How to Successfully Develop Commercial Real Estate – Part 4

In Parts 1, 2 and 3 of this article, we discussed the three fundamental components underlying each of the major areas of the development process; money or financing, tenants and the lease agreement and finally the golden rule of real estate, location, location, location. Location is probably the single most important factor for attracting and…

In Parts 1, 2 and 3 of this article, we discussed the three fundamental components underlying each of the major areas of the development process; money or financing, tenants and the lease agreement and finally the golden rule of real estate, location, location, location. Location is probably the single most important factor for attracting and retaining quality tenants.

However, there are typically many desirable locations for the coveted tenant and the developers and land owners who control these locations are busy marketing and appealing the same tenants to their sites. It is important, therefore, that the successful developer distinguishing themselves in more ways than project site location. It is incumbent on the developer to demonstrate to the prospective tenants, financing and others that they have the leadership, experience and ability to bring the proposed development project to a successful conclusion. This dividing line will often come down to a clear and concise vision for the development effort-the project plan. This author believes there are five basic principles that must be addressed to adequately define and achieve a successful new development project. These five basic principles are who, what, where, why and how. The principles guide the developer through a simple, step by step process to developing a new project including the vision and project plan. Understanding the process is a fundamental concept in relation to buying the land, building the building, attracting contracts, securing financing and functioning as landlord.

We addressed the importance of the tenant in Part 3 of this article but what about the developer and the development team? The who president addresses this issue. The who principle breaks down into three basic components; who is the developer, who is the development team and who are the actual and proposed tenants and users? As the developer, you are the main force behind the promotion of the project and responsible for leading each and every aspect of the development effort. Do not underestimate the power of the personality and confidence of the developer in obtaining a lender to lend, equity investor to invest, tenants to commit and team members to join the development team. An experienced or novice developer can and will leverage the experience of the team to demonstrate the probable success of a proposed development project. The team typically consist of an experienced architect, general contractor, pool of engineers, real estate professionals-broker, lawyer and others. However, not every architect, engineer or GC will be acceptable. You must find those with experience in the location, product type and tenant user that you are trying to attract. Assembling the key players necessary is a fundamental element of creating a successful development project.

We will address the fundamental aspects of the what principle: what are you going to develop and build, in Part 5 of this article.