Real Estate Development Drivers
Housing (retail): demolitions, population growth, reduction of household size, shifting of household type toward non-family, increase proportion of middle-age and seniors, etc.
Commercial and Industrial: employment growth, etc.
increase of land prices and supplies, increase of material prices, reduction of mortgage rates, increase of labor costs, etc.
Cultural values and attitudes, infrastructure, etc.
High housing vacancy
Rapid growth of seniors
Flat per capita income growth
Potential post-recession surges in employment and housing starts
Fastest growth in medical, office and educational occupations
Job leadership by small establishments
Strong inflation in steel prices
Sources of Return for Developers
Development fees, selling property to investors, income from long-term equity, selling development rights and environmental mitigation credits, satisfaction, reputation, etc.
Risks and Their Mitigation
Draw a salary, follow public plans and zoning, be collaborative, buy land with entitlements.
Use equity partners, take advantage of credits and incentives, spread investments across multiple projects, multi tenant, multi customer projects, build to suit market need.
GUARANTEES TO INVESTORS:
Draw a salary, agree to split returns equally, agree to return equity to all first, avoid a guaranteed amount or rate of return.
PAYMENTS TO LENDERS:
Due diligence, market research, build to suit market need, use reliable consultants.