One real estate development company acquired a parcel of land in excess of 100 acres planning to rezone and subdivide the property. After 3 years and a hard won rezoning process they found themselves with development cost charges, infrastructure investment costs, and community amenity contribution requirements which would make the project uneconomical to complete.
Believing the highest density plan would be the most profitable lead this company to design a plan which would also require the largest capital outlay in advance of generating any lot sale revenue. The large number of homes planned elevated the services design to a community scale system which magnified costs.
To solve the problem, the project was re-designed to switch the site to a bare land strata where the engineering specifications applied would allow for more cost effective interior driveways, septic treatment, and water supply standards to be used. By reducing the number of lots and changing sizing along with the competitive offering the optimal balance of total revenue and gross profit margin could be achieved.
Ultimately the change in plan took the project from having a residual land value from $3.5 million to up over $10 million. One other benefit of this approach is the allowance for easier phasing of site works for the individual lot servicing investment and gives the developer the ability to use sales revenue to cover later phase costs. Maximizing density generally achieves the highest value but not always.
For development economics design ideas, fill in a contact email on the "about REAfe" page and we all be sure to find some value creating alternatives for your project.