1.1. Types of real estate: Characteristics of real estate:
- Commercial - Immovable
- Social - Capital-intensive
- Residential - Long development period
- Industrial - Long life span
- Stockpiling
Phases of the property development process:
a. Initiation
→ Starts with a location (a parcel of land considered suitable for a different or more intensive use)
and an idea (an increased level of demand)
→ Initiators can be:
o Public parties – municipality
o Private parties – project developer, land/property owner, investor
o Government policy is leading
→ Main stakeholders are landowners with the main motive of selling and/or improving the value of
the land
b. Investigation and analysis of the viability
→ Detailed market research needs to be undertaken
→ An analysis of viability needs to be done:
o It should be conducted prior to committing to the property development
o It is crucial to the successful completion of a development
o It needs constant re-evaluation
A positive outcome of investigation and viability analysis will determine
the decision to proceed by the developer
c. Acquisition
→ Stages of preparation prior to acquisition needed:
o Legal investigation
o Physical inspection and examination – enough load-bearing
soil? Biological problems of soil? Check electricity, water,
cables, etc.
o Finance
d. Design and costing
→ Design and costs are interlinked – iterative process
→ Design and costing stages involve contributions from all members of the professional team
→ Design is influenced by the client’s brief, public perception, current architectural styles
→ Design is a continuous process
e. Consent and permission
→ New development may require a 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
f. Commitment
→ ‘Due diligence’ checks are needed prior to commitment
→ Reconsider the development proposal
→ After granted permission, contracts can be signed
,→ Signing contract includes to:
o Purchase or lease the land o Engage building contractor
o Secure the required finance (with the o Confirm professional team
bank)
g. Implementation – construction of the building
→ The primary aim is to ensure that the completion of the development is within the allocated
timeframe and the financial budget but there may appear delays which can increase costs
→ The project manager is appointed to coordinate the design and building process
→ Developer takes a substantial interest in running the project and its overall promotion
h. Leasing/managing/disposal
→ Final stage but relevant from initiation of development
→ A development has value only when it is sold or leased at the estimated price or rental value
and within the period originally forecasted in the evaluation
→ Tenants are usually locked in and confirmed before the commencement of a development
→ The role of the developer is whether he retains ownership or sells it and realizes a profit
Main stakeholders in the development process:
a. Landowners – appears in the initiation stage
→ Land ownership can be:
o Traditional – church, landed gentry o Corporate – industrial companies
o Financial – financial institutions (banks), pension funds, insurance companies
b. Developers
→ Can range from single-person entities to global multi-nationals
→ The main objective is to make a profit and maximize financial return for stakeholders
→ Trader vs. Investor:
o A developer can be either a trader and sell the project or an investor and keep the
ownership
→ The type of developers varies since the developments can also vary
c. Public sector/government
→ Are rarely directly involved, constrained by financial resources, and limited by legal power
→ Government participation depends on whether the government seeks to encourage or control
development (e.g. can make sure that public transport or parking space will exist)
→ Government assists developers with site identification, site reclamation, the provision of
infrastructure, and sometimes financial grants (e.g. can provide permission)
d. Planners
→ The objective is to monitor and control the use of land in alignment with the public interest
→ Government vs. Planners:
o The government is regarded as politicians, and municipality, while planners refer to
professionals who make plans
→ Planning applications are determined in the light of legislation, local and regional plans,
government policy, etc.
→ Successful application is achieved by prior consultation and negotiation with authorities
e. Financial institutions and lenders (e.g. pension funds, insurance companies, etc.)
→ Types of money needed to complete a development:
o Short-term finance – if the developer sells the ownership
o Long-term funding – if the developer keeps the ownership
→ Financers seek to minimize risk and maximize future yields to achieve capital growth
→ Investment in a property is a relatively long-term investment
, f. Building contractors
→ Is employed by the developer and their task is to physically construct the development
→ The objective is to have direct financial gain and profit
→ Some development companies employ their own building contractors
g. Real estate agents
→ Will sell real estate/real property
→ Need details knowledge of the property market (the demands) and personal contact with
stakeholders (‘the property industry is all about people’)
→ The motivation is to make a financial profit
h. Professional team
→ Developers employ a range of professionals because they don’t have all the expertise in-house:
o Planning consultants o Engineers – e.g. for construction
o Market research analysts/economic o Project managers
consultants / valuation surveyors o Solicitors – for legal expertise
o Architects o Accountants
o Quantity surveyors
i. Objectors
→ Have the right to provide input on the viability of the proposed development
→ There are two types:
o ‘amateurs’ / self-interested neighbors (e.g. NYMBYs = ‘not in my backyard’)
o well-organized professional – local / regional / national (e.g. environmental organizations)
→ A prudent developer accounts for objectors when evaluating the likelihood of the development
proposal receiving planning permission
j. Occupiers
→ Occupier is known or unknown before development starts
→ Different occupiers have different real estate requirements and priorities
→ Future requirements need to be researched at the beginning of the process
→ Financial institutions seek highest quality specifications with a layout to suit the widest possible
range of tenants, so the occupier might not be forced to compromise
Types and private developers and stages:
1. Initiation – independent developer – the aim is to make a profit
2. Design – developing architect – the aim is to design
3. Realization – developing contractor – the aim is to build
4. Financing – developing financial institution – the aim is to produce a return on their
investments
5. Lease/sell – developing real estate (RE) agent – the aim is to lease or sell properties
6. Investment – developing investor – the aim is to invest
7. Exploitation – developing housing association – the aim is to compensate for other
unrewarding activities
- Commercial - Immovable
- Social - Capital-intensive
- Residential - Long development period
- Industrial - Long life span
- Stockpiling
Phases of the property development process:
a. Initiation
→ Starts with a location (a parcel of land considered suitable for a different or more intensive use)
and an idea (an increased level of demand)
→ Initiators can be:
o Public parties – municipality
o Private parties – project developer, land/property owner, investor
o Government policy is leading
→ Main stakeholders are landowners with the main motive of selling and/or improving the value of
the land
b. Investigation and analysis of the viability
→ Detailed market research needs to be undertaken
→ An analysis of viability needs to be done:
o It should be conducted prior to committing to the property development
o It is crucial to the successful completion of a development
o It needs constant re-evaluation
A positive outcome of investigation and viability analysis will determine
the decision to proceed by the developer
c. Acquisition
→ Stages of preparation prior to acquisition needed:
o Legal investigation
o Physical inspection and examination – enough load-bearing
soil? Biological problems of soil? Check electricity, water,
cables, etc.
