want to take a quick profit and move on to the next development. If a particular project is likely to have an extended pre-development stage owing to complicated zoning, environmental or community issues, it is best to recognise that money will be tied up in legal and consultants' services. If a lending institution does not finance speculative projects, then other ventures should be considered. When an objective has been selected, the developer should review their position once more and consider alternative options before making financial commitments.
Social goals
Social goals relate to the local area and the surrounding community in general. Before starting the development, the unique challenges associated with a particular location should be considered carefully. If the developer is selfish and believes only in taking from, but not contributing to, the community, the environment and community will suffer. In the long term, this may contribute to the destruction of what was a strong market, which in turn will affect the developer's objectives and reputation negatively. Developers should always consider contributing to the community and environment. These social objectives mean designing a project that blends into the social and historical setting of the community. They include being sensitive to surrounding neighbourhoods, well-planned traffic flows, and retaining or replacing any trees or vegetation destroyed during construction. They also involve using building materials and designs that are sympathetic to the surrounding area and local customs and are environmentally friendly.
Understanding the market
For a property developer, understanding the market is vital for good decision making. With the significant capital involved in a project and the long development process any error of judgement could lead to financial ruin. From the inception of the project through the site selection, planning, building design, financing and construction, the developer should be considering every aspect of the market requirements. By understanding the following points, a developer will be better placed for the market being targeted.
History has shown that property markets are cyclical in nature. When compared with the erratic performance of the stock market, property trends are more predictable, which makes the forecasting of property supply and demand conditions a lot easier. However, property cycles differ between property types and locations. For example, housing markets tend to relate more closely to the overall growth of the economy and of the local population, while the office market relates more closely to business activity.
Property markets are often considered in terms of the balance between supply and demand, also known as a state of equilibrium, in which the volume of buildings under construction should equal the volume of buildings in demand. Unfortunately, markets cannot maintain stability for any period of time owing to their cyclical nature. It is therefore important to understand where a market stands in relation to its equilibrium state in order to assess future demand. An awareness of these variations in property cycles can be a valuable guide for developers. Reading business articles and talking to people in the real estate industry are ways of maintaining awareness of where the market is sitting.
As mentioned, demand factors can vary from one property type to another. For example, the level of employment in the area is of primary importance for office and industrial properties, whereas residential demand relies on population growth. An analysis of the office space vacancy rate, employment distribution (as derived from government forecasts and data collected by the Australian Bureau of Statistics), building approvals, buildings under construction and the quantity of similar types of projects in the planning stages can all assist in determining demand.
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