The Cheapest Site a Buyer Can Add Is the One You Built

Development costs moved, but many owners are still pricing their sites as if they did not. The all-in cost of developing a new site has moved from roughly $5 million to closer to $7 million, with land, construction, and equipment all increasing at the same time.

That shift creates more leverage for existing operators. A buyer evaluating an acquisition is not simply looking at the price of your site. They are also weighing it against the cost, time, and risk of building one themselves.

A New Build Has a Different Cost

At approximately $7 million, a ground-up development requires significantly more capital than when the same build was closer to $5 million. It also requires more time before the site begins producing cash flow.

An acquired site produces cash flow at closing, while a new site may not produce it until year three. That changes the comparison. The buyer is weighing an operating asset against development cost, delayed cash flow, and the uncertainty that comes with starting from scratch.

Existing Sites Offer Three Things Buyers Value

Time matters because a buyer may wait years for a new site to be built and fully ramped. An established site has already gone through that process and is operating today.

Certainty also carries value. New development comes with entitlement risk, construction risk, and ramp risk. An operating site removes much of that uncertainty, and buyers place value on the risks they do not have to take.

Density can make an acquisition even more attractive. If a buyer already serves the trade area, adding another existing site can cost almost nothing in new overhead. That can make the economics of an acquisition more compelling than starting over with a new development.

The Valuation Conversation Has Changed

Owners often focus on what another existing site might sell for, but that is only part of the comparison. As development costs rise, an existing site’s current cash flow, established operation, and reduced development risk become more relevant to the buyer.

The takeaway from John-Michael’s analysis is straightforward:

“A buyer is not choosing between your site and a cheaper one. They are choosing between your site and a shovel.”

That is the comparison owners should understand when evaluating what they have already built.

John-Michael Tamburro

Strategic Advisor