Real estate development, or property development, is a

business process A business process, business method, or business function is a collection of related, structured activities or tasks performed by people or equipment in which a specific sequence produces a service or product (that serves a particular business g ...

, encompassing activities that range from the renovation and re-

lease A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial ...

of existing

building A building or edifice is an enclosed Structure#Load-bearing, structure with a roof, walls and window, windows, usually standing permanently in one place, such as a house or factory. Buildings come in a variety of sizes, shapes, and functions, a ...

s to the purchase of raw

land Land, also known as dry land, ground, or earth, is the solid terrestrial surface of Earth not submerged by the ocean or another body of water. It makes up 29.2% of Earth's surface and includes all continents and islands. Earth's land sur ...

and the sale of developed land or parcels to others. Real estate developers are the people and companies who coordinate all of these activities, converting ideas from paper to real

property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to consume, alter, share, re ...

. Real estate development is different from

construction Construction are processes involved in delivering buildings, infrastructure, industrial facilities, and associated activities through to the end of their life. It typically starts with planning, financing, and design that continues until the a ...

or housebuilding, although many developers also manage the construction process or engage in housebuilding. Developers buy land, finance real estate deals, build or have builders build projects, develop projects in joint ventures, and create, imagine, control, and orchestrate the process of development from beginning to end.New York Times, March 16, 1963, "Personality Boom is Loud for Louis Lesser" Developers usually take the greatest

risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environ ...

in the creation or renovation of real estate and receive the greatest rewards. Typically, developers purchase a tract of land, determine the

marketing Marketing is the act of acquiring, satisfying and retaining customers. It is one of the primary components of Business administration, business management and commerce. Marketing is usually conducted by the seller, typically a retailer or ma ...

of the property, develop the building program and design, obtain the necessary public approval and financing, build the structures, and rent out, manage, and ultimately sell it. Sometimes property developers will only undertake part of the process. For example, some developers source a property and get the plans and permits approved before selling the property with the plans and permits to a builder at a premium price. Alternatively, a developer who is also a builder may purchase a property with the plans and permits in place so that they do not have the risk of failing to obtain planning approval and can start construction on the development immediately. The

financial risk Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financi ...

s of real estate development and

real estate investing Real estate investing involves purchasing, owning, managing, renting, or selling real estate to generate profit or long-term wealth. A real estate investor or entrepreneur may participate actively or passively in real estate transactions. The p ...

differ due to leverage effects. Supply-demand-equilibrium

Developers work with many different counterparts along each step of this process, including architects, city planners, engineers, surveyors, inspectors, contractors, lawyers, leasing agents, etc. In the Town and Country Planning context in the United Kingdom, 'development' is defined in the Town and Country Planning Act 1990 s55.

Organizing for development

A development team can be put together in one of several ways. At one extreme, a large company might include many services, from

architecture Architecture is the art and technique of designing and building, as distinguished from the skills associated with construction. It is both the process and the product of sketching, conceiving, planning, designing, and construction, constructi ...

engineering Engineering is the practice of using natural science, mathematics, and the engineering design process to Problem solving#Engineering, solve problems within technology, increase efficiency and productivity, and improve Systems engineering, s ...

. At the other end of the spectrum, a development company might consist of one principal and a few staff who hire or contract with other companies and professionals for each service as needed. Assembling a team of professionals to address the environmental, economic, private, physical and political issues inherent in a complex development project is critical. A developer's success depends on the ability to coordinate and lead the completion of a series of interrelated activities efficiently and at the appropriate time. Development process requires skills of many professionals:

architect An architect is a person who plans, designs, and oversees the construction of buildings. To practice architecture means to provide services in connection with the design of buildings and the space within the site surrounding the buildings that h ...

landscape architect A landscape architect is a person who is educated in the field of landscape architecture. The practice of landscape architecture includes: site analysis, site inventory, site planning, land planning, planting design, grading, storm water manage ...

civil engineer A civil engineer is a person who practices civil engineering – the application of planning, designing, constructing, maintaining, and operating infrastructure while protecting the public and environmental health, as well as improving existing i ...

s and site planners to address project design; market consultants to determine demand and a project's

economics Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interac ...

; attorneys to handle agreements and government approvals; environmental consultants and soils engineers to analyze a site's physical limitations and environmental impacts; surveyors and

title A title is one or more words used before or after a person's name, in certain contexts. It may signify their generation, official position, military rank, professional or academic qualification, or nobility. In some languages, titles may be ins ...

companies to provide legal descriptions of a property; and lenders to provide financing. The

general contractor A contractor (North American English) or builder (British English), is responsible for the day-to-day oversight of a construction site, management of vendors and trades, and the communication of information to all involved parties throughout the c ...

of the project hires

subcontractor A subcontractor is a person or business which undertakes to perform part or all of the obligations of another's contract, and a subcontract is a contract which assigns part of an existing contract to a subcontractor. A general contractor, prime ...

s to put the

architectural plan In architecture and building engineering, a floor plan is a technical drawing to scale, showing a view from above, of the relationships between rooms, spaces, traffic patterns, and other physical features at one level of a structure. Dimensio ...

s into action.

Land development

Purchasing unused land for a potential development is sometimes called speculative development. Subdivision of land is the principal mechanism by which communities are developed. Technically, subdivision describes the legal and physical steps a developer must take to convert raw land into developed land. Subdivision is a vital part of a community's growth, determining its appearance, the mix of its

land use Land use is an umbrella term to describe what happens on a parcel of land. It concerns the benefits derived from using the land, and also the land management actions that humans carry out there. The following categories are used for land use: fo ...

s, and its infrastructure, including

road A road is a thoroughfare used primarily for movement of traffic. Roads differ from streets, whose primary use is local access. They also differ from stroads, which combine the features of streets and roads. Most modern roads are paved. Th ...

drainage Drainage is the natural or artificial removal of a surface's water and sub-surface water from an area with excess water. The internal drainage of most agricultural soils can prevent severe waterlogging (anaerobic conditions that harm root gro ...

systems,

water Water is an inorganic compound with the chemical formula . It is a transparent, tasteless, odorless, and Color of water, nearly colorless chemical substance. It is the main constituent of Earth's hydrosphere and the fluids of all known liv ...

sewerage Sewerage (or sewage system) is the infrastructure that conveys sewage or surface runoff ( stormwater, meltwater, rainwater) using sewers. It encompasses components such as receiving drains, manholes, pumping stations, storm overflows, and scr ...

, and

public utilities A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and r ...

. Land development can pose the most risk, but can also be the most profitable technique as it is dependent on the

public sector The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, pu ...

for approvals and infrastructure and because it involves a long investment period with no positive

cash flow Cash flow, in general, refers to payments made into or out of a business, project, or financial product. It can also refer more specifically to a real or virtual movement of money. *Cash flow, in its narrow sense, is a payment (in a currency), es ...

. After subdivision is complete, the developer usually markets the land to a home builder or other end user, for such uses as a

warehouse A warehouse is a building for storing goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial parks on the rural–urban fringe, out ...

shopping center A shopping center in American English, shopping centre in English in the Commonwealth of Nations, Commonwealth English (see American and British English spelling differences#-re, -er, spelling differences), shopping complex, shopping arcade, ...

. In any case, use of spatial intelligence tools mitigate the risk of these developers by modeling the population trends and demographic make-up of the sort of customers a home builder or retailer would like to have surrounding their new development.

References

External links

* {{Authority control Architecture Construction Real estate

Organizing for development

Land development

See also

References

External links