We’ve all experienced the effects of land development in our day-to-lives. Whether it’s our home, job, or favorite retail store, land developments are all around us. So, have you ever wondered how people and companies take pieces of land and convert them into thriving new homes, offices, or stores? In this article, we’ll dive into a few different aspects that land development companies undergo in order to do this. These companies have the knowledge and expertise to get any project done anywhere.
What Do Land Development Companies Do
So what do land development companies actually do? That might be a loaded question that comes with many answers, but let’s try to digest it anyway. The first thing to understand about a land developer is the fact that they take on a tremendous amount of risk. But with great risk comes an even greater reward. Land developers purchase a piece of land, then utilize that land for a specific real estate development project. They take on the tasks of building, creating, and controlling the development process typically from start to finish. When developers purchase a piece of land, they usually have in mind what will be residing on it. From this, they can determine the course of action that needs to be taken in order to get approval and funding for the appropriate construction process. Developers work with an extensive list of people – from city planners to architects to engineers to lawyers. The land development process is a long, but potentially rewarding process.
Stages of Land Development
In order to ensure that the all of the hard work in which land development companies engage doesn’t go to waste, it is important that a detailed process is followed. Inexperienced land developers think that any piece of land is a good choice for the project they want to take on. This is definitely not the case. They can often be tempted by the low price of a piece of land and think “I can make this work.” However, it takes a lot more than price to choose a piece of land.
- The first stage of the land development process is: research. This might be the most important step because it can determine the success or failure of a project. Many factors go into this step of the process: the local community, the state and condition of the land, the ease of access to utilities such as electricity, water, and infrastructure, plus much more.
- Once it is determined that the land is perfect for the project the land developer has in mind, the next stage is acquiring the necessary funding. This is an essential stage to ensure that the project is accomplished.
- The next stage would be obtaining all of the necessary approvals from the city, county, state, etc. to get the project started. This step involves speaking with city planners and surveyors. This process can be very time consuming, so be prepared for a wait.
- The next stage is the actual construction process. Builders will have specific plans and instructions on what needs to be built and how it should be built. Through this stage, all of the creative elements the developer envisioned will come to fruition.
- Following construction is, of course, the completion. This is where the space is then leased or sold for profit. All of the hard work of the developers, architects, and builders is finished and it is time to move on to the next project.
How Land Development Impacts Our Waterways
A concern that land development companies take into account when taking on a land development project is the impact it will have on waterways. Land developers have ignored the negative affects that they can have on waterways in the past. This negligence has led to damage in the local environment such as flooding, erosion, and alteration of seams. When land development projects begin, the drainage of runoff can be affected, resulting in too much or too little rainwater being funneled to a water source. This can essentially disrupt the water cycle process, especially if the development project affects the amount of water that is absorbed into the ground. In addition to this disruption, land development can increase the amount of man-made pollution that travels from the construction site to a stream, lake, pond, river, etc. It is important that developers do everything they can to limit the environmental affect of their project as much as possible.
Where Do Land Development Companies Begin When Planning a Community
This is an important question to ask: where does a developer begin when planning a community? It all starts with a concept; and with a concept comes question after question. What is the vision for the community? What’s the demographic of the area? What is the layout of the landscape? Developing a community allocates public and private company resources in order to meet a common goal that is going to benefit the community as a whole. This process begins with activism amongst members of the community who want to see a certain change or development in their town. Land development companies work with business, government officials, and developers to achieve this common goal.
Land Developer VS Home Builder
The differentiation between land development companies and a homebuilder is an important distinction to make. Developers purchase raw land, obtains approvals and permits, cultivates lots, and formulates a way for the property to access utilities and infrastructure. A builder is the person/people that erect a structure. In hindsight, a developer develops land and a builder builds upon that developed land. This seems somewhat intuitive, but it is a common misconception.
Land Development Companies and Sewer Rights
With the development of raw land comes the need to expand sewer lines to reach the property. In order to expand the line, approval needs to come from the municipality that the project resides within. It is essential that a permit is acquired and kept at the site during the development process. The steps to apply for this permit depend upon the area the property is located. In some instances, sewer rights can be purchased. Depending on the location, some cities make available for purchase the sewer access rights of a certain property in order to provide sewage access to the city’s sewer system.
Environmental Impacts of Land Development
Earlier, we touched on the impacts land development can have on waterways. Now, let’s focus a little more on the environment as a whole and how land development can affect it. One of the biggest barriers faced is deforestation. Deforestation removes trees and other vegetation that are essential to absorbing carbon dioxide in the atmosphere and reduces the biodiversity of an ecosystem. This is known as land degradation.
