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Market Research, Investment Analysis & Strategic Planning for an 87-Acre TIF District
Client: The Village of Flossmoor, Illinois
The Village of Flossmoor retained GG+A to conduct an analysis of the market for office and retail uses to develop an information base to support the planning and decision-making process for the future of a 87-acre TIF District on Vollmer Road and Crawford Avenue that had not been developed as originally planned when formed. In order to identify potential demand opportunities and constraints that apply to the TIF site, we conducted demographic research and analysis. We also completed 20 interviews with real estate brokers, developers and property owners, an appraiser, market area municipal planning and economic development staff and representatives of economic development/chamber of commerce entities in order to ascertain the supply competition, absorption and rental rates. Based on this research and analysis, we identified and assessed for the office space market: (a) the geographic area within which office space at the site would compete for space users, (b) potential sources and scale of demand; (c) the site's comparative advantages and disadvantages and (d) and the preferred product type and typical tenant size for office space in the market area.For the retail space market, we analyzed demographic and income data for the relevant market area. We estimated expenditure potential based on the purchasing characteristics of residents in the market area and converted these estimates to the supportable amount of on-the-ground retail space for the market area. We identified the relevant supply of retail space within the identified market area and evaluated the relationship between the demand for and supply of retail space for the market area.
As part of a subsequent phase of market research, we considered the potential for a specialty retail center focused on the higher-income households within the market area. We were also asked to conduct an overview analysis of the potential for the site to serve industrial space demands.
Based on the findings of the market reconnaissance, GG+A outlined strategic action planning options to proactively produce one or more demonstration projects that will be feasibly developed by the private sector to accomplish civic goals. These included mechanisms to deal with the problem of the raising of reservation prices as the result of announcement of a developer solicitation process and to obtain control of development sites, without the expenditure of significant resources.
Following adoption of GG+A's recommendations, in order to identify whether a smaller office building development option is likely to be feasible, GG+A simulated the real estate investment results of a prototypical development from the viewpoint of a prospective developer. We analyzed the feasibility of development, or the need for a TIF incentive in order to bridge a feasibility gap, based on a financial yardstick or measure referred to as a residual land value, assuming a required internal rate of return. We performed sensitivity analysis to identify value-deflating risks and to identify viable options for bridging the feasibility gap.
Based on the market research and real estate economic analysis, GG+A recommended changes in the planning, regulatory and use guidelines for the TIF District.