If you own a property you’d like to develop, the right design and high-quality construction can transform it into valuable commercial real estate. However, real estate development projects can easily get derailed by obstacles such as permit issues, opposition from the area’s residents, and overly optimistic budgeting, among many other potential problems, according to the Investopedia article “Challenges in Real Estate Development.”
Before you move forward with the real estate development process, you should know to watch out for these common missteps that could stop you from successfully constructing a profitable commercial property. Note: This isn’t an exhaustive list.
1. Not considering the local real estate market.
Before you decide on the type of real estate you’d like on your property, consider the state of the local market and whether there’s enough demand in the area for an office building, shopping center or whichever kind of commercial development you have in mind. It’s standard for property developers to assess the local real estate market first with economic, education, environmental and employment factors in mind, according to Investopedia.
2. Failing to account for environmental regulations.
Depending on the state you’re in and the size of your project, local regulations might require an environmental assessment or report, according to the AllBusiness article “Big Mistakes to Avoid in Your First Real Estate Development Project.” As the owner of the property, you’ll be responsible for any negative environmental effects, so a thorough evaluation of potential impact is an absolute must before you move forward with development.
3. Not anticipating neighborhood opposition.
Even if you’ve squared everything away legally, residents of the area surrounding your property could convince local officials to put a stop to your project if they object to the construction, according to Investopedia. Consider reasons why people in the neighborhood might push back against your project (e.g., increased traffic and noise) and come up with strategies for communicating with them and addressing their worries.
4. Not allowing enough time to obtain the proper permits.
You’ll need the correct building permits from your local municipal office to move forward with your real estate development project. Submitting the paperwork and getting approval can end up taking a considerable amount of time, so you should start the process early to avoid falling behind schedule, according to the Realty Biz News article “5 Challenges You May Face in the Real Estate Development Industry.”
5. Underestimating costs.
When determining the budget for your commercial development project, it’s best to expect the unexpected. Materials, labor and other aspects of the undertaking could change in price and end up costing more than you anticipated. Investopedia advises taking what you expect to spend and increasing it by 10 to 20 percent to account for the unknown.
6. Forgetting to account for upkeep.
Once the project is complete, remember to budget for property management services to ensure your building attracts and retains tenants. For instance, parking lot maintenance and landscaping can go a long way in making commercial real estate as appealing as possible.
Ultimately, if you want to avoid these common pitfalls, you should partner with a commercial real estate developer with the experience and knowledge needed to minimize risks and ensure the process goes as smoothly as possible.
If you’re looking to develop a commercial property, the Avalon Realty Associates team would be happy to assist you. We offer various property development services, including feasibility studies, site selection, architectural design, and on-site construction planning and management. We can help every step of the way through project completion and will develop your property like we own it.
To learn more about our commercial development services, connect with the Avalon team today by calling 847-506-1000 or emailing info@avalonreal.com.