The Most Common Real Estate Development Issues
Real estate development is a rewarding field, as you will watch new or distressed property projects develop into beautiful homes, offices, retail spaces, restaurants, or other commercial buildings. However, it isn’t without its challenges, as real estate developers can face various problems that can slow down a project or even grind it to a halt. Continue reading to learn about the most common real estate development issues.
The Wrong Location
A real estate project’s location will determine its value, design requirements, target market, accessibility, and the number of potential buyers or tenants. Choosing the wrong site could lead to missed opportunities, competition problems, or a longer time on the market.
Real estate developers must consider the following factors when choosing a prospective site:
- Local competition
- Design restrictions
- Environmental issues
- The local demographic
Real estate developers follow strict budgets to minimize overheads and generate a huge return on investment. Yet, labor and material costs can rise, development issues may crop up, and financial complications could grind a project to a temporary halt.
A budget buffer of between 10% to 20% is a wise idea to protect a project against unexpected costs or delays. Also, you can turn to reputable private lenders that can provide distressed property, new construction, or fix and flip loans, which can help your business recover its finances and resume a project with ease.
Most real estate developers will face local opposition to a project at some point. Neighbors might successfully convince elected officials to cancel or pause a project, even if construction is on the right side of the law.
Potential causes of local opposition may include a project’s risk of:
- Noise pollution
- Traffic congestion
- Environmental hazards
- Ruining a neighborhood’s character
For the above reasons, real estate developers must identify if a project could face local opposition before submitting and executing plans. If they suspect they might run into concerns, they could develop an outreach strategy to alleviate worries and gather local support.
Every industry can experience onsite injuries, from office spaces to restaurants. However, construction workers will have a higher risk of injury, as they’ll need to handle dangerous equipment, work at height, deal with excessive noise, use many electrical items, and face excess exposure to airborne particles. Real estate developers can mitigate potential site injuries and fatalities by introducing appropriate safety procedures, training, PPE, and plans that adhere to the law.
Plan Approval and Permit Problems
Plan approval from the appropriate municipal office is crucial during the initial stages of a real estate development project. Also, developers will often need to obtain specific permits for a new construction, building reconstruction, repairs, site relocation, alterations, or demolition.
Despite most permits and approvals being straightforward, real estate developers might face delays or issues at times. For this reason, it is an intelligent idea to kickstart the approval or permit process as soon as possible and to communicate with a municipal office to identify potential hurdles before commencing with a project.