Ben Morgan is a client and productivity-focused manager at RCE with a strong focus on process improvements and business development. He is committed to serving clients better by establishing a more collaborative relationship throughout the design and construction process. Ben shares his advice for aspiring property developers to ensure a successful project.
Words by Ben Morgan of Reed Consulting Engineers.
With many realising exceptional returns in the Cayman Islands real estate market, there is an unprecedented rise in the number of new developments and developers. And rightly so. If well-executed, property development can be profitable, a significant driver of economic growth, a chance to be creative and, with the right business acumen, financially successful. But, as with most investments, the outsized returns you hear about are earned by those brave enough and wise enough to navigate and mitigate the associated risks.
The following are key concepts to keep in mind when embarking on your first real estate development venture:
UNDERSTAND THE DEVELOPMENT PROCESS
Planning, planning and more planning is vital. Do your due diligence and feasibility studies. Ensure you have: a project vision; strong knowledge of planning and building applications; an understanding of construction tendering and ongoing management; and marketing, sales, business, finance and investment skills. Understanding and navigating these processes will give you rewarding results.
RESEARCH THE PROPERTY MARKET
Before you take on any development, you must research your market. Review the socio-economic facts and statistics: these will help you make informed choices. It may seem obvious, but consider supply and demand, median property prices and growth, market cycles, demographics, residential needs, and the site’s proximity to amenities and services.
IDENTIFY YOUR PROJECT’S KEY PERFORMANCE INDICATORS (KPIS)
Before construction begins set your KPIs. These are the measures of your project’s success and should include: minimising construction costs, minimising construction time, and ensuring exceptional build quality. Whichever combination of KPIs you choose to monitor, do not underestimate how powerful these insights can be to property developers of all sizes.
Additionally, understanding your market and financial models should make the hierarchy for your development obvious, along with defining your marketing mix: product, price, place and promotion. A planned, clear vision will help you avoid potentially costly impulse decisions. Finally, be prepared: your time will be precious later on, and you will want to be ready.
LOOK BEYOND THE BOTTOM LINE
Fixed fee construction contracts are great for shifting risk. Here’s the secret, though: when it comes to construction, the contracts are only as good as the balance sheets and reliability of the companies behind them. If they choose to walk off the site because they’re losing money, guess who will lose even more – you! Understand service providers’ pricing and their credentials. Comparing the bottom line between two proposals is a dangerous game and could cost you more later without comparing deliverables and experience.
BUILD A TEAM YOU CAN TRUST AND DEFINE YOUR EXPECTATIONS
If there are any knowledge gaps in your team, find partners who can fill them. A quality team creates a quality product from sourcing and planning to building and managing. Build a team with strong communication skills, creativity and analytical minds. People with these traits are essential for success. Seek out the professionals for Structural and MEPF Engineering, financial and legal matters, cost consulting, architecture, interior design, landscaping, pool design, planning/BCU liaison, construction, marketing and sales. The list goes on and on, but they are all worth the investment.
Property development takes a village, so make sure you can trust everyone on your team to deliver. Define your expectations, schedule and scope with every consultant and ensure you include this in your agreements. Leave no margin for error. Finding the development dream team can make the difference between a project exceeding its expectations or missing them.
To learn more, contact, Ben Morgan, Reed Consulting Engineers: