How Economic Impact Studies Help Municipalities Make Better Property Development Decisions

A vacant shopping center. An undeveloped tract near a highway. A city-owned parcel downtown.

Each property presents an opportunity. Each also raises questions about what should happen there, who would benefit, and how much public investment might be needed.

For municipalities, selecting a property for development, or deciding which proposal to support, means looking beyond the purchase price and projected construction spending. City leaders need to understand how a project could affect employment, local businesses, and the community’s economic future.

An economic impact study can help make those effects clearer. Used alongside market research, fiscal analysis, and site due diligence, it gives municipalities a stronger foundation for deciding where and how to grow.

What Does an Economic Impact Study Measure?

An economic impact study estimates how a proposed project or change in activity could affect a defined economy. Depending on its scope and methodology, it may examine employment, labor income, economic output, and value added.

The analysis often considers three types of effects:

• – Direct effects: Activity generated by the project itself, such as construction spending or employment at a new facility.
• – Indirect effects: Activity supported through purchases from suppliers and other businesses.
• – Induced effects: Activity supported when workers spend their earnings within the study area.

The U.S. Bureau of Economic Analysis explains that regional economic models can estimate these spending relationships and their effects on employment, earnings, and production. The results depend on the project inputs and the region being studied.

For municipal leaders, these estimates help answer a practical question: What economic activity could this development support, and where would that activity occur?

That last part matters. Benefits estimated for a multicounty region should not automatically be presented as benefits occurring within the city limits.

Understand the Difference Between Economic Impact and Municipal Revenue

Before using a study to compare properties, municipalities should be clear about what each type of analysis answers.

A project’s estimated economic output is not money flowing into the city’s budget. Likewise, a proposal that could support substantial employment may still require costly infrastructure improvements.

Municipalities benefit from reviewing these findings together. Economic impact analysis describes potential economic activity; fiscal analysis helps determine what that activity could mean for public finances.

Compare Properties Against the Same Development Goals

Imagine a municipality evaluating two locations for a proposed employment center.

One is an undeveloped property near a major transportation corridor. The other is a previously developed site closer to existing neighborhoods and businesses.

The first may offer room for expansion. The second may offer access to established infrastructure and a different redevelopment opportunity.

An economic impact study can help compare the proposed operating activity at each location. However, if the same business would operate at the same scale on either property within the same study region, the modeled economic impacts may be similar.

The meaningful differences may emerge through transportation access, infrastructure costs, workforce availability, development timing, or the amount of usable land. Those factors require complementary analysis.

A useful comparison starts with shared goals. Is the municipality trying to attract employment, reactivate an underused corridor, or expand a particular industry? Establishing those priorities makes the findings easier to interpret.

Evaluate the Proposed Use Before Committing to a Site

Sometimes the question is less about choosing between properties and more about choosing between possible uses for one property.

An underused parcel might be considered for housing, retail, a hotel, or an employment-focused development. Each option would create a different pattern of construction activity and ongoing operations.

Municipalities can use economic impact scenarios to explore those differences, provided each scenario begins with credible assumptions about project size, occupancy, spending, and timing.

Market research is essential here. A development concept may produce an attractive impact estimate on paper while depending on demand that has not been demonstrated.

For example, modeling a fully occupied office development does not establish that tenants will lease the space. A market and feasibility study should help determine whether that operating scenario is realistic before its estimated impacts influence a public decision.

CDS provides market analysis and feasibility studies for public- and private-sector clients across residential, commercial, industrial, and mixed-use properties.

Separate Construction Activity From Ongoing Benefits

Construction can generate substantial activity during a project’s development. Municipalities should also understand what happens after the buildings open.

A clear study separates temporary construction effects from recurring operating effects. It should explain the reporting period and how employment is measured so readers do not mistake construction-related job estimates for permanent positions.

For property selection, the useful question becomes: What activity is expected to remain once construction is complete?

Municipal reviewers can request separate construction and operating results, along with the assumptions behind each. That makes it easier to assess how a proposal fits the community’s longer-term goals.

Put Infrastructure Costs Into the Decision

A property’s development potential must be considered alongside the infrastructure needed to serve it.

A municipality may need to evaluate road improvements, utility extensions, drainage, or additional service capacity. It should also consider who would pay for those improvements and who would maintain them over time.

These are fiscal and engineering questions that complement an economic impact study.

EPA’s guidance on local development identifies opportunities to use existing infrastructure and notes that development patterns can affect the cost of providing public services. That supports examining a site’s location and infrastructure requirements alongside its potential benefits.

An infill site still needs careful review. Existing utilities may require upgrades, and redevelopment may involve demolition or remediation. Similarly, an undeveloped site may be appropriate when its advantages justify the required investment.

The goal is to understand the full commitment before selecting a property or supporting a proposal.

Ask How Much Activity Is Truly Additional

A new development does not necessarily create an equivalent amount of new activity for the community.

Consider a retailer moving from one location to another within the same municipality. The new property may gain investment and employment, but some activity may simply shift from the original location.

A useful review asks what would happen without the proposed project. Would the business locate elsewhere? Would the property remain vacant? Could another viable use develop there?

These questions help distinguish a project’s gross economic footprint from its potential net contribution.

Municipalities should request clear treatment of relocation, displaced activity, and spending that leaves the study area where relevant. A standard impact estimate should not be assumed to account for every one of these factors.

Test the Assumptions Before Supporting Public Investment

Economic impact results are estimates built from assumptions. BEA emphasizes that analysts need detailed project information and an understanding of the model’s limitations to use regional impact methods appropriately.

Before relying on a study, municipal leaders should ask:

• – What geography and time period do the results cover?
• – Where did the project’s spending and employment inputs come from?
• – How are construction and ongoing operations reported?
• – What happens if occupancy, hiring, or development timing falls below expectations?
• – Which public costs and revenues require separate analysis?

Testing a slower development schedule or lower level of activity can show how sensitive the findings are to the original assumptions.

When incentives or public improvements are under consideration, those findings can inform discussions about phasing, milestones, and performance measures. The impact study provides evidence for that discussion; municipal financial review and applicable approval requirements remain part of the decision.

Use the Findings to Shape the Development

An economic impact study is most useful while a municipality still has choices.

That might be before acquiring land, preparing a developer solicitation, prioritizing infrastructure improvements, or negotiating public participation.

At that stage, research can help municipal staff identify which concepts deserve further evaluation and what information a developer should provide. It can also reveal where a proposal needs adjustment—for example, when projected activity depends on an aggressive buildout schedule.

The findings should help shape the next step. They may support proceeding with a concept, revising its scope, comparing an alternative, or gathering more information before making a commitment.

Give Residents and Elected Officials a Clear Explanation

Property development decisions often involve competing priorities. Residents want to understand what a project could bring to the community and what the municipality may be asked to contribute.

A useful public summary explains the proposal, its estimated effects, the assumptions behind those estimates, and the costs evaluated separately.

It should also make uncertainty visible. An estimate based on full occupancy five years from now needs to be presented that way.

Clear communication helps elected officials explain why a property or development concept is being considered. It also gives residents a more useful basis for discussion than a single headline number.