Water and the site selection process

“When the well is dry, we know the worth of water.” — Benjamin Franklin.

The right site has always been a common thread between business owners and real estate developers. In selecting the right property for a business or a development project, the old axiom continues to ring true….Location, Location, Location. While the right site is as imperative as always, there is another factor that is increasingly impacting real estate sales and development in our market: Availability of water. So the new axiom could very well sounds more like water, location, water.

Land and water. With our water access hurdles in Northern Colorado, compounded with the rising cost of construction and maintenance, there is a need for business owners and developers to be more strategic than ever in their site selection process.

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The goal of real estate site selection is to balance the space needs of the business model with the total costs to occupy the space. The key to success is to engage directly with business stakeholders, owners, property managers, and brokers and to understand the market. This methodical process is a major part of proactive real estate portfolio management. In an effort to understand the need and react quickly to opportunities, developers need to constantly monitor trends in the market when it comes to space, cities, and locations that align with the business model.

For Colorado’s Front Range, understanding the user’s need and water access will be an increasing concern for developers. Already, the average rate and cost to access the water infrastructure has increased more than 2 percent annually over the past 5 years — roughly a 10 percent increase over that period. With several municipalities installing a time of day or time of year rate structure where there is a stepped-up rate for historically high use time periods, the total costs of occupancy is impacting the developers’ ability to make economic sense out of a project, while restricting the ability to find quality credit tenants that don’t have a national or regional financial backing.

With different water districts, you can find a big swing in not only the monthly rate structures but also the tap, plant investment and raw water fees. In Fort Collins, there are three service providers and in comparing the cost to install a two-inch tap, there may be as much as a 30 percent differential between providers, which could equate to a six-figure difference for the project.

Flash forward. On average, Colorado receives 20 inches of precipitation every year (most in the form of snow). Of this amount, roughly two-thirds of this water is contracted to other states through interstate contracts, leaving only one-third for local use. To complicate the matter for us living on the Front Range, 80 percent of that precipitation flows west, while 80 percent of the population lives on the eastern slope.

This leads us to the issue of demand. For the census period 2010 to 2018, Colorado has seen an increase in population of 13.2 percent with projections that many municipalities will double in size by 2050. The inevitable conclusion is that demand will exceed supply soon. Some estimates say this will happen sooner than 2050, while others predict that it aligns with the doubling population.

Should we continue on this current trajectory, the price of water will increase dramatically, and access to water may not be available in some areas.. So as they say…”denial ain’t just a river in Egypt!” We know that water is an essential element to life, and it is the responsibility of all users, be it municipalities, service providers, business owners, or real estate developers, to ensure future access to this precious resource.

In working with local planners and service providers, and embracing social and environmental development practices for both new and existing inventory we can work to ensure that this vital resource is available for future generations.

Todd Parker is director of development for Waypoint Real Estate, Fort Collins.