Real Estate Development Planning – 5 Levels of Risk Management
Posted On July 2, 2023
Risk management planning is key to successful real estate development. Risk Management, the science of analyzing risk areas according to their greatest impact, allows real estate investors to appropriately allocate resources and/or assess the feasibility of real estate development projects.
A clear understanding of the development process and the ability to quantify areas of risk will give investors the competitive advantage they need to break out of the pack in the new economy.
Below is a summary of key risk management due diligence levels for real estate development and estate planning.
Level 1: Impact evaluation
1.1 Industry Standards Assessment
Analytical evaluation allows owners to compare existing facilities to commercial and industry standards. Assessment of industry standards can be used as the basis for planning physical construction projects.
1.2 Socioeconomic impact assessment
Analytical assessment allows owners to determine the status of socioeconomic impacts on existing and planned future facilities with respect to changes in the business environment. The assessment can be used to help identify social, cultural, and economic impacts for physical construction project planning.
1.3 Assessment of operational needs
The inclusive process allows owners to identify general business and operational needs to be used as a baseline for physical construction project planning.
1.4 Condition Assessment (Existing Properties)
It allows existing owners to better manage their facilities and set budgets for maintenance and repair.
1.5 Identification of Strategic Planning Objectives
Allows owners to identify key scheduling needs in connection with planning for future site and construction projects.
Level 2: Concept development
2.1 Conceptual Site/Campus Planning
It allows owners to assess investment risk based on how well scheduled site elements fit and function on the available site.
2.2 Conceptual planning of the building
It allows owners to assess investment risk based on how well scheduled building elements work in a basic building configuration as it is located on the proposed site.
2.3 Conceptual Phase Plan
Allows owners to review short-term and long-term project phases and impacts on facility criteria such as operations, capital expenditures, projected business growth, etc.
Level 3: Environmental Plan
3.1 Introduction to sustainable construction strategies
It allows owners to consider different environmentally conscious planning strategies and assess the impact on long-term construction costs.
3.2 Environmental Assessment
It allows owners to have a conceptual environmental study of the existing facilities to use as a reference point in future planning projects.
3.3 Sustainable construction recommendations
Proposes conceptual environmental construction strategies suitable as updates to existing facilities.
Level 4: Risk Management Plan
4.1 Review of Surveys and Reports
It allows owners to have a quick technical verification evaluation of a site before investing a lot of time or resources.
4.2 Zoning Analysis
It allows owners to assess investment risk based on how well the proposed site plan and building meet local planning and zoning requirements.
4.3 Building code analysis
Allows owners to assess investment risk based on the impacts of current building codes and local amendments.
4.4 Risk Management Programming
It allows owners to assess the overall risk of the investment in relation to the project schedule and the requirements for project financing.
4.5 Cost estimation
It allows owners to assess investment risk as it is affected by the total cost of the project and provides a complete figure for construction-related costs to be incorporated into the financial analysis of the project.
Level 5: Implementation Plan
5.1 Long-term physical planning strategy
The executive summary format allows owners to have a concise integrated guide for long-term planning of physical facilities.
5.2 Short-term physical planning strategy
The executive summary format allows owners to have a concise integrated guide for short-term planning of physical facilities.
Make a plan. Have a plan. You’ll be glad you did!