In addition to land degradation, there can be other factors that negatively impact the environment such as carbon dioxide emissions. When new neighborhoods are developed outside of a more developed area, the distance people have to travel in vehicles to get to jobs, schools, stores, restaurants, etc. is far more substantial than the travel distance in a developed area. This, in turn, results in carbon emissions being higher per household. In order to ease this burden, trees and other vegetation native to the region should be planted throughout this new neighborhood/subdivision. Communities that are built within walking distance to stores, jobs, schools, etc. are known to have the least impact when it comes to producing a carbon footprint.
The takeaway from this is for land development companies to always be mindful of the location of their projects and take into account the distance that people must travel from point A to point B.
Conversion of Landforms
Economic growth and development is a good thing. It means that things are getting done; people are going places. With this growth comes land development and converting that land to suit the project at hand. Along with buildings, land developers have to take a close look at the property they have in their hands. All land sits on what is called a watershed. These watersheds collect water and funnel it to a larger source, such as a river, lake, stream, or ocean. The topography of this land is key in determining where this rainwater goes after it falls. It is important that land developers develop the property keeping water runoff in mind. This means pouring asphalt and concrete at different slopes, providing a source of drainage so the property doesn’t become flooded, and ensuring that there is plenty of vegetation to absorb approximately the same amount of rainwater as before the land was developed. Keeping all of these factors in mind will ensure that the conversion of landforms have as little impact as possible on the surrounding environment.
Residential Land Development Process
One of the types of land that is developed is for residential purposes. It can consist of something as small as a single home to something as big as a subdivision. Residential development projects can be classified into a few different categories:
Condominiums Land Development
Condominiums, condos for short, are buildings that contain individual units that people lease or purchase. Condos often take the pressure off of the unit owner to upkeep and maintain the property. In addition to this, condos often times provide amenities that other residential properties do not, such as pools, gyms, and lounges. One of the drawbacks of living in a condo is the likelihood of being wrapped in a Homeowner’s Association (HOA), limiting the scope of renovations the residents can make to their unit. Another drawback would be the lack of privacy due to the closeness of your neighbors.
Single-Family Homes Land Development
One the flip side of condos, sing-family homes are built on a lot that does not share walls with a neighbor. These properties typically offer more privacy and freedom to make most any renovation that pleases. However, the cost of maintenance and upkeep falls completely on the homeowner.
Co-Ops and Land Development Companies
Co-ops are very similar in design and function to condos; the main difference with co-ops is that everybody in the building owns a piece of the building. People who reside in co-ops take on maintenance and upkeep together, resulting in lover HOA costs. However, since you are all paying for the building, if one of the owners skips out on paying their mortgage, the entire building could be foreclosed upon by the band.
Townhouses are a happy medium between condos and single-family homes. They’re often bigger than condos, but smaller than homes. A few townhouses have HOAs to ease the burden of maintenance costs. They’re typically less expensive than single-family homes, perfect for anybody not quite ready to commit to big kid home.
Multi-Family Homes Land Development Companies
These are the least common amongst residential properties. Multi-family homes are basically full-sized homes that have been turned into a space with two or more units. A benefit of multi-family homes is the fact that you own only the unit you’re in, there is no owner of the entire complex. However, this leaves the duty and cost of maintenance completely on the owner of the unit.
These homes have different processes that they need to undergo in order to be developed. Land developers often purchase the land upon which they want to build these residential properties (with the help of investors), hire builders, surveyors, designers, architects, etc. to move along the construction process, then sell the finished project to people whom then become the landlord of the property.
Commercial Land Development Process
On the opposite end of the spectrum to residential properties, land development companies acquire land and use it for commercial property projects. These properties are intended to help a company or organization generate some sort of profit. The following is a list of the different categories of commercial properties and examples of each:
Retail Development Process
- Boutiques, etc.
These can range in size from a small, single tenant space to a large, multistory facility.
Leisure Land Development
- Public housing
- Arenas, etc
Industrial Land Development
- Distribution/fulfillment centers
- Garages, etc.
Office Land Development
- Office buildings
- Co-working spaces, etc.
Multifamily Apartments/Condos Land Development
This overlaps with the residential development types because of their ability to be rented out for profit by a landlord.
Healthcare Land Development
- Doctor’s offices
- Urgent care centers
- Nursing homes
- Assisted living facilities, etc.
