5 Types of Property Development to Consider
Whether you’re starting out in property development or looking to expand into new types of projects, you’ll need a good understanding of the different types of development you could pursue.
- Brownfield Site Development
A brownfield site is land previously used for industrial purposes but is now neglected. This type of land is usually located in urban areas, which means it has lots of potential for residential housing developments due to the local amenities.
Brownfield sites have become increasingly popular with developers in recent years, and in October 2021, the government announced a £57.8 million allocation of funding for councils to develop this type of land.
Competition for brownfield sites can be fierce, but development can be lucrative if you’re lucky enough to secure one. All the necessary infrastructure is typically in place, which keeps development costs down and means that work can begin sooner than if you start entirely from scratch with an undeveloped piece of land with no planning permission. There may also be government incentives available and less likelihood of objections from local residents as it is in everybody’s interest for land to be put to good use. Neglected land can attract criminal activity, be unsightly, and decrease local property prices. However, there may be limitations on how you can develop the land. The cost of upgrading a brownfield site to comply with current legislation on environmental standards can be prohibitive.
- Greenfield Site Development
A greenfield site is undeveloped land in an urban or rural location that has been used for agricultural or landscape design or left to evolve naturally. It differs from a brownfield site because it has never had permanent structures built on it.
While it may be tempting to opt for a “blank canvas” on which to build your development, remember that you will be starting from scratch to establish an infrastructure. There may be difficulties with utility supply and access issues. Local residents might also raise objections to the loss of ecological habitats and biodiversity. Furthermore, developing a site from scratch can be extremely expensive, and delays in obtaining the necessary planning permission can slow things down and send your plans off track.
However, greenfield sites offer developers maximum flexibility in design and operation, and it’s much easier to meet environmental standards than when developing a brownfield site.
- Industrial Development
Many property developers focus on a particular niche, for example, residential, commercial or industrial projects.
Industrial sites are pieces of land used for manufacturing, production, assembly storage, warehousing, distribution and research. It is typically cheaper to buy than other types of land, and construction costs may be lower than for a similar-sized residential development.
The drawback of this type of development is that it will probably be slow-moving and take considerable time to complete. You will probably also need to find a client before beginning work so that you can develop the site to their needs.
- Residential Development
This is possibly the first type of project that came to mind when you decided to launch your property development career. A residential development incorporates properties built for living purposes. This includes retirement home developments.
This type of development benefits as everyone needs a home, so there is always demand for residential properties. So, unlike with industrial development, there’s no need to line up a client before starting work. Once your residential development is complete, you can entice potential customers with on-point marketing and services that make buying your properties as easy as possible, such as house part exchange.
However, it takes considerable experience and knowledge to know when and where to build to deliver a profitable development — mistakes can be costly!
- Commercial Development
Commercial developments can offer a lucrative long-term income. This may not be the right choice If you’re eager to “flip” a property or properties quickly.
Commercial land is developed to generate a profit. This can be from building and selling properties — capital gain — or rental income. Most commercial developers retain ownership of the buildings they create or renovate and lease them to businesses.
This type of development is a great way to diversify your portfolio. Mixing short term developments with longer-term investments that will deliver an ongoing income will help you maintain a healthy cash flow. Leasing commercial properties is often more profitable than renting out residential homes. There’s also less competition for this type of project as it requires a significant upfront investment that not all developers can afford. In addition to the rental income your development generates, there will be capital appreciation as the buildings climb in price over time.
The downside is that you’ll need to make a significant initial investment and manage the properties long-term. This is not a one time deal that will deliver a quick return on investment.
There is no “best” type of property development. What’s right for you will depend on the finances you have access to, whether you want to invest in short or long-term projects (or both) and what opportunities there are in your target area. However, understanding the different types of property development available can help you make an informed decision about your first or next property development.