Leaving Money on the Table? Real Estate Development Savings
Real Estate development programs are often overlooked and underutilized by companies, developers, and even economic development organizations. We know that 90% of companies don’t know when their investment projects qualify for incentives. Even worse, this statistic only aligns with accessing more traditional incentives such as income tax credits, fixed asset grants, training grants, and property and sales tax abatements. But there’s another toolbox available for real estate development that is leveraged far less than these traditional incentives - programs that many investors and job creators are unaware of, causing companies to miss out on millions in short-term and long-term savings.
Our objective is to highlight the purpose of these programs, bringing more awareness to end users (companies). This awareness will ensure that developers, property owners, and economic development organizations across the country will exhaust every option to reduce the final costs for the end user.
Real estate development incentives are created to spark catalytic development in communities all across the country. State and local economic development organizations deploy resources (incentives) to accelerate the attraction of private investment and the creation of new jobs. Often these programs are targeted toward distressed communities, focused on revitalization and returning land and buildings to productive job, investment, and payroll-generating sites. But this is not always the case, there are also real estate development programs that offer flexibility on location for developers and companies alike.
These programs are not always as visible as traditional incentive programs, but there is real value to be realized to end users. The impact of these programs is realized through the company's partnership and collaboration with the developer and property owner. Awareness of these programs when considering a site, speculative development, or an existing building for long-term commitments can reduce the overall costs captured in lease agreements or upfront capital. Regional and local economic development groups have been proactive in leveraging local and state support to identify targeted sites and buildings in their markets. These locations are identified based on the multiplier effect and potential impact that a company can bring if located at these specific sites. With state and local dollars invested into these specific locations focused on infrastructure, utilities, water, site prep, new construction, and renovations, the development price becomes much more attractive and competitive. One of the main reasons why these programs are not as visible is because the incentive goes to the developer/property owner. The savings are then passed through to the company via purchase and lease agreements.
States and jurisdictions compete heavily to increase tax revenues and stimulate their economies. Many states will deploy many resources to ensure their business climate is in a position to attract companies considering new sites or building locations for their future growth. Per the 2022 National Site Selection Magazine rankings of Top Business Climates, Ohio ranked 6th. Part of the index used to determine the ranking is a survey of site selectors who were asked to rank the states in order of attractiveness based on experience locating projects in them. With JobsOhio at the head, a private non-profit economic development organization operating on behalf of Ohio, the state has implemented programs to help sustain that competitiveness. This means that there are incentives and tools available in Ohio but also across the country. One of the challenges for many states including Ohio, Indiana, and Kentucky is having cost-effective ready sites and turnkey buildings available to land end users. One of Ohio’s strategies to solve this challenge was by introducing the Ohio Site Inventory Program.
The Ohio Site Inventory Program offers grants and low-interest loans for speculative sites and building development. This program will consider speculative site development with no identified end user, but evidence of interest in the site/building (location) is a key driver in securing investment from JobsOhio. The goal of the program is to proactively identify sites that have a high likelihood of securing an end user and creating jobs in the near term for targeted industries with significant economic multipliers. This means that engaging with experts aware of these programs when considering site and building location decisions can ensure the right groups are presenting solutions that meet your project’s budget. While an end user can’t occupy the site or building to qualify for the funds, but discussions can occur concurrently, leading to significant savings once a final location decision is made.
The program is more flexible than many of the revitalization incentives available across the country and allows for the development of office, R&D, as well as manufacturing, warehousing, and distribution located in urban, suburban, and rural locations. Sites ranging from brownfield redevelopment to newly constructed Class A office space can be eligible within the program’s guidelines. The program is competitive, and requires an application process and is currently funded through 2025.
A recent example of this program being utilized by a developer/property owner was the expansion and relocation of Divisions Maintenance Group, one of Cincinnati’s largest private companies. Many of the Cincinnati business leaders have been well aware of the long time vacancy at Fountain Place, a building in the heart of downtown Cincinnati, just off Fountain Square. After more than three years of vacancy Divisions Maintenance Group agreed to serve as the anchor tenant and expand within the building. The building, owned by Cincinnati Center City Development Corp (3CDC), became a priority for the City, as the building and its occupancy were key to sustaining the vibrancy of Fountain Square and the urban core of Cincinnati. The prioritization of the site for the City and region, and the alignment with the goals of JobsOhio’s Ohio Sites Inventory Program (OSIP), OSIP dollars allowed the property owner to better ready the building, reduce renovation costs for the end user and offer more competitive leasing rates.
This is just one example of one program but there are many others in Ohio and across the country that have served a similar purpose in trying to invest in sites and buildings proactively to encourage catalytic development. These programs have played roles in reducing development costs and providing more competitive pricing helping to secure private investment.
If you have questions regarding the real estate development incentives available in the markets you are considering please call us at 513.639.3971 or email email@example.com.