Developers 101, an Introduction

When Clients approach a realtor with a property that they wish to sell, they are often looking for a developer to take it off their hands. Who are developers? Developers embrace a wide range of agencies from large volume homebuilders to small local house builders. There profit motivations range from the most profit driven private sector entrepreneurs to non profit-organizations, such as co-housing associations. Some developers specialize in specific markets like retail, office, industrial or residential while other developers will take on any project. Some developers specialize in niche markets like the conversion and conservation of historic buildings, while others specialize in specific locations like waterfronts or specific cities.

There are three basic types of developers: serendipitous entrepreneurs, active entrepreneurs and structured speculators. Serendipitous entrepreneurs usually acquire land and property through inheritance or as a sideline to their main business and find that it can generate rental income or capital gain if sold. Active entrepreneurs anticipate the changing patterns of land use and value, buying and selling land accordingly. Structural speculators operate strategically, lobbying for public expenditures in certain areas, changing zoning or land use or influencing the route of roads for their own benefit.

Developers are motivated to take advantage of the development value of real estate, that is the difference between the current value of the property and the value derived form the properties highest and best use, less the cost of the land and producing the higher value use. Developers often use urban planners and designers to help determine this development value.

If a steadily growing city is surrounded by agricultural land (Ag), all Ag landowners may hope to sell their land at a price higher than its value in agriculture as their retirement plan. Practically, only a few owners can (at that point in time) sell their land for development. Development value, therefore, “floats” over an extensive area, but settles on only a small part of it. Provision of new infrastructure or development will also “shift” the development value from one site to another. And of course planning controls shift value by giving land a particular designation (i.e. a change from Ag to residential).

When marketing Real Estate to developers keep in mind their general design considerations.

• Investor and occupier requirements, preferences and tastes, and the price point to be achieved for a product responding to these
• Flexibility of building and site layout to meet changing circumstances
• Build ability, cost efficiency and value for money
• Visual impact and “branding opportunities” for the developers
• And management/running costs of the development

MJA Consulting not only provides aid to developers by using Geographic Information Services to determine the development value of a property, but also helps Realtors to determine highest and best use for property and find the right Developer to develop that profit potential.