Building any potential commercial real estate project will inevitably require large sources of financing and investment. While every company’s needs will vary greatly, any company attempting to secure the required funding for a commercial building project should first outline some universal concerns. Figuring the cost and investment needs for constructing a large scale real estate project begins with defining market demands or perceived needs.
Defining the potential market demands will help the project define and narrow the objective and scope of the proposed construction. It’s imperative to know the scale of your project to ensure your company meets its mission statement. Considering this base principle will help decide factors like flex space needs, parking requirements, maintenance facilities and other determining requirements. Knowing the project’s objectives can help calculate potential cost factors for which you will require funding.
After defining the project’s objectives, a conceptual planning and feasibility study must be fulfilled. Determining the feasibility of a project will enable project management to begin assessing the preliminary design requirements. Better understanding of the initial design requirements can help quantify potential costs related to material and work force demands in addition to helping define the potential project life cycle. Any potential construction project needs to identify the project life cycle to help understand the project time of completion and rate of return of any possible investment. A strong feasibility study will help make some of these determinations before a comprehensive financial needs assessment can be asserted.
As the preliminary design and engineering plans are solidified, a potential commercial real estate project can begin developing the final construction plans and specifications. Finalizing the construction plans will allow project management to draw up a more complete understanding of the potential cost of construction. These costs can then be finalized and presented for future investment needs.
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Determining the cost of procurement will need to be factored. Prices of land and title are a major factor and the associated cost of procurement must be determined before financing can be secured. Title of ownership must also be determined to ensure the proper entities are requesting investment and potential financing. This step must be done before factoring in the final cost of construction.
The potential commercial development project must then determine any associated costs which must be meet to ensure initial occupancy. If the project were to move forward it is important to quantify the start-up costs needed to gain a viable initial occupancy. These costs will vary greatly on the scope of the project but any commercial project aimed at building real estate must assess the upfront costs associated with advertising or other needs, needed to ensure a profitable initial occupancy.
Lastly any potential project needs to assess the cost of facility disposal. It seems unnatural to consider the cost of a project’s termination and disposal before the project has even secured financing for its creation, but it is imperative that these costs be considered. Many commercial projects may have significant environmental impact concerns upon disposal. These costs can be levied against the initial project developers and the cost can be great. It is important to understand these risks so that the project can calculate the cost of insurance or end of life cycle cost before applying for financial or investment assistance.
These are important considerations before applying for finance investment for any commercial real estate project. By addressing these concerns early and formulating strong quantifiable projections, any potential developer can better understand the fiscal needs of the proposed project.
The initial cost associated with project development can be very large. These costs may prohibit many potential developers from even getting started even before financing concerns can be assessed. There are many entities that specialize in helping to determine a potential developer’s project costs but these entities can be costly. Many developers are relying on construction software pricing to save large amounts of initial capital. These software pricing systems can be instrumental for a potential developer to help ensure the project isn’t stopped before it even gets started.
