If your business goals include building a new space for expansion, knowing how to get the construction process underway can be challenging. Development of new commercial real estate is a demanding and stressful venture, much more than building a home. While some aspects are similar, commercial construction depends on a greater number of teams and suppliers, which increases both the margin for error and delay. With every decision being vital to success, here are the six considerations to help you grasp the fundamental principles of commercial real estate development.
Find the Perfect Location
Finding the best location for the property is the first crucial step. While the size of your property is important, there are other factors to be taken into account. For example, you need to assess the amount of traffic you expect to receive and the position of the competing companies already present in the area. Developing a commercial property right next to a company you can’t compete with doesn’t make much sense. Finally, finding the perfect location for real estate isn’t only crucial for your business – you should inquire whether the area is in an earthquake or flood zone.
Obtain the Necessary Permits
As your construction unfolds, your office will be overwhelmed with specific permits you need to acquire in advance, regardless of the type of commercial property you’re building. Check with the local authorities about the permits that apply in your area, since construction permitting varies from region to region. Your plans will have to be approved by the local planning commission, often requiring three readings before the approval. In real-time, this often takes up to a month, or even longer, with several pre-construction meetings before the foundation is struck. If you have a tight schedule, be aware of these administrative issues and plan for them well in advance.
Pick the Right Contractors
Choosing the contractors you’ll entrust with the project is probably the most essential aspect of developing a commercial or real estate property. If you know any other entrepreneurs who have recently constructed their buildings, don’t hesitate to ask for a recommendation. If you don’t know who to hire right away, make a list of potential contractors and narrow it down until there are just a few companies left. While researching potential candidates, focus on their referrals and references, work experience, financial stability, budget compliance, but also sustainability and energy-efficiency.
Hire or Buy Equipment
In commercial construction and real estate development, project managers are often working on a tight timeline, where every opportunity to improve efficiency is more than welcome. This is especially important when selecting necessary machinery which can make the difference between finishing the project on time or falling out of schedules. Quality construction machines are expensive and buying only makes sense if your business can use a piece of equipment more often than 60% of the time. Reaching out to an established company for crane hire will ensure that you have both dependable and safe equipment as well as expert crews at your disposal, which is critically important for keeping the project within budget and on schedule.
Anticipate Unexpected Expenses
Cost and schedule overruns often happen when planners are unrealistically optimistic about their construction projects. This optimism bias involves people being too confident about the outcome of their planned actions, often fully underestimating the possibility of any adverse effects. Elaborate construction projects are especially prone to schedule and cost fallouts, so it’s important to remain realistic through every stage of your construction project. For example, if the focus of your project is on the renovation, you may find out that the existing underground utilities or building plans aren’t specified or even missing. If the construction extends into an unfavorable season, keep in mind that weather conditions like snow, rain, or extreme temperatures can affect the process, causing delays and additional expenses.
Asses Your Involvement
The main question here is whether you have the skills and time to put together a construction project by yourself. Business owners and real estate investors should be realistic in assessing how much time they can devote to the project. During construction projects, it’s not uncommon for companies to lose business because the management team is more focused on the new building than on performance. Depending on the magnitude of the real estate development project, consider hiring project managers to take care of complex logistic, and keep your involvement only related to decision making. An experienced project manager is essential for ensuring that the layout designer, architect, engineer, and contractors work in coordination. Your presence on the site is still very important, as there’s no better way to feel the pulse of what’s happening than to put on a hardhat and get your shoes dusty.
Related: 7 Characteristics of a Successful Real Estate Developer
Even as an armchair developer who delegates project managers and consulting teams, you need to embrace various roles and responsibilities to get the job done. Understanding these roles is impossible without understating every stage that is essential for the real estate development process itself.
This article has been contributed by Tracey Clayton.