Understanding the Different Phases of Commercial Real Estate Development

Initiation of the Project

During this phase of the development, the conditions will be created. When it comes to real estate development, there are three basic principles:

1. The Company Seeks Ideas and Capital Investment - The company will seek out an investor and a project idea for a property that they already own. This typically occurs when the company's primary business is not related to real estate. Architects are often approached by investors who are seeking project ideas for a site.

2. An Idea Has Been Formulated and the Company Requires a Location and Investment Capital - In this instance, the client already has an idea or a demand and requires a suitable location as well as investment capital.

3. The Investor Has Capital and Needs an Idea and a Location - In this scenario, you have an investor who wishes to invest in the real estate market for a myriad of reasons, such as other investors or a pension fund.

A project will begin with one of these factors - an idea, capital or a location. During the first stage of development, the other parts need to be found. Once they have been procured, a project description that includes measurements and usage ideas will be produced.

After this, the next phase involves calculating the development. During the early stages, a developer will use either a front door of back door approach. These approaches will be discussed in other articles. For now, we will need to focus on how the process begins.

The final part of this phase is to acquire land for the project.

The Conception of the Project

Once the location has been found, the idea agreed upon and the capital raised, it is time to begin the project conception. Throughout this phase, numerous analyses will be performed to ensure that the project is both feasible and profitable.

A feasibility study will be performed during this phase to investigate both the positive outcomes and the negative outcomes of the project before any money or time is invested in the project. All aspects of the project will be analyzed, including sociological, economic, legal, planning and technical aspects. During the feasibility study, the following analysis will be performed:

* Competition Analysis

* Cost Analysis

* Location Analysis

* Market Analysis

* Risk Analysis

* Usage Analysis

A project is considered feasible when the analyses determine that project will satisfy the objectives of the project within the appropriate time constraints and financial restraints. Once the feasibility study is completed, you should be able to determine if the project will have a positive or negative impact on society, investors and the project's location.

Project Management Phase

During the project management phase of the project, the developer represents the client. The design will be finalized, and the developer will delegate tasks to an outside construction project manager. During this phase, the overall planning, control and coordination of the project from start to finish will be planned and carried out. Architects can be utilized as a project management developer during this phase because of the knowledge, education and experience they have gained throughout their careers.

Project Marketing Phase

Marketing the project can begin early in the project and continue throughout the entire project. One way to minimize risk is to attain an early sale or lease of the property. A marketing specialist who is hired during the early stages of the project can offer numerous suggestions based on their knowledge of the market.

When it comes to all the different phases of commercial real estate development, it is important to remember that they do not need to stay in a strictly chronological order. Typically, these phases will overlap. For example, locating and purchasing or leasing a property can begin during the conception phases of the project.

After the project is completed, the next phase of the project begins - the facility management phase. This is phase is used to ensure optimal property values.