Property development transforms ideas into reality by delivering new homes and communities. This complex process demands strategic vision aligned with meticulous execution across planning, design, financing, construction and sales to steer projects from concept to completion. By sharing industry insights around best practice, this guide aims to help investors and developers navigate the multifaceted journey to achieve sustainable outcomes fulfilling societal needs.
Property development follows a complex process from concept to completion requiring strategic vision and meticulous execution. It involves opportunity identification, feasibility analysis, financing, design, construction, marketing, sales and handover spanning several years. Careful management and governance align the efforts of specialised teams to profitably transform ideas into quality reality.
Essential Phases in Property Development:
Researching local real estate market trends, demands, and site availability. Utilising property portals and demographic statistics to pinpoint profitable areas.
Conducting Due Diligence
Assessing viability of sites through legal, physical, and environmental checks. Includes professional surveys and planning policy analysis.
Financial Feasibility Analysis
Using market research and due diligence data for financial modelling. Assessing costs, revenues, risks, and returns for viability.
Conceptualising the Project
Researching and identifying potential opportunities. Analysing housing needs, demand, costs, and revenues for initial feasibility.
Detailed financial viability analysis of selected sites. Includes construction costs, revenue projections, and risk analysis.
Obtaining loans, joint venture partnerships, and grants. Includes debt and equity financing considerations.
Securing Planning Permissions
Gaining necessary approvals from local authorities. Involves pre-application discussions and addressing concerns.
Appointing Consultants and Contractors
Tendering processes for architectural, surveying, and construction services. Ensuring quality and compliance with project requirements.
Creating Budget and Financing Plan
Detailed budgeting of all expenses and exploring funding options. Includes debt financing, equity partners, and grant funding.
Managing the Process
Securing all necessary consents and creating detailed project plans. Involves coordination of trades and progress monitoring.
Monitoring construction phase for compliance, quality, and addressing challenges. Includes quality assurance and sustainability considerations.
Marketing and Sales
Promoting homes through marketing suites, digital platforms, and phased sales strategies.
Transitioning to Management
Supporting new owners and tenants during the settling-in period. Involves handover demonstrations and customer service.
Reviewing project financials, calculating ROI, and identifying lessons learned for future improvements.
Starting the property development journey can be daunting to start with. Conducting thorough research into the local property market is a crucial first step when identifying potential development opportunities. This involves analysing trends in sales and rental prices, demand from buyers and tenants, and availability of sites over the past 5-10 years.
Monitoring property portals like Rightmove and Zoopla will give insight into asking prices and rents in the area, along with the volume of new listings coming onto the market. Sales records held by the Land Registry provide evidence of actual sold prices, which may differ from the initial asking price. Analysing this data can reveal growing or declining areas and types of property.
Population and demographic statistics can also indicate areas likely to see rising demand. For example, urban areas popular with young professionals may see more demand for city centre apartments. Whereas suburban or rural areas with good schools may suit growing families needing more bedrooms. Tracking planning applications also highlights developers trying to meet local housing needs.
By fully researching the intricacies of the local market, developers can zero in on areas and types of properties likely to provide profitable property development opportunities now and into the future.
Once promising development opportunities have been identified from market research, conducting due diligence allows developers to assess the true viability of potential sites.
This process scrutinises factors like ownership and legal status, physical condition, access rights and ground stability. It involves commissioning professional site surveys, environmental reports, flood risk assessments and geological investigations. These reveal potential issues and allow you to understand the risks in property development. This proactive approach enables the assessment of potential challenges and estimation of remediation costs upfront, rather than discovering problems part way through managing construction.
Due diligence also analyses planning policy for the site and surrounds. Checking policies, site allocations, development plan documents and existing planning permissions provides certainty around what can realistically be built. It may highlight planning risk, chance of objections or need for Section 106 contributions.
Evaluating all these factors provides developers the necessary insight into risks which will help with risk management, costs and ultimate viability before committing to acquire a site. It prevents wasting time and money on land that proves unsuitable once fully analysed. Detailed due diligence protects developers from unforeseen issues and guides decision making.
