Phase I – Land acquisition
The details about land acquisition process can be found in our earlier post of land development process.
Phase II – Construction
Construction phase requires applying for license (permitting), and project development.
The permitting process usually begins with an application which identifies the site, its location, and a preliminary design of the improvements to be constructed. This application is then used by public officials to verify compliance with its current zoning classification. If it complies, the permit is granted and the construction of the project may commence subject to building codes and inspections. If the permit is denied, the applicant will usually clarify or amend the application and will ask the city planning staff/director to review it again.
- Preliminary checklist – Project development:
This checklist is usually the first step that a developer reviews when evaluating a site for possible development.
- Allowable uses per zoning classification.
- Minimum lot size per zoning classification.
- Maximum floor to area ratio (FAR).
- Building bulk/density limits.
- Setback/building line.
- Building height limits.
- Building footprint/envelope.
- Parking ratios.
- Important terms/project development:
- Setback/building line – requirement to construct building a specified number of feet (setback) from the right-of-way line or other landmark.
- Right-of-way line – area designated for a public street or alley that is dedicated for traffic, public use, utilities, etc.
- Building related terms:
- Footprint – it is the shape or outline of the primary building slab or foundation as it will be constructed on the site.
- Envelope – the total outside perimeter of a structure, including footprints and any exterior patios, mall ways, landscaping, etc.
- Facade – the exterior, usually the main entrance of a structure
- Bulk – a three dimensional space within which height, width, footprint, and number of structures/elevations/shapes are viewed in total relative to the land area upon which it will sit to determine land use intensity.
- Building codes – refer to required materials and methods used to construct improvements within a jurisdiction.
- Permit- document executed by the director of planning authorizing the construction, restoration, alteration, repair, etc., of a structure and acknowledging that it conforms to requirements under the applicable zoning ordinance.
Phase III – Completion and occupancy
There are certain risks in any real estate project development. Once the construction has been completed, there is an additional risk of selling and handing over the project to clients or bringing in tenants in case of rental property. Risk begins with land acquisition and increase steadily as construction commences until cash flows from the leasing phase materialize. It should be noted that factors determining the demand for type of space (such as office, retail, warehouse) being developed are critical to project risk. These factors may manifest themselves in current market indicators, such as vacancy rate levels, rent levels, or the extent of leasing commitments from the tenants.
A very good understanding of the underlying economic base of an urban area or region is critical when assessing the viability of real estate development. The point is that investors must examine the demand for space in terms of the characteristics of the demand by end users (tenants) in a given market. This demand in turn depends on the type of employment in the local market and the nature of the functions tenants will perform. Only by understanding the local economy and the nature of employment can developer anticipate demand accurately and produce and supply the quantity and quality of space in the proper combination to satisfy market demand.
Phase IV – Management
Once the property is occupied by clients/tenants, there is need for professionally managed facility management team. This team can look into the property management tasks such as maintenance, HVAC, parking management, security, civil works, housekeeping, landscaping, etc. These tasks are equally important and ascertain the long life of property and thus ensure positive rental income as well as capital appreciation.
Phase V – Sale
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