The Ultimate Guide to Real Estate Development: From Concept to Completion

Planning and developing a real estate project, also known as a business case, involves a meticulous evaluation process comprising several stages of analysis and study. The life cycle of an office project can last from 20 to 30 months, depending on its scale. According to Osvaldo Silva, a civil engineer and Portfolio Manager at the real estate developer U-Calli, initiating an office project includes determining a location, analyzing it, conducting a market study, and defining the regulations for its construction. In the following sections, we will explain the process of creating a business case based on the information provided by this esteemed guest lecturer during the SiiLA ACADEMY 2023 office course.

Step 1: Location Analysis.

Once a specific location has been identified, the first step is to analyze the property's characteristics to determine if it is optimal and meets the requirements for office development. Factors such as lot size, frontage and depth, access roads, land use, and adjacent properties are considered. Additionally, conducting an urban, traffic, and prospective analysis is crucial during this project stage. This involves assessing the area's expansion and verticalization, the residential and working population, and the region's available businesses and services. With this information, one can determine which complementary services should or should not be included in the development and assess the viability of constructing in that location. Location analysis provides information on demographic conditions, population needs in the area, and regional access and mobility.

Step 2: Regulatory Framework Definition.

The second step in creating a business case involves determining the project's potential. To achieve this, it is necessary to develop an urban development plan that evaluates the compatibility of land use and the property's physical characteristics based on applicable regulations. During this stage, utilizing various coefficients to define the development's dimensions is essential. These coefficients include land occupancy and utilization, absorption area, green spaces, and height or the number of levels. These indicators enable appropriate sizing and segmentation of the property based on its purpose and operational efficiency requirements.

Step 3: Market Study.

Steps 1 and 2 enable the determination of land use and construction guidelines for the project. In contrast, Step 3 lets us ascertain how much and what to develop. During this stage, it is necessary to gather sufficient information "to sensitize decision-makers and understand the extent of the product that can be developed," as Osvaldo Silva from U-Calli stated. To achieve this, it is crucial to perform adequate segmentation and categorization of the supply and demand. This includes determining the type of offices to construct based on potential clients and the needs of the area.

Additionally, applying indicators to comprehend the market, such as existing and available inventory in the area, occupancy rates, request prices, absorption levels, and tenant types or industries, is fundamental. According to Silva, economic indicators should also be considered since "office development has a strong correlation with the growth of economic units in the 'Corporate and Services' sector." Therefore, it is crucial to determine the economic sectors' segmentation and the region's income or purchasing power levels. Overall, a market study involves analyzing historical data and the evolution of an area and comparing it with similar or adjacent regions to understand market needs and the business model.

Creating a business case is the starting point for real estate development, followed by other stages such as pre-development, construction, closure, and property management. To learn more about this process or explore our solutions for owners, operators and developers, visit SiiLA or contact us at contacto@siila.com.mx.