A development project is a multi-step, complex, risky, and time-intensive process. However, it can deliver fresh new supply and satisfy pent-up market demand if done well.
Whether you're a growing business considering construction or an investor weighing an opportunity, understanding the real estate development process is critical to success. This comprehensive guide will walk you through the different stages of development - from pre-development to operations.
Pre-Construction
Real estate development is a complex process that takes years to complete. It requires a team of experts in the field, including attorneys, engineers, land planners, surveyors, architects, and construction contractors, to complete the job.
The pre-construction phase of the real estate development process is the next step after the pre-development and permitting phases. It includes everything that needs to be done before breaking ground on the project. This includes navigating land entitlement steps such as environmental assessments and engineering reports to ensure the raw land is ready for building. It also includes preparing detailed architectural and engineering designs that comply with city development plans.
After the plans have been approved, it's time for land clearing and site preparation, including roadwork, grading, utility installations, and building pad construction. The team also enlists a general contractor to interpret the architect's design intent and devise an attack plan for building that refined concept on the ground. The entire project team needs to communicate with each other and coordinate with other stakeholders to ensure that everything is completed on schedule and within budget.
This is often the most expensive phase in a project because it involves bringing all of the necessary resources to bear. It can take 6-12 months to finish this stage. Teams must stay on track throughout this phase because a delay here can cause the whole project to be put on hold until the problem is solved.
With a connected preconstruction process, Your Home Wichita development teams can collaborate more efficiently and find savings by leveraging shared workflows. This allows them to understand each other's needs better, ensure they meet milestones on time and fully comply with regulatory requirements. It can also improve transparency and accountability to reduce the likelihood of costly mistakes or rework later in the build.
Pre-Development
The pre-development phase is where the real estate development process gets its start. This includes research, planning, and project due diligence. The results of the pre-development stage can set a property up for success or failure right from the beginning. Investing enough time and energy into this stage can help mitigate future problems like cost overruns, schedule delays, and regulatory issues.
The next step is securing the land entitlements necessary to begin construction, which can be long and involved. The specific steps required and levels of government involvement may differ depending on the type of development. For example, a redevelopment project that involves utility and landscape approvals will likely have a longer timeline than new construction on vacant land.
During this stage, development teams must also make the final decisions regarding capital stack and lock in the debt or equity financing needed to fund the construction phase. This is also the time to begin marketing the building to potential tenants, ideally securing a pre-lease agreement. Once the final construction plans are approved, a building permit allows the construction to commence.
When construction is underway, the development team must diligently track and manage progress and work closely with a general contractor to ensure all tasks are completed on schedule. This is where having a robust real estate development software solution can come in handy. Leading development teams use this technology to streamline day-to-day work, maintain build visibility, and meet critical project milestones.
The development process can be a long and complex undertaking with varying degrees of risk. Regardless of the type of project, mistakes made in this phase can be costly and delay or even derail it altogether. Having a clear and sequential process for managing each stage of development and establishing effective risk mitigation measures is critical to real estate developers, especially when they are borrowing money or responsible for managing the interests of 3rd party stakeholders.