The information gathered during market research and due diligence feeds into formal financial modelling and feasibility analysis. This is where developers assess projected costs, revenues, risks and returns to determine if a potential development is financially viable.
Construction cost consultants produce comprehensive cost plans itemising every expense needed to take a project from land purchase through to completion. The Gross Development Value is calculated from the potential rental income or sales proceeds based on current market evidence.
Deducting the costs from the GDV provides the potential profit. Further deductions are then made to allow for site specific risks and unforeseen events - usually 20-30%. And financing costs are accounted for if funding is required.
The viability relies on the developer making an acceptable profit margin after these deductions. As a rule of thumb, most look for at least 20% profit on cost and 100% on GDV as a minimum benchmark.
If the projections meet viability criteria taking into account realistic sales prices, achievable rents, construction costs and measured risk allowances, then the site presents a path to profitable development opportunity worth pursuing. If not, then alternative proposals need evaluation or the site should be discarded in favour of better prospects.
The conceptualisation stage is when a property developer researches and identifies potential development opportunities to assess viability. This crucial first step examines factors like local housing needs, demand levels, land availability, costs, revenues and risks.
Thorough market analysis reveals where demand exceeds supply for certain types of residential or commercial property. Tracking asking sale prices and rents shows where values are rising rapidly. And monitoring planning applications highlights developers trying to capitalise on demand.
Land registry records and proprietary real estate databases help identify sites coming onto the market. Initial feasibility analysis calculates potential development costs and revenues for candidate sites to gauge approximate viability.
Opportunities are discarded if projected revenues don’t sufficiently exceed costs to leave an acceptable profit margin after financing expenses and risk factors. Priority ranking helps compare shortlisted opportunities against one another on financial viability.
The outcome is a clear picture of the best market segments and sites to target. For example, city centre locations near transport hubs may suit modern studio and one-bedroom flats for young professionals. While family houses with gardens could be most viable for suburban infill plots. So there are a few things to consider when choosing the right location for your property development project.
Once a site has been selected for development, comprehensive feasibility analysis evaluates its financial viability in detail prior to acquisition. All projected costs, revenues, risks and financing expenses are thoroughly modelled to ensure the concept stacks up.
Construction costs are obtained from quantity surveyors and technical consultants to accurately budget for materials, labour and every other project expense. Schedules detail costs for demolishing existing structures, remediating land, enabling works, substructures, core services, fit out and external works. A contingency allowance caters for unforeseen events.
The sales or rental value for each unit factors in local market evidence like achieved prices and rents for comparable stock. Acceptable benchmark figures for different unit types ensure overall revenues are realistic, not inflated wishful thinking.
Professional risk analysis quantifies allowances for issues like construction delays, planning refusals, funding problems, cladding safety and market fluctuations - usually 20-30% of costs.
The feasibility study amalgamates all this data to model overall viability. Developers expect 20%+ profit on costs and 100%+ on gross development value to consider projects worthwhile. If projections meet these key metrics, acquisition and planning applications proceed.
With a viable concept proven, financing and funding enables the project to proceed. Loans from banks or other lenders provide initial capital to purchase the site then cover construction costs until sale completes.
Debt financing expenses like arrangement fees, interest payments and exit charges are incorporated into the feasibility study. Funders undertake due diligence like valuations and credit checks before approving loans.
Joint venture partnerships with investors and funding platforms also finance developments in return for an equity share in profits. By aligning interests, all parties share risk and reward. Equity financing avoids accumulating interest debt that erodes margins but investors scrutinise projections before committing funds.
Grants from public bodies support residential schemes addressing local housing needs. These reduce viability pressure but strict eligibility criteria focuses support on affordable tenures. Securing funding requires detailed applications evidencing housing demand.
Securing finance completes the conceptualisation phase where a viable development opportunity researched in depth finally obtains backing to proceed towards planning submission and eventual construction. The comprehensive feasibility study instils confidence for developers to pursue the scheme and reassures lenders to release funds.
Best Practices for Successful Property Development:
Thorough analysis of local market trends, demands, and site availability. Utilise data from property portals and demographic statistics.
Conduct comprehensive due diligence including legal checks, site surveys, and planning policy analysis.
