Land development refers to altering the landscape in any number of ways such as: Changing landforms from a natural or semi-natural state for a purpose such as agriculture or housing Subdividing real estate into lots, typically for the purpose of building homes Developing property or changing its purpose, for example by converting an unused factory complex into condominia.
The prudent landowner or developer on any size of project will inevitably want to maximise profits, minimise risk and control cash flow.
This is a process called “profit enhancement”, which means identifying and developing the best scheme for the local marketplace, whilst satisfying the local planning process.
Essentially, Development Analysis puts development prospects, and the development process itself, under the microscope, identifying exactly where enhancements and improvements can be introduced.
These improvements aim to align with best design practice, political sensitivities, and the inevitable social requirements of a project, with the overarching objective of increasing land values and profit margins on behalf of the landowner or developer.
Development analysis can add significantly to the value of land and development, and as such is becoming a crucial tool for landowners and developers.
It is an essential step in Kevin A. Lynch’s 1960 book ”The Image of the City”, and is considered nowadays to be an essential step to realising the value potential of land.
The landowner can share in additional planning gain (significant value uplift) via an awareness of the land’s development potential. This is done via a residual development appraisal or residual valuation.
The residual appraisal calculates the sale value of the end product (the gross development value, or GDV), and hypothetically deducts costs, including planning and construction costs, finance costs and developer’s profit.
The “residue”, or leftover proportion, represents the land value. Therefore, in maximising the GDV (that which one could build on the land), you concurrently enhance the land value.
Furthermore the land value is highly sensitive to supply and demand (for the end product), build costs, planning and contributions, and so on.
Conversely, understanding and enhancing the effect of “value drivers” will have an equally positive effect.
On the other hand, understanding the intricacies of the development system, can equate to massive differences in the landowner’s sale value.
If development analysis is left to the developer, however, then it will be he, and not the landowner, who will receive all of the betterment.
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Bob and Diana
Robert Ratliff RE/MAX Reliance