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Summary Real estate Intermediate test 1
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Real estate Intermediate test 1
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Week 1 – Lecture 1Types of real estate
1. Commercial real estate: Offices, retail, car parking
2. Social real estate: Schools, hospitals
3. Residential real estate: Housing
4. Industrial real estate: Factories, mines, farms
Characteristics of real estate
- Immovable (in Dutch ‘vastgoed’, it stays in almost all cases on the same place)
- Capital-intensive (large amounts of money are involved)
- Long period of development (takes on average 2-4 year to complete)
- Long lifespan (the lifespan of a building varies between 50 till 150 years)
- Stockpiling (think of neighborhoods with large stocks of the same building type)
The property development process
The years 2 till 10 are about realization:
1. Initiation
2. Design
3. Acquisition of site
4. Analysis of feasibility
5. Realization
6. Financing
The years 50 till 80 are about exploitation and transformation:
1. Lease/sale
2. Investment
3. Exploitation
4. Demolition
5. Replacement
6. Re-development
Since the property development process has a large timespan, as a consequence, assumptions at start of
development may have (dramatically) changed by completion.
What is building information modeling (BIM)?
1. A process for generating and leveraging information to design, construct and operate built assets.
2. A digital model representing the physical and functional characteristics of built assets.
3. A management of the process by utilizing the information in the digital models to aid collaboration
and information sharing.
,Week 1 – Lecture 2
The development process: can be likened to any other industrial production process that involves the
combination of various inputs in order to achieve an output or product.
In the case of property development, the product is a change of land use and/or a new or altered building in
a process that combines land, labor, materials, and finance.
The development process may be divided into the following main stages:
1. Initiation |
2. Evaluation |
3. Acquisition |
4. Design and costing Initiation and planning
5. Permissions |
6. Commitment _|
7. Implementation Construction of building starts here
8. Leasing/manage/dispose Exploitation
However, the property development is not an entirely sequential activity and the stages in the process often
overlap or repeat.
For example: if the development is pre-sold to an occupier, then stage 8 precedes stages 2-7.
It’s common for speculative development: develop for the market and sell it when it’s completed.
1. Initiation
Development is initiated when a parcel of land or site is considered suitable for a different use, or if demand
for a particular use leads to a search for a suitable site.
The initiative may come from any of the actors or stakeholders in the development process:
- Public parties: municipalities
- Private parties: project developer, land/property owner, investor
- In most instances, the developer is the initiator
- Government policy is leading
Happens when these stakeholders are seeking an appropriate site in anticipation of the demands or needs,
or when these stakeholders anticipate towards a potentially higher value use of an existing site due to
changing demographic, economic, social or physical circumstances.
2. Evaluation
One of the most important stages of the development process is evaluation as it influences the decision
making of the developer throughout. Evaluation includes market research and the financial appraisal of the
proposal.
The process of financial evaluation needs to ensure that the cost of the development is reasonable and
viable. For private sector developments, the evaluation establishes the potential for profit in relation to the
risks incurred. For the public sector and non-profit-making organizations, it will attempt to ensure that the
costs are recovered.
This stage of the process should be undertaken prior to any commitment and while the developer retains
flexibility.
, 3. Acquisition
Once the decision to proceed is taken, there are many other decisions to be made and steps to be taken
before the site can be acquired and the development started.
Legal investigation
Unless the developer is the existing site owner all legal issues concerning the site must be assessed: this
includes ownership, existing planning permissions, and any rights of way, light, or support. Careful
preparation is required to establish who the existing owners of all the rights to the site actually are and what
twill be necessary to acquire them.
Ground investigation
A thorough physical assessment of the capabilities of the site to accommodate the proposed use should be
undertaken. Ground investigations involve the assessment of the site’s load-bearing capacity, access, and
drainage.
All existing services (electricity, water, gas, and telephone) should be surveyed to ascertain their capacity to
serve the proposed development.
The investigation should highlight the existence of underground problems such as geological faults and
made-up ground, together with the presence of any archaeological remains, contamination, underground
services, and storage tanks.
Finance
The developer, unless using internal resources, must also obtain appropriate finance for the development
project on the most favorable terms over the entire length of the scheme, before committing to a scheme.
Two sorts of finance:
- Short-term finance: needed to cover costs during the development process
- Long-term finance (funding): to cover the cost of holding the completed development as an
investment or to secure a buyer for the completed scheme.
4. Design and costing
Design is an almost continuous process running in parallel with the various other stages, getting
progressively more detailed as the development proposal increases in certainty.
In case of a speculative scheme, the developer may need to work on a number of initial ideas with the agents
of the professional team before establishing a design brief for the project. The brief is particularly important
for complex schemes as it sets the design parameters for the architect.
In most cases, simple plans (sections, elevation drawings, floorplans, etc.) together with an outline
specification of the building materials and finishes, are often desirable. These plans along with the initial cost
estimate should enable the developer to prepare the initial evaluation.
By the time a decision has been made to submit a detailed planning application for the proposed scheme,
the initial plans will be in much greater detail.
The design and costing stages include all members of the professional team and continues throughout the
construction of the scheme. The developer has to ensure, where possible, significant, and potentially costly,
design changes are minimized when the commitment stage is reached.
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