Perform detailed financial feasibility analysis considering all costs, revenues, risks, and returns.
Identify and research opportunities thoroughly, considering local housing needs and market demands.
Conduct in-depth financial analysis of selected sites, considering construction costs and revenue projections.
Explore various financing options including loans, joint ventures, and grants. Balance debt and equity financing.
Engage in proactive discussions with local authorities and address planning concerns effectively.
Choose experienced consultants and contractors through competitive tendering, focusing on quality and project alignment.
Create comprehensive budgets and funding plans, considering all project expenses and funding options.
Ensure meticulous planning and coordination of all development stages. Regularly monitor progress and manage challenges.
Maintain strict quality control and sustainability standards during construction. Address unforeseen challenges promptly.
Sales and Marketing
Implement strategic marketing and sales plans. Utilise digital tools and phased approaches to maximise sales.
Provide comprehensive support to new owners and tenants, focusing on customer service and aftercare.
Conduct thorough financial reviews post-completion, calculate ROI, and extract lessons for continuous improvement.
Before construction can commence, a residential developer must secure the necessary planning permissions and permits from local authorities. Pre-application discussions identify information required to submit a viable proposal complying with policies.
Applications evidence demand and document how schemes provide suitable housing for different groups - singles, couples, families, elderly etc. They demonstrate designs integrating sympathetically into surroundings through appropriate scale, height, massing and external materials.
Elevations, floorplans, landscaping and contextual models visualise proposals. Supporting statements cover areas like sustainability credentials, traffic impacts, flood risk mitigation and economic benefits - creating jobs, enabling housing growth and increasing council tax revenues.
Gaining permissions invariably involves addressing concerns then negotiating Section 106 agreements. These legal contracts commit developers to prescribed levels of affordable housing, local employment opportunities, infrastructure contributions etc to offset a scheme's impacts.
Once satisfactory resolutions allow projects to progress in principle, multiple detailed consents like demolition, drainage, highways and cladding sign off are still required before building work can proceed on site.
With heads of terms planning permission in place, competitive tendering processes appoint the necessary consultants and contractors to deliver schemes.
Architectural practices specialising in contextually sensitive residential design can create inspiring yet deliverable proposals balancing aesthetic, practical and commercial considerations.
Quantity surveyors accurately budget projects then obtain competitive market rates from potential building contractors through closed bid tender processes. They also later validate construction cost claims, providing oversight protecting client interests.
Multi-disciplinary consultancy firms often offer specialist services spanning architecture, planning, surveying, engineering, sustainability, acoustics and project management. Appointing these avoids engaging disparate parties, streamlining communication.
Main contractors able to demonstrate strong experience constructing similar developments in accordance with approved budgets and timescales should be prioritised. Those offering longest defect liability periods provide most protection if issues later arise.
Requiring professional indemnity insurance guarantees compensating financial recourse if consultants’ poor advice or negligent services increase costs down the line.
When it comes to financing your property development project, there are a few things to consider. With the project fully designed and costed, quantity surveyors produce comprehensive budgets itemising every project expense - land purchase, finance costs, professional fees, demolition, construction, cladding, fit out, contingency etc.
Multiple open market funding options are explored for the best rates, features and flexibility regarding drawdown timing, interest payments and repayment terms. Debt financing from banks and other lenders offers senior funding for 70%+ of costs secured against the site and development.
Junior funding from equity partners or property funding platforms covers the remaining 25-30% of costs, subordinate to senior lenders. Investors inject capital in return for a preferred return and share of project profits instead of charging interest. This avoids worsening finance costs and diminishing returns.
If available, grant funding also subsidises construction of prescribed levels of affordable housing. Modelling required tenure mixes into appraisals highlights where this improves viability.
The budget and funding plan provides developers a clear roadmap guiding how schemes are financially structured. This determines timing of expenditure vs forecast revenues from pre-sales and tenancy agreements vs drawdown of debt and equity finance.
Careful cashflow planning ensures developments have sufficient capital resources available to smoothly progress construction and completion.
