WHAT EXACTLY DOES A PROJECT DEVELOPER DO?

This following brief history of the real estate project developer’s profession was written and published in 2009 by Matthias Hühne. It is a profession that remains relatively cryptic to large parts of the public even today, especially in Germany and other non-English-speaking countries, where the role of the real estate developer is in many cases not even fully understood within the real estate sector.

For some, the term ‘real estate developer’ refers abstractly to a builder or just the ‘initiator’ of a construction project. For others it is more closely associated with the role of a project manager – and there are various other definitions too.

The profession of real estate developer is comparatively new, especially considering that the construction of buildings is one of mankind’s oldest trades, and it is considerably more complex than it may first appear. So it is worth taking a look at the circumstances in which it emerged.

In the nineteenth century, when industrialization gave rise to a noticeable service industry, demand for office space suddenly boomed. In the second half of the century, a completely new type of building came into being, initially in New York and Chicago, and later in cities across Europe as well: the speculative office building, which had to be flexible enough to respond to different demand scenarios.

Office buildings soon became more widespread. The use of steel took hold in construction; new air-conditioning technologies were developed, and elevators became not only safer but also faster. Together, these advances paved the way for the construction of ever taller buildings.

Burgeoning urban populations in the industrialized world also gave rise to significant numbers of apartment buildings of various sizes and formats. The middle of the twentieth century saw the development of another new type of building: the covered, air-conditioned shopping mall, conceived in the United States.

Driven by expectations of increasing demand, these buildings were often erected speculatively. Large real estate projects became a source of major fortunes, but they also entailed the risk of significant losses. Their initiators quickly came to realize that the chances of success could be much improved by matching the concept and architecture of a structure as closely as possible to the expectations of its prospective users. In addition, it seemed advantageous not only to establish a convincing marketing concept to procure tenants and/or purchasers early on but also to minimize construction costs and scheduling risks by commissioning a professional project manager.

Intense and unrelenting competition meant that, on the one hand, the extreme risks of speculative construction had to be minimized; on the other, the chances of positive returns had to be maximized. It was from this need that the profession of the real estate developer emerged.

Nowadays, developers are in a position to shape and optimize every aspect of a construction project, irrespective of whether they are working independently or as a service provider for investors seeking to maximize the returns from a real estate project.

Responsible for a variety of management tasks, project developers draw not only on their own expertise but also on that of a broad, tried-and-tested network of specialists. For a real estate project to succeed, budgeting must be accurate, financing solid, contracts well thought-out, and planning precisely coordinated and detailed. Building permits must allow for the best possible use of the construction site; construction must be actively controlled; leasing and marketing must be well executed. Given the scope of their wide-ranging management tasks, developers are often seen as the ‘captains’ of real estate projects.

Without doubt, coordinating every aspect of a major construction project to perfection takes considerable skill and experience. But there is also a second, even more important set of tasks on which a project’s success depends — and for which the project developer is also responsible: determining the concept and architecture of the project. To establish the precise requirements for a building’s usage, design and quality standards, real estate developers use their exceptional market expertise to determine which criteria will matter to prospective users. They then shape the way the building is planned, maintaining a firm focus on project outcomes throughout, from overall concept to every minute detail. They ensure that all of the individuals and trades involved are coordinated as best possible. Optimizing construction planning in this way not only supports better overall quality but also saves money, as anything superfluous is kept firmly out of the project right from the start.

The right combination of qualified concept and design work with professional project management is key to leading a real-estate project to success. And because successful buildings often pave the way for further investments in the same area, a real-estate project developer can do much to contribute to positive urban development. And as environmental awareness increases ever more, real estate developers will carry a key responsibility for sustainable building concepts.