Development sites are scarcer and the risks are getting
Today I'll make some observations on the current state of
the commercial development property market. Half-jokingly, it's
often said within the industry that it's relatively easy easier
to assemble capital than it is to deploy capital. There is a
scarcity of development sites currently available in the
marketplace. Those development sites – particularly in the
residential space – which become available, are obviously
much sought after and you need to move very quickly indeed to get
control of those sites.
I suppose you could put the participants in the development
industry into three buckets, certainly in relation to those who are
interested in development sites.
There are those who are relatively small - usually privately
owned – who have the ability to move very quickly deploying
expertise in a relatively informal manner. Certainly their hallmark
is they're able to move very quickly.
The second bucket would be those who have significant balance
sheets, but who have more formal due diligence and corporate
processes. Their nirvana is to acquire the very large sites but
there are even less of those than there are generally speaking of
The third bucket relates to those who are not really originators
of sites or originators of development projects, but are those
entities which wish to participate by joint venture in development
The scarcity of development sites arises and partly because
vendors are still holding out for higher prices, but it is more
accentuated by the fact that given the range of development
constraints that now apply in the modern marketplace it's very
difficult indeed to move quickly and to assess the appropriate
There are issues of contamination, planning, the mere risk
assessment or risk allocation in the acquisition contract itself,
joint venture and project finance. All these matters need to be
assessed and then brought together to enable the acquisition to
take place. Now more than ever development executives with
experience are required in these development entities to move
nimbly to acquire or achieve acquisition of sites.
It is in this context that the pressures on development
executives are heightened. Their need to move quickly to acquire
sites, to structure sites, to assess the suitability of sites is
constantly being raised again and again. The need for experienced
development executives and experienced industry generally to deal
with this context is again and again being emphasised.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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