When applied to real property, the term ‘development’ means project promotion. In Ukraine, property development is a multistage, capital-intensive process often exposed to obstruction by a heavy bureaucratic system and hampered by legislative loopholes. It requires a strong professional team, regional and national market research, planning and design, construction, financing, and so on. As a rule, property development requires large investment with a long cycle of use. At the same time, the finished product (immovable property) generates substantial steady cash flow for the property owner for a long time to come.
Property development is a business that instantly reacts to political decisions, economic forecasts, legislative innovations, social changes, architectural trends and the use of the most advanced technologies. The goal of a professional developer is to emerge as the winner in a struggle against the unpredictable market environment.
In Ukraine, the notion of ‘property development’ has appeared relatively recently. What do several decades mean in comparison with, say, centuries-old experience of American or British property developers? American specialists characterize this sphere as follows.
Property development is a diverse business encompassing various areas of activity: from reconstruction and lease of existing buildings to the purchase of uncultivated land and sale of improved land plots. Developers coordinate these activities, transforming the ideas laid out on paper into real property. Developers initiate, create, finance, control and organize development process from the beginning to the end.
Developers assume the greatest risks related to the construction or reconstruction of real property and reap the greatest benefits. As a rule, developers buy a parcel of land, determine the target market, develop a construction program and project, procure required approval and authorization documentation and financing, build a property, lease it out, manage it and, finally, sell it.
Property development is a deeply-specialized business, and successful developers know that every detail must be checked and double checked. An unchecked article in a title deed or an unverified soil survey may become a source of constant problems. Developers understand that they bear responsibility for any mistakes and overlooks.
Even if a mistake was made through somebody else’s negligence, a developer must promptly react to it. A good developer always expects the unexpected, easily adapts to circumstances and is capable of quickly changing the strategy. For example, at the project approval stage a developer is often has to negotiate with local stakeholders who, as a rule, want to make significant changes in the proposed project. If a developer is not ready to find a compromise, these stakeholders may put the brakes on the whole project.
A developer must be able to accommodate requirements of the local community without jeopardizing the project’s economic viability. To achieve a compromise, a developer may reformulate or even completely change his objective, both in his personal interests and in interests of others.
To control the property development process, a developer has to possess certain personal qualities, not least the common sense. A developer must have a clear idea of what he wants to do; in addition, he must become a leader. A developer must have strong personality and authoritative opinion, but at the same time, must be able to listen to the opinion of others. Developers cannot be experts in all fields required for the project’s implementation, and therefore, they depend on many other specialists.
Developers work with various people: construction specialists including architects, designers, contractors, consultants, builders of various specialization, tenants and buyers, lawyers, bankers and investors, public officials, representatives of city administration, inspectors, citizen groups, house owner associations, leaders of civic organizations. They must be knowledgeable in many fields: from personnel management to building management.
No developer can be an expert in all fields at the same time. Success comes to those who know what questions to ask and whom, what the generally-accepted practice and rules of the game are, how to distinguish a worthy advice and important information.
The immovable property sphere is divided into five main areas according to the property type: residential property, office property, commercial property, industrial property, and land. The market for every property depends on the property’s location. The amount of rent which in the past was reaching the peak in a business center is often much higher today in suburban areas.
What distinguishes successful developers from their competitors is, as a rule, the spark of creative potential: in the project conception, financing and marketing. As in any other creative activity, property development and personnel management may become an extremely difficult task. Too rigid management may choke up creative potential, while excessive freedom can make the process uncontrollable. One of the main goals of property development management is to achieve creative teamwork without exceeding the budget and meet the required deadlines.
Property development is a harmonious, evolving process. No two projects can be alike, and circumstances in property development business are constantly changing. Newcomers often see property development an easier thing to do than it actually is. To succeed in this business, the beginners must work twice as hard as experienced professionals do. In the course of implementation of almost every project a developer may both regret that he ever undertook it, and experience an inspiration from successfully completing it.
Solving the problems as they come by is the meaning of developer’s everyday work. If one is constantly ready to deal with surprises and never leaves anything to chance, one can reduce the number of problems, lower the stress and achieve greater satisfaction from his career.
Developers often say: ‘Better to be lucky than good’. But Phil Hughes once observed: ‘In this business, it’s better to be both lucky and good. Luck comes where favorable opportunities confluence with preparation, and in our business, developer does the entire preparation himself and creates all opportunities himself. He has the power to combine one with the other’.
(Professional Real Estate Development: The ULI Guide to the Business by David Hamilton and Richard Peiser (2012, Hardcover)