Summary Property Development

Summary Realization, Exploitation and Transformation: Property
Development

Chapter 1 Introduction property development
What is Real Estate?
Real Estate: a parcel of land/ site and everything that is attached to that
Characteristics:
 Immovable
 Capital-intensive (important investment of money)
 Long period of development: market might have changed when building is
completed
 Long lifespan (normal life span: about 50 years)
 Stockpiling

Types of Real Estate
 Commercial Real Estate (ofces, retail, car parks)
 Social Real Estate (schools, hospitals)
 Residential Real Estate (housing)
 Industrial Real Estate (factories, mines, farms)

The Property Development Process
Property development: a process that involves changing or intensifying the use of
land to produce buildings
Essential components:
 Land
 Building materials
 Labor
 Infrastructure
 Financial capital
 Professional services




Initiation Why and how the building is built,
general questions: e.g. what is the
name of the building
Acquisition of site Who is the owner of the property the
building is built on

,Design Who designs the building
Realization Who constructs the building
Financing How is the building fnanced
Lease/sale Who owns the building, who uses the
building
Investment Who owns the building
Exploitation Who manages the building, who is
responsible for maintenance, who is
exploiting the building
Demolition What to do with materials after
demolition

Recent developments:
 Transformation of ofce spaces: ofces go empty due to economic crisis
and new way of working (fexible work spaces)  ofce buildings have
been demolished or transformed for another use
 Circular economy: Dutch Government changed policy for building industry:
we must reduce use of primary raw materials  challenge: in current
recycling system materials are getting downgraded and current buildings
are not designed to disassemble in reusable or recyclable parts

Building Information Modeling (BIM)
BIM: method to integrate information from various stakeholders in order to
enhance collaboration. Digital representation of physical/functional
characteristics of a development. Produces 3D models to help understand how a
development will function when completed.
BIM can work in diferent phases:
1. Realization: fnd building layout
2. Exploitation: facility management

Property development & Land for development
Location theory
Determining factor: transportation costs
Transportation costs low  location rent will be high

Adaptability  important because
- Real-estate has a long life-span
- Market demands are dynamic
- The land-use in the environment of a building may change
- Demolition and reconstruction is bad for the environment – a long life is
important for efcient use of materials and energy

Requirements for adaptability
 Structural features of the building (another use often requires a diferent
structure)  agile buildings (has become more important due to circular
economy)
 Features of the built environment, mixed land-use is more attractive
(transforming an ofce to a dwelling will not be attractive if the ofce is
located in an ofce park)

Development project types

Speculative project vs. design-and-build project
 Speculative: produces for the market

,  Design-and-built: produces for a particular client

Public vs. private project
 Public: for the public beneft (aim is not to make proft but to be cost-
efective)  schools, hospitals, care centers
 Private: aim is to make proft
Also: private-public relationships

The Property Development Process
1. Initiation: starts with location (a parcel of land is considered suitable for a
diferent or more intensive use) and idea (an increased level of demand)
Who could initiate?  public parties (municipalities), private parties
(project developer, owner, investor), government policy is leading
2. Investigation and analysis of viability: detailed market search needs to be
undertaken and analysis of viability needs to be done. Project needs
constant re-evaluation
3. Acquisition: Prior to acquisition:
- Legal investigation: ownership, existing planning permissions
- Physical inspection and examination: assessment of site’s load-bearing
capacity, access and drainage
- Finance (or funding): how to cover the cost of holding the completed
development as an investment or to secure a buyer for the completed
scheme  short-term and long-term funding
4. Design and costing: design and costs are interlinked. Design is infuenced
by the client’s brief, public perception, current architectural styles 
continuous process. All members of professional team are involved
5. Consent and permission: new development may require change of land
use. Every development requires planning consent or permission. A
detailed application needs to be submitted. Other legal consents may be
necessary.
 all legal permission hurdles need to be cleared before full commitment
6. Commitment: prior to commitment  ‘Due diligence’ check (go through all
factors that infuence success/failure and check if everything is in order)
Then: make commitments by signing contacts:
- To purchase or lease the land
- To secure the required fnance
- To engage building contractor
- To confrm professional team
7. Implementation: primary aim  ensure that the completion of the
development is within the allocated timeframe and financial budget
8. Leasing/managing/disposal: fnal stage but relevant from initiation of
development. Development only has value when it is sold or leased at the
estimated price or rental value. Tenants are usually locked in and
confrmed before the commencement of a development.

Stakeholders
Landowner
May take an initiative via a decision to sell its land to enter a partnership with the
developer. Motive: sell and/or improve value of the land
Land ownership:
1. Traditional (church, landed gentry etc.)
2. Corporate (industrial companies, retailers etc.)