Property Development Metrics – Finding The Right Site
Property development can only be successful if you get your metrics right!
What does this mean? If you intend to become a property developer or you are looking for a site to develop, before you need to know what you are looking for, you need to know why you are looking for it.
What this means is that you must establish if there is demand for a certain property product; once you know that there is demand you can then start looking for the appropriate site to develop to satisfy that demand. This is called research.
There is no use developing a property that nobody wants; whether that is because it is in the wrong location or if it is the wrong product for that area.
The majority of people understand residential property so I will use that as the example. If you want to develop apartments you must establish where there is a demand for that product. Don’t simply say “I want to develop apartments in my suburb” as this may get you into real trouble.
If your market research shows you that there is a demand for apartments in your suburb then proceed to the next step in the development process, but not without establishing the market demand first. By the way, you haven’t started looking for a development site yet!
Assuming you have found an area that has demand you now need to consider whether there is any supply coming into the market to satisfy the demand you have identified. Drive around the area and see how many apartment blocks are being constructed.
Talk to local real estate agents about what is on the market and what new property developments are coming up; agents know a lot about their area. The agents will also inform you of locations to avoid or areas that you should focus upon.
Most Local Council’s publish records about what planning/development applications have been lodged or are approved. You may wish to visit the Local Council and ask a town planner about the amount of apartment applications they have determined or have in the system at that time.
And don’t forget about the internet; there is so much information available on the web that you just can’t afford to ignore it.
What you ‘re trying to establish is whether there is an oversupply of apartments coming into the market to satisfy the demand that you have identified. If there are too many apartments coming into the market then why would you want to develop more and create an oversupply and risk your money?
But if there’s not enough supply coming into the market to meet the demand, you know it’s time to find that site to develop. Research can be rewarding.