Today there are many tools and ways to check a property before making investment decisions. This makes it all the more unwise to build a warehouse or factory on a plot of land we know nothing about. The important aspect before deciding to start the investment process is due diligence of the property. This is a series of analyses and studies aimed at recognising the legal and technical situation of the land. In addition, one cannot forget to conduct a thorough analysis of the subsoil.
Legal Due Diligence
“We have learned from experience that a land inspection must start with a precise analysis of the ownership status and a review of all available documents,” says Agata Zając, Senior Director, JLL. This, as the expert says, is the first step in legal due diligence. “Clarification of ownership status through court or notary proceedings can take from eighteen to even more than thirty months,” explains the JLL expert. This is one of the longest processes in preparing land for sale.
“When approaching the preparation of land for investment, we start by reviewing the most complicated legal situations,” says Agata Zając. In the process of reviewing the documentation, it is important to examine, among other things, all the grounds for acquiring the property. Decisions on property divisions and information on changes in the land register should also be checked, as well as the planning conditions. However, this is only the beginning.
Technical Due Diligence
Technical analysis of the property is another element of land preparation. “In this matter, the land is also being thoroughly audited by examining available documents that will show, among other things, the availability of utilities,” says Agata Zając.
“Over the past few years, a specific critical parameter has emerged when analysing investment sites. It is the availability of electricity. For example, in a warehouse park of 20,000 square metres we always ask for at least 5 MW. Unfortunately, more and more locations have problems with providing such power,” explains Agata Zając. Trying to find a suitable location with adequate power or the need to bring the installation in leads to a significant increase in investment costs. Finding a site for data centre facilities is a major challenge, as their power requirements reach up to 40 MW.
Environmental Due Diligence
“It is extremely important whether there is ground or groundwater contamination on the property, as this is the main aspect associated with costly remediation and is responsible for the actual valuation of the property in question,” points out dr Michał Grela, CEO of Geotest company which has been evaluating sites for investment construction for almost 30 years.
The entire research is compiled in a detailed analytical study including, in addition to a thorough environmental analysis, a description of all potential risks such as flooding, mining damage, waste accumulated on the plot of land, as well as structures to be demolished or trees to be removed.
Dr Michał Grela adds, that “comprehensive environmental or technical due diligence also includes an analysis of the amount of ground work required during the construction of large-scale facilities.” Increasingly, such calculations are made on the basis of a photogrammetric survey performed by a drone.
When it comes to an investment property, due diligence aims to establish the risks associated with the profitability of the investment. If you want to provide a potential client with detailed information about the land, it is worth checking it from all possible angles. “Aware investors calculate risks. Only the unaware think exclusively in terms of their finances at first, and try to minimise their risks later,” straightforwardly says dr Michał Grela.
As the expert points out, the Construction Law does not specify the need for such research. Its provisions read that the building permit design has to include the results of geological and engineering analyses and geotechnical conditions for the foundation of building facilities, as required. “However, such research should be carried out even before the plot of land is bought. It is simply not worth taking the risk that the land will not be suitable for the planned development,” adds dr Michał Grela.
A proper survey will show the investor what type of terrain is in the area, at what depth the individual layers of soil are located, including the bearing layer, and what the groundwater level is and how it fluctuates. “Geophysical surveys are also carried out to check more challenging properties, mainly to confirm what maps and other historical materials show. This is particularly important in post-mining areas,” underlines Geotest expert. The analysis is supplemented by probing and laboratory testing of soil samples taken during drilling. How long do such tests take? “In the field, the duration closes in a fortnight, with another two to three weeks spent on analytical work in the office. Therefore, a complete study should take about 5-6 weeks,” says the expert.
Importantly, such research means actual savings for investors. “A thorough analysis of the land, preceded by our research, can give the answer to the question of how much the investor can save or how much he has to spend to prepare the property for construction,” argues CEO of CEO Geotest.
Prepared land attracts investors
As experts point out, land that already has some preparation behind is much more attractive and valuable for investors than unresearched land. “Investors consciously choose more expensive, but comprehensively prepared land for investment, because it is profitable for them in the long run,” concludes Agata Zając. The JLL experts have extensive knowledge in the field of land preparation for investments, and their portfolio includes several dozen sites ready for large-scale investments. To find out more, please visit https://warehousefinder.pl/industrial-sites/ or contact our experts.