Property development is exactly what it sounds like. It doesn’t matter if you’re constructing a commercial facility to boost your business or revitalizing an older area for a mixed-use space, the fundamental process remains quite similar.
However, when you run a business and also own the property, your approach to real estate development might be different from that of regular investors. This isn’t just because you need the project to be financially viable or because you’re concerned about the practicality and potential resale value of the space.
It’s because, as a small business owner, you’re faced with a layered decision-making process. It involves considering real estate as both an investment in your business’s infrastructure and a potential source of personal wealth and income.
Moreover, deciding to build a property from the ground up, as opposed to buying an existing one, brings its own set of challenges to think about. Factors like the cost of replacement, site flexibility, scheduling, and optimizing the facility play crucial roles. Furthermore, many business owners who try to oversee their property developments themselves encounter major roadblocks. These can range from overspending on consultancy fees to timing conflicts, or even experiencing a decrease in their primary business revenue due to the divided focus.
Today, we’re exploring a few strategies small business owners can use to develop a property for their business needs. Our goal is to help you navigate the challenges of property development successfully, so read on for more insights!
Collaborating with civil engineers
A well-crafted site plan is crucial for the success of owner-occupied projects. However, a common issue arises when businesses managing their own developments, or even experienced developers, grant excessive freedom to their civil engineers.
Civil engineers tend to focus on the limitations set by the land and local regulations. This approach, while practical, might lead to a site plan that falls short of your business needs. To guide your civil engineer effectively during the creation of site plans and construction drawings, consider the following aspects:
- Parking Requirements: Many local authorities set minimum parking requirements, some of which are changing to promote affordable housing. Often, these minimum standards don’t fully support a business’s needs. Without specific instructions, engineers may default to these basic municipal standards for parking layout, which might not be ideal for your project.
- Site Flow and Circulation: An often overlooked but vital aspect of land planning is how movement is managed on the site. Consider how parking relates to building entrances, tenant areas, and internal operations. If your business uses loading docks, ensure there’s enough space for large vehicles to maneuver without disrupting other site traffic. Each business operation type, whether customer-facing or not, demands careful planning of site circulation.
- Value Engineering: The straightforward solutions made by civil engineers aren’t always the most cost-effective. While they excel technically in site planning, they may not be the best at budgeting or cost estimation. Business owners might lack the experience to optimize site design for cost efficiency. Therefore, bringing in a construction management team early on in the design process for real-time pricing feedback can be beneficial. Project managers can provide innovative solutions to make site designs more efficient without compromising functionality.
Managing construction costs
As a business owner, you’re likely familiar with managing your business’s finances. However, keeping a handle on construction and property development costs is a whole different ballpark.
One tip for effective cost management is to actively manage the project’s design from the get-go. As you refine your plans, your development budget will evolve, but it’s important to assess the costs of key design decisions in real time. Every choice, from light fixtures to electrical setups, has a cost impact. Therefore, start planning your budget during the design phase, not after construction starts. This prevents the risk of overdesigning and facing unexpected costs later on.
Managing risks
Successful property development requires a keen eye on risk management. A thorough, process-oriented approach to the initial stages of property evaluation is essential. Dissect every detail of the property – from utilities and soil conditions to zoning regulations and environmental factors
To handle the risks associated with land entitlements, consider hiring a real estate development consultant. Their expertise can be valuable during interactions with municipal departments and government bodies.
From an operational standpoint, it’s also important to think about future needs. Planning for potential expansion, appropriate sizing of utilities for future growth, and even building extra space for leasing are strategic moves.
Final thoughts for small business owners
Jumping into property development shouldn’t be an impulsive decision for business owners. Oftentimes, we see owners take on more than they can manage, exposing their businesses to risks. Therefore, if you’re already involved in a development project, considering one, or unsure where to begin, SCGWest is here to help you reduce risks and guide you towards a successful development. Contact us today to get started!