Before breaking ground on site, developers must secure all necessary consents like asbestos removal, demolition, drainage, highways access and building control. Each requires formal applications evidencing compliance with relevant legislation to gain approval.
For example, an asbestos survey has to be carried out by a licensed specialist. If asbestos is discovered, its safe removal by a registered contractor needs approving prior to demolition. Likewise, building control signs off detailed construction plans, specifying materials and methods meeting stringent UK building regulations.
Highways departments must formally permit creating or upgrading any vehicular site access. And drainage authorities require proposals detailing separating rainwater from wastewater to avoid flooding issues, pollution and strain on infrastructure.
Gaining these essential approvals involves submitting meticulous particulars, liaising with multiple local government departments, then satisfactorily addressing any concerns raised by referrals to statutory consultees.
Careful project management ensures submitting detail-driven consent applications promptly once headline planning permission is granted. This prevents delays if queries arise needing information clarified, proposals altered and amended documentation resubmitted for reapproval.
With finances and permissions in place, comprehensive development plans drive successful, timely execution. Master schedules sequence activities from site preliminary works like demolition through to structural frames, building envelopes, internals, testing and commissioning.
Detailed programmes assign durations, resources and costs to thousands of interconnected tasks – erecting scaffolding, concreting foundations, installing plumbing, second fixing carpentry, snagging, landscaping etc. Task dependencies identify work requiring completion before subsequent activities can begin so any delays highlighted promptly keep programmes on track.
Sophisticated software models programmes, optimises sequences, tracks progress and predicts future outcomes. But human oversight checks projections tally with actual site conditions. Adequate project planning builds in contingencies so unforeseen events don’t necessarily impact completion dates.
Beyond building works, plans schedule pre-selling apartments to hit sales targets needed to satisfy investor return hurdles. Marketing suites, show units, brochures and online portals market schemes attracting buyer reservations before construction finishes.
Successfully orchestrating multifaceted programmes requires experienced project leadership with key team members. Developers like Beech Holdings employ development managers providing oversight across design procurement, planning, construction, sales and customer handover.
Architects, contractors and specialist consultants have responsibility for delivering prescribed work packages in line with approved quality, budget and timeline expectations. Developer reps embedded within contractor project teams provide close monitoring, highlighting any emerging issues needing resolution.
With numerous interdependent trades needing coordination, monthly progress meetings assess completed tasks against schedules. Here lead contractors report on upcoming activity sequences, resourcing needs, procuring materials and equipment plus highlight any program risks and their mitigation strategies.
Specialists provide updates on aspects like sustainability targets, sales progress and customer care preparations. Minutes document progress, actions and accountabilities providing transparency. Open collaboration ensures all parties own collective responsibility delivering projects on time and budget.
This integrated governance structure aligns commercial interests and channels expertise towards the shared goal of successful project completion and customer satisfaction throughout occupancy.
Throughout the construction phase, developers closely oversee progress to ensure seamless completion. Site manager reps attend regular progress meetings, monitoring programmes against key milestones while snagging finished areas.
Onsite quality assurance audits check compliance with specifications. Sustainability consultants track construction methods and materials that meet environmental standards like responsibly sourced timber or low carbon concrete.
With hundreds of interdependent trades cooperating, developers facilitate collaboration. They help overcome unforeseen challenges – materials supply delays, adverse weather, labour shortages or design coordination issues between services and structure.
Technical queries raised in monthly reports compile actions from all contractors and consultants into a single project register. These track accountable owners progressing solutions, providing governance until signed off preventing recurrence.
Approaching finishing works, managers begin planning customer care arrangements, pre-empting teething issues new occupiers often encounter becoming familiar with everything from parking to bin stores and bicycle storage. Concierges help answer initial questions during the settling in period.
Overseeing the successful timely delivery of complex residential schemes demands methodical attention to detail. But witnessing new communities flourish makes the intensive effort worthwhile.
While homes are under construction, marketing suites promote schemes to potential buyers through show units displaying indicative fully fitted interiors and a range of room layouts.
Digital brochures and websites detail specifications so customers visualise making properties their home before signing. Interactive floor plans allow buyers to browse available apartments, reserve favourites and customise options like finishes.
