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ABSTRACT: Here is presented an overview of the Construction and Real Estate Development Management
process. It should be of use to Owners looking to expand their real estate or to Engineering managers who want
to expand into this field
Keywords: Construction, Real Estate, Development, Engineering, Management
.
I. INTRODUCTION
Real Estate comprises 40% of the worlds assets. Construction of facilities is the largest single industry
in the developed world. Projects developers deal with are mainly in the building construction industry, ICI
Industrial, Commercial & Institutional and Residential. There are various ownership structures such as fee hold
property and improvements, leasing, 3P (Private Public Partnership, and condominiums for example. There is
new, renovation, retrofitting, and heritage construction.
II. CONCEPTUAL STUDIES & ECONOMIC FEASIBILITY INCEPTION / CONCEPT /NEED /
MARKET
Business Rule #1: Every product MUST have a market. In order for a project to succeed, there must be
competitive advantage for the product. There must be a gap between what is available at a market driven price,
and what is needed or demanded. The supply and demand will come into balance eventually. It is the role for
the Developer/ Entrepreneur to sense this gap and be there to fill it before it is filled by somebody else sooner.
The product of Real Estate Development is accommodation, space. or land use. The raw material for
development is land. Increasingly this land is not virgin land but brown fields, grey fields or infill. As the
ultimate entrepreneur, developers must innovate. Their product must be differentiated in the market place since
less than 5% of the people will be interested in a given product. The life blood of most developers is the vacancy
rate. This is a measure of the demand. When balanced against the supply, one has knowledge of the market
opportunities available.
Venture Capitalist: Obtain Seed Financing
In getting started in a development project, seed financing is needed to cover indirect costs such as
salaries of professionals, obtaining options on land, or covering general overhead of running a business. Often
times a personal guarantee from the developer is required of the developer to ensure ultimate repayment.
In Venture financing, oftentimes, its the family member or a close friend called an angle who
provide the startup funds. Sometimes government s, such as municipalities will provide a sweet deal for the
developer to get a start. In lending / borrowing for any type venture, remember the Golden Rule:, namely, He
who has the gold makes the rules!
Class D Design Estimate & Development Schedule
A class D estimate may be off by as much as 20 to 100%. It is really only a guess without having all
the necessary details that are uncovered as the project progresses and takes in more investment. Murphys Law
in Development is that everything will cost twice as much as thought and takes twice as long to produce and
sell. With profit margins seldom above 8% as in a recession as low as 1.5%, for example, taking a $2.0 million
risk hoiping to make $30,000 is quite a risky business that not many can stomach nor care to. Then, there is not
this kind of cushion for mistakes or the wide range allotted by the estimate. Much more work remains to be done
as the project takes shape
Pre-feasibility Studies
Once the unmet need is perceived, one must seek to put incomes versus expenses to determine the
potential margin. If there is a potential profit the competition must be assessed: Who and how many are
beginning to fill this unmet profitable need? If there is still a potential for profit at an acceptable margin, and if
the funds may be available for such a project, then the developer would form a team to begin the real work of
bringing a project from a concept to a reality.
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VII.
CONSTRUCTION MANAGEMENT
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VIII.
QUALITY ASSURANCE
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REFERENCES
[1]
[2]
[3]
Collier, N.S., (2003) Construction funding: The Process of Real Estate Development, Appraisal, and Finance 3 rd ed Wiley
Government of Canada, (2004) A Guide to Understaning the Canadian Environmental Protection Act, 1999
Horgarth R. (2008) Insurance Law for the Construction for the Construction Industry Oxford Kelleher T H (2009) Smith, Currie and
Hancocks Construction law: A Practical guide for the Construction Professional Wiley Kone D.L. (2006) Land Development 10th ed.
AIA (2003) The Architects Guide to Design- Build Services Wiley Rumane A R (2011) Quality management in Construction Projects
CRC Press
Appendices
Original Documents are available for a fee from:
Association of Consulting Engineering Companies Canada
Association of Professional Engineers and Geoscientists of New Brunswick
Canadian Construction Association
Canadian Construction Documents Committee
Canadian Green Building Council (LEED)
Construction Specifications Canada
FIDIC International Federation of Consulting Engineers
Harvard Business Review
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