the developments will be successful. Mapping the target market will also help determine the type of housing to offer and the mix of ground floor businesses for each project.
The analyst decides to use tapestry market segmentation data to home in on the target demographic. Tapestry combines census information with market research data to define fairly specific market niches. After perusing the tapestry documentation, she determines that the target demographic likely falls within two of Tapestry's fourteen LifeMode groups, known as "Middle Ground" (LifeMode 8) and "Midtown Singles" (LifeMode 11). Each of the LifeMode groups contains several subcategories, or segments.
To narrow the segment selection, the analyst decides to consult with the company's marketing team. After reviewing the tapestry segment documentation, the team identifies three segments that include the young renters with relatively high income comprising their target market: one LifeMode 8 segment termed Bright Young Professionals (8C), and two LifeMode 11 segments, Young and Restless (11B) and Metro Fusion (11C).
Read the descriptions of the Bright Young Professionals, Young and Restless,and Metro Fusion segments.
She adds the three tapestry segments to a layer of block group boundaries she obtained from the regional planning agency's online GIS database. She can now see which block groups contain households in those segments. As it turns out, there are a number of households falling in two of the segments—Bright Young Professionals and Metro Fusion—but no households in the Young and Restless segment.
The analyst can now map the block groups based on the number of households in each of these segments (in this example, the block groups contain households in one segment or the other, but not both).
The map shows that the block groups where Bright Young Professionals live are located between the city center and the northwest area, as well as east of the city center. They are mainly outside the ¾-mile walk/bike areas around light rail stops. The block groups containing Metro Fusions tend to cluster around both the city center and the northwest, within the walk/bike areas.
The analyst concludes that on the one hand, there is good news: there are at least some elements of the target demographic living near the potential project sites. On the other hand, the potential market is limited to two tapestry segments; the company's sales people will have to come up with some creative targeted marketing to reach potential customers. The company will also have to look very closely at the types of businesses needed to ensure success.
The analyst embeds her map in a report, which she distributes throughout the company. The officers are encouraged by the results of the analysis. They decide the projects are viable. Before meeting with their financial partners, however, they want to make sure they are on a solid footing with the City. They decide to meet one more time with the Planning Department.
The planners think the potential sites look viable. They suggest that the developers present the proposed sites to the public to judge community reaction. Even though it's early in the process, this will help avoid potential pitfalls later. The developers agree, and the planners offer to organize two town hall meetings—one in the city center and one in the northwest.
Engaging with the public
At the city center town hall meeting, the reaction, especially from local business owners, is positive. With the new developments, they see the possibility of additional potential customers. They are concerned, however, about the strain on existing downtown parking, since there is already a shortage of parking space.
The reaction from the few residents living in the northwest who attend the town hall meeting in that neighborhood is less enthusiastic. They see little benefit to the neighborhood from the new developments. They are even more concerned about parking than the folks downtown, especially given the many large apartment complexes in the area. Parking lots are always full, they say, and it's difficult to find spots on the street, especially with all the parking restrictions.
Company management is undaunted by the reaction at the town hall meetings. They are encouraged that most of the objections were regarding the parking issue and that objection to the proposed developments overall was minimal.
The managers want to be proactive and present a plan to address the parking issue to the community as the project progresses. They know that normally if there isn't enough parking onsite to meet the city's standards, the city requires developers to pay into a fund to build parking elsewhere at $10,000 per parking space. At this early stage, the company has not selected specific sites, let alone done any design work, so it's unknown whether additional parking will be required. Still, they want to be ready if the issue arises. They also want to ensure that there's plenty of nearby parking for the ground-floor businesses.
While the company could simply pay into the fund, instead the managers propose to purchase small lots near the developments as overflow parking if needed (there would be a two-hour limit on parking, with 24-hour permits for residents and their visitors). This approach would be less costly in the long run. The company's officers meet with the Planning Department to present their idea. The planners note that the arrangement is a little unusual, but they are willing to consider the proposal, subject to approval by the Planning Commission and City Manager.
The availability of suitable parking areas nearby now becomes a final criteria for the potential project sites. The analyst first looks for vacant lots that are between 0.1 and 0.25 acres. These are a reasonable size for a small parking lot; they'd provide 15 to 30 spaces. She then identifies the potential project sites that have at least one such lot within a one-minute walk, close enough to accommodate residents and the businesses' customers.
As it happens, most of the sites (25, to be exact) have a potential site for a parking lot nearby. That's more good news for company management. She adds a field to the layer of potential sites indicating those that have a lot suitable for parking nearby, and those that don't.
The analyst had previously assigned the project sites to one of two priorities. Now there is an additional layer of information for the two categories; some of the sites in each category have potential parking lots nearby, and others do not. It's not known at this point if these extra parking lots would even be needed.
She decides the best thing to do is map and present the sites in the two geographic areas—northwest, and city center—separately. That will make it easier for management to evaluate the individual sites.
She creates a story map that presents an overview of the analysis, along with the two project areas on separate screens.
After reviewing the results of the analysis, company officials decide to initially pursue three developments, two near the city center, and one in the northwest area.
They are confident the city center developments will be successful given the desirability of the area and the potential customer base. One of the developments will include relatively upscale condos with additional amenities, such as a small gym. They hope to lure some of the Bright Young Professionals who tend to live a little farther from the city center and who may want to become first time homeowners. The other city center development will include rental units to appeal to the Metro Fusion segment. Likely businesses for both projects would include discount fashion boutiques, cafes, wine bars, and natural food stores or restaurants.
The development in the northwest is more of a risk, since there are already many apartments—and not much of an urban scene—in this area. The company has developed somewhat of a reputation for taking risks, and they want to get a foothold in this area thinking it is an up-and-coming neighborhood. The development will consist of rentals to attract the Metro Fusion segment. The ground level businesses will be key to making the project successful; possibilities include a brew pub, gourmet fast food, sporting goods, and retail technology (such as cell phone and tablet sales). Additional research will be needed to find the right combination of businesses.
The company officers present the story map to their financial partners and detail their plans for the three developments. The banks agree to provide initial funding so the project can move forward.
The acquisitions team will investigate the purchase of specific sites. They'll start with site visits and a document search to find out if any of the sites are already being developed or are slated for development, or are not available for some other reason. (For example, lots comprising parks and other open space are often listed in tax rolls as having a land use of "Vacant," when in fact they are not available for development.) Undoubtedly, some of the sites will drop off the list right away. While in the field, the acquisitions team will check the potential parking lot sites to see if they're still vacant, can be configured for parking, and have viable access from nearby streets.
In the meantime, the marketing team will take a closer look at the mix of apartments and condos for potential developments in the two project areas as well as the types of businesses that will have the best chance of success. The company and its partners will then review this work and decide on moving forward to the next stage: applying for zoning changes, site planning, and developing preliminary designs. With any luck, in a year or so they'll be breaking ground.
Workflow using ArcGIS Pro
Launching the project
- This story map presents the analysis workflow using ArcGIS Pro.
