Property developers are a good source of new business for commercial real estate agents. Timing is an important aspect of working with them. Not every property will work in every market. The best property developers are looking to the future and understanding what the local demographics require as a property. Older properties become refurbishment and fresh development opportunities. Vacant land is also a significant opportunity.
That being said, property developers require good relationships with real estate agents that know the market. Most particularly they require land and redundant sites around which they can construct the property of the future.
It is interesting to note that many real estate agents claim to have good working relationships with developers. The reality is that developers are very selective with any real estate agents they work with. Good relationships with are only built on foundations of trust and property knowledge in the region. As the local real estate agent, your focus can be to build these relevant relationships on strong foundations. Your knowledge about the market place is highly valuable to developers.
To work with developers, you must understand the local zoning and planning regulations. As part of this you know what type of property can be constructed in various locations. Most local councils have a planning committee that meets on a regular basis. In many circumstances, the minutes of these planning committee’s are available for public scrutiny. In that way you can understand where the new property deals and developments are being considered. You can then understand where the zoning is being changed that can allow fresh and new property development of a different type.
Developers know the industry and operating costs for a new project. They know their margins at the macro level. If a property satisfies the macro analysis, then the developer will move to a micro analysis. It is not unusual for a developer to place a contract on a piece of land with a long-term settlement. This allows them to time the project completion to the needs of the local business and population needs.
Property development is currently less active due to restrictive financing and slow business growth. This will however change as we move away from economic downturn pressures. Commercial real estate is built around a property cycle which is geared to the community and overall economic growth. Things will improve and properties will again be developed. When situations are quiet, the property developers are planning the next needs and projects. This is a great time to be building relationships with property developers.
The stages of investments and development can best be summarised as:
- Sourcing of suitable land
- Engineering studies of the site
- Studying the needs of the local demographic
- Land acquisition and documentation
- Financing alternatives for the duration of the project
- Financing costs and controls
- Project planning and timing
- Architectural plans
- Construction timetables
- Planning the tenant mix
- Project leasing
- Property management
Property development will always be an opportunity in waiting. If you are a real estate agent, get to know your market and the development opportunities that exist therein. Understand what the demographic requires and where the growth is in your local and business community. Property development may take time to achieve the end result, but the complexity and numerous commissions from a property development are very attractive.