Sean Tarpenning | Challenges in Real Estate Development
Challenges in Real Estate Development
Building new structures and changing existing ones to raise the value of a real estate is known as real estate development. Typically, this entails converting the land into buildings for commercial or residential use, such as office buildings, restaurants, or retail establishments.
According to Sean Tarpenning Developers are in charge of a project from beginning to end; they plan, design, finance, and put together a team to carry it out. The developer typically sells the property to a real estate investor after the project is finished. A real estate developer could sell straight to the customer if the project is a collection of dwellings.
Although the real estate industry’s property development sector can be highly lucrative, projects and revenues are constantly at risk. Here are some of the main difficulties that real estate development faces.
Resident Opposition
It’s simple to underestimate the likelihood of local opposition. Even when the law is on the developer’s side, projects can be stopped if neighbors successfully convince political officials to halt them. The neighbors of a project may object for a variety of reasons, such as concerns over the project’s effects on traffic congestion, noise, the character of a community, conflicts of interest, and conflicts of values (e.g., ecological preservation vs. economic growth).
To reduce potential issues, project creators should first identify potential reasons for opposition to the project before developing an outreach plan that addresses the issues.
The Wrong Site was Selected
Location, location, location — you’ve heard it before. A great location that matches the developer’s target market and key demographics is the foundation of every successful real estate development project. Developers must seek out the best real estate options since making the right choice in real estate may make or break a project. When evaluating potential sites, developers take into account things like:
- Accessibility
- Competition
- Environmental risks
- Applicable fees
- Design requirements
- Planned improvements
The Real Estate Market:- Misreading
As per Sean Tarpenning Developers should pursue projects driven by present market needs — not by trying to create a need — as it can be a costly mistake to think “If I build it, they will come” in the field of real estate development. Developers assess the trade area and a wide range of elements, including economic, educational, employment, and environmental aspects, to get a good feel of the market.
Workplace Risks
Construction sites are inherently dangerous, and it’s important to identify and assess those risks. It is necessary to put in place appropriate safety strategies and procedures. The rate of fatal injuries in the construction sector is greater than the national average for all other industries, according to the Occupational Safety and Health Administration (OSHA). The most frequent wounds include:
- Falling
- Slipping and tripping
- Airborne and material exposure
- “Struck-by” accidents (when a worker is hit by a vehicle, falling object, or flying object)
- Excessive noise
- Vibration-related injuries
- Scaffold-related injuries
- Electrical incidents
- Burns
- Material Handling
Conditions on the job site might cause project delays and increased construction costs. Examples include unfavorable weather conditions, hidden debris, unforeseen utilities, unexpected rocks, higher-than-expected groundwater levels, and soil with insufficient bearing capacity. There is a possibility that these circumstances will set off contract provisions that transfer risk from the contractor to the developer.
Losses from Design Errors
Generally speaking, architects carry professional liability insurance to guard against errors like specifying the incorrect concrete type or calculating a structural load incorrectly. However, especially when substantial building projects (i.e., $50+ million) are involved, the damages resulting from design errors can greatly surpass policy restrictions. That implies that the developer could suffer a catastrophic loss.
Fortunately, the risk of design flaw losses can be reduced. For instance, the developer can purchase an Owner’s Protective Professional Indemnity (OPPI) policy and raise the project’s insurance coverage in conjunction with the architect and through a project policy. Of course, preventing design flaws in the first place is the greatest approach to lower risk, therefore look for highly qualified architectural companies with good ratings and low.
Permits and Project Approvals
Sean Tarpenning Said Getting the right municipal agency to approve the plan is one of the initial steps in development. Then there are the permits, which are necessary for any building removal or destruction as well as new construction, reconstruction, alteration, and repair. Electrical, mechanical, HVAC, and plumbing systems must be installed, extended, altered, or repaired according to separate permits.
The process of obtaining the necessary approvals and licenses can be simple, but there is always a chance that it will take much longer than anticipated or that the required approvals and permits won’t be given. Developers should begin the permission and approval process early and maintain efficient communication with the neighborhood municipality’s permit department to reduce potential difficulties.