To hit investor targets, developers phase marketing and sales around project milestones. VIP pre-launch events create anticipation among priority prospects who sign up to early reservation waiting lists.
Drip fed releases to this engaged audience aims to achieve 20-30% pre-sales before wider launch announcements target hitting 60% sales by completion. This mitigates market risk and provides positive endorsement helping momentum build.
Removing barriers like complicated legalese or hard sales techniques makes purchasing straightforward. Conveyancers answer technical queries around leases, service charges and help complete sales as homes reach finished condition.
Once construction finishes, developers support new owners and tenants through the initial settling in period. Handover demonstrations explain appliance functionality or heating and ventilation controls unfamiliar to occupiers.
Concierges answer everyday questions around parking arrangements or waste disposal routines while residents orientate themselves. Management companies have contractors return to address any teething issues.
Ongoing communication provides updates around communal area enhancements, events programming and sustains positive relations making aftercare feel personal, not just contractual. Customer service teams proactively contact occupiers to check satisfaction levels, identifying where extra support helps owners fully enjoy new properties. This earns loyalty and recommendations helping future sales.
For rental blocks, specialist operators like Beech Holdings take over tenancy management. Centralised maintenance contracts keep homes well presented while dedicated staff look after tenant relations and lease renewals maximising occupancy and returns for investor owners.
After intense efforts delivering new communities, considerate handover and aftercare ensures customers left with positive lasting impressions.
Following completion, developers undertake financial reconciliation analysing actual costs against approved budgets. Final accounts compile invoices, contract values, variations and expenses into a master spreadsheet comparing payments made across all construction, consultant, statutory and marketing activities with original projections.
Sometimes fate deals unforeseen blows – pandemics, cladding safety crises, war in Europe or spiking inflation. While prudent contingency allowances help absorb some unpredictable impacts, reviews identify where extenuating circumstances caused significant overspends.
Construction delays owing to COVID lockdowns, enhanced fire safety regulations emerging post-Grenfell or surging material expenses from supply chain turmoil all wreaked havoc with budgets over recent years. Flexible project financing structures have proven essential adapting to uncharted waters.
Understanding root causes behind any major deviations allows lessons learned to strengthen future budgeting. Accurately projecting how external influences like evolving regulations, geopolitics of climate change might impact specific spending categories reduces repeat exposure.
With all costs and revenues reconciled in final accounts, developers calculate profit against the total capital invested providing the all-important return on investment metric.
Overall costs cover land purchase, construction, consultancy fees, finance charges, marketing plus indirect corporate overheads apportioned across projects. Revenues accumulate from sales or capitalised rental income valuations at completion.
The relationship between costs and revenues determines whether schemes met, exceeded or fell short of target profit expectations. Benchmarking against feasibility studies indicates which projections were realistic versus optimistic across the two or three year delivery timeframe.
An annualised ROI percentage provides a standardised performance measure accounting for varying development durations. Top performing projects will hopefully have achieved 20%+ returns for developers.
Evaluating ROI by scheme and location identifies optimal site characteristics and sector niches warranting focus for future investments. Manchester city centre apartments aimed at young professionals have delivered excellent returns for operators like Beech Holdings specialising in this domain.
To continually strengthen competencies, property developers document lessons learned examining what went well or poorly at each project stage - concept, planning, construction and completion.
Categorising insights by specialism reduces risk of repeat issues: Legal advisors reflect on lease complexities. Architects consider design challenges. Sales teams appraise customer feedback. Across disciplines, best practice gets codified into standards and checklists applied to subsequent developments.
Comparing notes across comparable projects highlights trends – certain contractor performance consistently impresses while particular sustainability targets remain elusive despite remedial actions. Objective data analysis removes subjectivity focusing efforts where they best enhance quality, efficiencies and returns.
Sharing discoveries across industry advances innovation. For example, cladding safety reforms implemented by conscientious developers like Beech Holdings following the Grenfell tragedy have raised quality benchmarks protecting society.
Continuous improvement comes from auditing successes and shortcomings. Dogged determination to incrementally edge closer towards the ultimate goal of perfectly orchestrated, profitable, sustainable development projects drives progress.