With all of these different types of commercial properties, it is important that land developers understand the needs for each project. This will allow them to obtain the necessary permits and funding to support the project and the necessary marketing to reach the target customers to occupy these spaces.
Real Estate Development
One might wonder how land development relates to real estate development. Real estate development is extremely similar to land development; however, real estate developers typically purchase sites that are already developed and change its purpose. For instance, taking an abandoned factory and turning it into a condominium would be considered real estate development. These developers take on a huge amount of risk, just as land developers do. Real estate developers hire architects, designers, etc. for the project, so they will be paid for their service regardless of the success of the development, whereas the developer does not. If one of their condo developments fail, developers and their investors assume 100% of the loses. Real estate developers are essential to communities that might be run down and/or neglected. They can take an area and completely revamp it.
Cost to Develop Land Per Acre
A recent study shows that the approximate cost of all the land in the contiguous United States is worth around $23 trillion. Trillion with a “T.” The most valuable state was found to be California, accounting for 17% of the net value of all 48 contiguous states. In the United States, the average value of developed land is $106,000 per acre, while land that is undeveloped is valued around $6,500 per acre. You might be wondering why this information is important; knowing the value of land will set limits on the amount of money a person or company is willing to put into the property.
What are some of the cost factors to be aware of when developing land? It’s always crucial to be aware of the extensive list of cost factors.
Some of the site development costs are as follows:
- Actual cost of the land.
- Fees and permits required by the local authority (can cost upwards of $10,000)
- Tap fees (for sewer, water, gas, electricity, etc.).
- Surveyor cost.
- Cost of paving (driveways, roads, sidewalks, etc.).
- Clearing trees and other natural barriers.
- Drainage for the site.
- Plus more.
All of these costs can begin to quickly add up. It’s important for a land developer to assess these fees and costs to see if the project they have planned can be completed and sold for a sufficient profit. The costs of these factors all depend on several different factors: the state the project resides within, the terrain and landscape of a certain area, the strictness of certain local authorities, etc. While the process of developing land comes with a hefty cost, the payoff can be quite significant if the developer does their homework correctly.
Land Development Approval Process
There are several things to keep in mind going through the land development approval process. Of course, all of this depends on where you’re located. Some cities require local, state, and federal approval before a person or company can begin developing a piece of land; others, not so much. These permits can take anywhere from just a few months to several years to obtain. The following is a list of the permits and requirements that may be required (obtained from the National Association of Home Builders):
- Submit Concept / Site Development Plan
- Subdivision Sketch & Plan (if subdivisions involved)
- Wait for approval by a planning commission.
- Federal Environmental Review (if federal permit is required)
- Environmental Impact Statement (if federal permit is required)
- Pay any potential bonds/fees (depending on the location)
- Post Construction Bond
- Impact Fees
- Grading Permit
- Building Permits
All of these, again, depend on the location of the land development project, so it is always good practice to check with the local government to ensure that you’re following all of the required steps. The last thing that should happen is a project being shut down because a permit wasn’t obtained or a fee wasn’t paid. Always, always, always, land development companies should do research before beginning a new project.
Land Use Planning and Zoning Regulations
With new land development comes obvious zoning regulations and requirements that a land development company has to follow. These regulations depend on how strict the local government is wherever the project is located. What exactly is zoning? The idea behind zoning: local authority in a community, such as a county or municipality, splits land into sections that are then assigned different purposes of use by a developer. It helps determine what the exact use of the plot of land (whether it’s residential or commercial), the size of the building, and the density of the specific block a plot lies within.
But, why is it necessary to have zoning laws? The purpose and reasoning behind zoning laws is to control the real estate environment in a community. It is in place to ensure that the land around a certain area complements other land development companies nearby. Local authorities then have the power to stimulate or slow down real estate development in their community.
Can land development companies request a change or amendment to the zoning of a particular process? For the most part, the answer is yes. However, this process can be a very long and drawn out ordeal. In most cases a developer must prove to the local authority that what they plan to construct will benefit the community in one way or another. The ease of zoning changes depends upon the city, county, and/or municipality that the development resides within.
To wrap things up, land development companies go through many steps to ensure that their land development project will be successful. Land developers take on a huge amount of risk, but they can also reap an even bigger reward. It is important that these developers obtain approval from local authorities and are aware of any repercussions that their project might have on the environment. With hard work and dedication, land developrment companies can take any piece of land and convert it to an incredible space enjoyed by a multitude of different people.