Common development risks are fairly universal. In the spirit of sharing information, we won’t brush over the essential ones, but there are a few risks specific to the North Gulf Coast that are important to research before planning your project.
In this article, we will cover an overview of both universal and site-specific qualities so that you can mitigate risks that you may have otherwise overlooked.
This is the fourth installment in our continuing blog series on risk mitigation. The following posts will cover many of the questions and concerns regarding development projects. If you’re just joining us now, you may find the rest of this series of use as well:
Follow the shortcuts:
Part 1 – Developing in the North Gulf Coast Region: Reaching Your Target Bottom Line
Part 2 – A Guide to a Realistic Commercial Development Budget
Part 3 – Ways to Keep a Development Schedule on Track
Part 4 – 4 Common Development Risks on the North Gulf Coast
Part 5 – Mitigating Commercial Development Risks on the North Gulf Coast
Part 6 – The 4 Critical Milestones for a Successful Development Project
Part 7 – How Design Impacts a Development Project’s ROI
Check your site before you buy
When buying eggs, it’s so simple to open the carton and check if they are broken or intact, and yet many of us don’t. Instead, we get home and find that one or two of them are broken. We aren’t here to talk about the integrity of eggs, but the point is exactly the same. If one-twelfth of your eggs are broken, that’s cost revenue. However, if one-twelfths of your site is undevelopable, you’ve just lost much more.
Common pitfalls as far as land goes along the North Gulf Coast are soil deficiencies due to wetlands, foundational issues due to flooding, and building restrictions due to endangered species or protected land. Make sure that the land you’re buying is as good as it looks on the surface, because in many cases it is not. Buffers also provide an unexpected and unwelcome surprise to many, so be sure to research this thoroughly or partner with an expert who already has this base of knowledge.
The solution to this is shared between matching the right site to your project, and having the soft costs set aside to tailor the site to your vision. If you can match a project to a site with very few repercussions to the bottom line, then that is a success.
Understand the local market
The success of any business-person worth their weight in salt is based on the ability to understand what it is that their target market really wants. Study the demographics of the area, find out who’s buying, and make them what they want. Depending on the area, suiting your vision to its environment could prove beneficial, in other cases adding specific amenities to attract a separate segment of the market will work in your favor. The bottom line is that without understanding the local market, matching your project to your site becomes tricky, and you will miss out on opportunities.
Get a realistic budget
We’ve been told that optimism is good for you, but when it comes to budgeting, preparing for the worst is the only way to go. Without a clear and concise budget that has contingencies planned out and strategies to overcome pitfalls, you risk slashing your bottom line. Include as much as you can in your budget; it’s always better to come under-budget on a sum that is a little under what you hoped than to be shocked by falling severely over-budget.
Develop a realistic timeline
Timeline and budget are connected at the hip. Where one goes, the other will follow. It is crucial to any development project to create a realistic timeline. This point is doubled in importance if investors are on the line. Understanding how long permit acquisition and construction will realistically take is the difference between a success and a waste of time.