o Finance
d. Design and costing
→ Design and costs are interlinked – iterative process
→ Design and costing stages involve contributions from all members of the professional team
→ Design is influenced by the client’s brief, public perception, current architectural styles
→ Design is a continuous process
e. Consent and permission
→ New development may require a 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
f. Commitment
→ ‘Due diligence’ checks are needed prior to commitment
→ Reconsider the development proposal
→ After granted permission, contracts can be signed
,→ Signing contract includes to:
o Purchase or lease the land o Engage building contractor
o Secure the required finance (with the o Confirm professional team
bank)
g. Implementation – construction of the building
→ The primary aim is to ensure that the completion of the development is within the allocated
timeframe and the financial budget but there may appear delays which can increase costs
→ The project manager is appointed to coordinate the design and building process
→ Developer takes a substantial interest in running the project and its overall promotion
h. Leasing/managing/disposal
→ Final stage but relevant from initiation of development
→ A development has value only when it is sold or leased at the estimated price or rental value
and within the period originally forecasted in the evaluation
→ Tenants are usually locked in and confirmed before the commencement of a development
→ The role of the developer is whether he retains ownership or sells it and realizes a profit
Main stakeholders in the development process:
a. Landowners – appears in the initiation stage
→ Land ownership can be:
o Traditional – church, landed gentry o Corporate – industrial companies
o Financial – financial institutions (banks), pension funds, insurance companies
b. Developers
→ Can range from single-person entities to global multi-nationals
→ The main objective is to make a profit and maximize financial return for stakeholders
→ Trader vs. Investor:
o A developer can be either a trader and sell the project or an investor and keep the
ownership
→ The type of developers varies since the developments can also vary
c. Public sector/government
→ Are rarely directly involved, constrained by financial resources, and limited by legal power
→ Government participation depends on whether the government seeks to encourage or control
development (e.g. can make sure that public transport or parking space will exist)
→ Government assists developers with site identification, site reclamation, the provision of
infrastructure, and sometimes financial grants (e.g. can provide permission)
d. Planners
→ The objective is to monitor and control the use of land in alignment with the public interest
→ Government vs. Planners:
o The government is regarded as politicians, and municipality, while planners refer to
professionals who make plans
→ Planning applications are determined in the light of legislation, local and regional plans,
government policy, etc.
→ Successful application is achieved by prior consultation and negotiation with authorities
e. Financial institutions and lenders (e.g. pension funds, insurance companies, etc.)
→ Types of money needed to complete a development:
o Short-term finance – if the developer sells the ownership
o Long-term funding – if the developer keeps the ownership
→ Financers seek to minimize risk and maximize future yields to achieve capital growth
→ Investment in a property is a relatively long-term investment
, f. Building contractors
→ Is employed by the developer and their task is to physically construct the development
→ The objective is to have direct financial gain and profit
→ Some development companies employ their own building contractors
g. Real estate agents
→ Will sell real estate/real property
→ Need details knowledge of the property market (the demands) and personal contact with
stakeholders (‘the property industry is all about people’)
→ The motivation is to make a financial profit
h. Professional team
→ Developers employ a range of professionals because they don’t have all the expertise in-house:
o Planning consultants o Engineers – e.g. for construction
o Market research analysts/economic o Project managers
consultants / valuation surveyors o Solicitors – for legal expertise
o Architects o Accountants
o Quantity surveyors
i. Objectors
→ Have the right to provide input on the viability of the proposed development
→ There are two types:
o ‘amateurs’ / self-interested neighbors (e.g. NYMBYs = ‘not in my backyard’)
o well-organized professional – local / regional / national (e.g. environmental organizations)
→ A prudent developer accounts for objectors when evaluating the likelihood of the development
proposal receiving planning permission
j. Occupiers
→ Occupier is known or unknown before development starts
→ Different occupiers have different real estate requirements and priorities
→ Future requirements need to be researched at the beginning of the process
→ Financial institutions seek highest quality specifications with a layout to suit the widest possible
range of tenants, so the occupier might not be forced to compromise
Types and private developers and stages:
1. Initiation – independent developer – the aim is to make a profit
2. Design – developing architect – the aim is to design
3. Realization – developing contractor – the aim is to build
4. Financing – developing financial institution – the aim is to produce a return on their
investments
5. Lease/sell – developing real estate (RE) agent – the aim is to lease or sell properties
6. Investment – developing investor – the aim is to invest
7. Exploitation – developing housing association – the aim is to compensate for other
unrewarding activities
