A seasoned developer looks back over forty years of experience. Although demographic fundamentals favor development, a developer must choose either to pre-lease or pre-sell his product (contracted development), or to build speculatively. Speculative development is riskier but results in higher profitability, assuming the new development is carried out on a risk-adjusted basis. Many private developers in residential housing are merchant builders who sell the product at completion. While merchant builders are likely to sell as soon as they feel they are getting a fair price, investment builders will hold the asset as a portfolio investment. REITs that engage in development are best thought of as investment builders. The author sees surviving economic cycles as a major challenge facing developers, and discusses several strategies.
Affordable Housing Architecture Asia Borrowing Constraints Canada China Colombia Commercial Brokerage covid-19 CRE Credit Risk Transfers Debt Market Demographics Development e-Commerce Equity Market Ethnic Factors Europe Foreclosures Global Global Financial Crisis hospitality Housing & Residential Housing Supply India inflation Investing land use regulation Macroeconomics Microeconomics Mixed-Use Mobility Mortgage Rates Mortgages Multi-family Non-Traditional Mortgages office sector Political Risk Real Estate Investment Trusts Recession Rental Retail South America Sub-Prime Mortgages Sustainability United States Urban Urbanization work from home