Overall, property development requires a mix of skills, including financial management, construction knowledge, project management, and market research. It is a complex and multifaceted process that involves significant risk, but also the potential for substantial rewards. Too much focus on the rich rewards without adequate consideration of all that is involved increases the risk considerably having an inverse effect on the rewards.
Last month we looked at the various stages of a typical property development and what is involved in each stage. Developing a property is a complex process, and there are many potential pitfalls that developers may encounter along the way. In this blog we’ll explore some of the more common mistakes we see developers making.
- Land acquisition: One common mistake that developers make in this stage is failing to conduct sufficient due diligence on the site they are considering for development. This can lead to unexpected costs and delays later in the process. Developers may also overpay for land, which can impact the project’s overall profitability. You need to have a clear understanding of what the site can yield given all constraints.
- Conceptualization and design: A common mistake in this stage is failing to consider the needs and preferences of the target market. In other words, misreading the market. It’s better to pursue projects driven by market demand / needs than hoping to create demand. Developers sometimes create a design that is too expensive to build.
- Planning and gaining local authority approval: One common mistake in this stage is failing to adequately engage with local authorities and other stakeholders prior to submission. This can lead to delays in obtaining necessary approvals or objections to the development. In some cases they submit designs that do not meet the local planning requirements, in which case it’s back to the drawing boards. Consent application processes can be lengthy anyway so one needs to plan for that. These time lines have ballooned since Covid.
- Neighbourhood Opposition: Objections from neighbours can be a powerful force when determining whether a project moves forward, so if you’re seeking approval for something outside the provuisions of the code some early research and consultation is advised.
- Detailed Design – Operational Works: One common mistake at this stage is appointing inexperienced consultants, often lured by cheaper fees, leading to failure to properly design for infrastructure and other operational works needed to support the development. This can lead to delays in the approval process and delays cost money. Too many delays may lead to missing the market.
- Tenders / Quoting: One common mistake in this stage is selecting a contractor based solely on the lowest price. This can often result in poor quality work or delays in the construction process, frequently because in calculating the lower price important project inputs were not accounted for. In extreme cases this leads to the contractor going bankrupt leaving the developer high and dry having to sort out the inevitable mess and needing to then find someone else to complete the project.
- Construction: Common mistakes in this stage include poor project management, failure to communicate effectively with contractors and other stakeholders, and inadequate quality control. Failure to gain sign off / approvals at certain points in the construction process will lead to your plans not being sealed. Also, remembering that developers often have to submit bonds or guarantees at the conclusion of construction as to the performance of the works for a period, usually a year, failures due to poor workmanship in this period, referred to as “On Maintenance,” will cost money.
- Plan sealing: A common mistake in this stage is failing to address all outstanding issues identified by the local authority or failing to comply with regulatory requirements. Keep doing this and your plans will fail to be sealed.
- Going it alone when it comes to managing the project: Need we say more? If you’re not experienced in developing property appoint a recognised competent Project Manager.