South Florida is a vibrant, fast-growing region that offers tremendous opportunities for commercial building land development. However, there are several common mistakes that investors (especially those who do not live locally) can make in this unique region, which can significantly impact the success of their projects. In this blog post we discuss three big mistakes in commercial building land development in South Florida and provide insights on how to avoid them.
1. Not buying land with the right zoning for a particular project
One of the most critical aspects of commercial building land development is understanding the local zoning regulations and purchasing land with the right zoning. Zoning laws regulate the type of activities that can take place in specific areas. In addition, they dictate the size, height, and density of buildings (number of occupants). Buying land with a different zoning can lead to significant legal and financial complications, drawn out approval process, additional fees and costs, delays, and even project cancellation.
Danto has recently had two clients who acquired land. One property was sold by a realtor for multi-family development. Information on the Property Appraiser’s Office and MLS indicated this property was multi-family; however, since the building was demolished, the current zoning applied. Unfortunately, the realtor did not check the zoning with the city and the buyer had trusted the realtor to have the correct and up-to-date information. In the other case, the zoning was correct, but the city denied the “use” of the property for “logistics” (trucks), so legal council was engaged and they must reposition the use to a warehouse. This all has cost a lot of time and money.
To avoid this mistake, conduct thorough research on zoning and use laws in the area where you plan to invest. The zoning map and code can usually be found on the city or county’s website. Additionally, you should consult with a local land-use attorney, or planner, who has experience in commercial land development in your target area.
2. Not understanding the local construction approval process
Another common mistake in commercial land development in the South Florida area is not understanding how the local construction process works, from site plan approval, variances, and permitting to design, construction and final approval. The process of obtaining site plan approval and building permits can be complicated and time-consuming, with different agencies involved, such as the local building department, fire department, and environmental agencies.
In addition, the site plan approval process can take several months to a year or more to complete, which can significantly impact the timeline and cost of your project. Delays in obtaining permits can also lead to higher construction costs, lost revenue, and even project cancellation. It’s crucial to have a good understanding of all the steps in the approval process, to factor in the timing and costs associated with it in the project planning phase.
To avoid this mistake, especially if you’re from out-of-town, you should work with a reputable construction manager who has experience in the area you’re developing. They should have expertise in the local approval process and be able to navigate the complex process efficiently. It’s also essential to have good relationships with land-use attorneys, architects, engineers, surveyors, and local authorities, and to maintain open lines of communication throughout the project, to avoid delays and minimize any potential issues that can arise.
3. Underestimating the “hidden costs”
A third big mistake commercial developers make is underestimating the hidden costs associated with the project. Many investors focus solely on the purchase price of the land, and the construction costs to build, but fail to consider the additional expenses that arise, such as treatment of contaminated soil, resilience planning for sea-level rise, increased storm intensity and extreme weather events, landscaping, upgrading utilities (gas, power, water, fire line), and other site improvements needed to complete the project.
These hidden costs can increase quickly and have a significant impact on the profitability of your project. It’s essential to conduct a thorough cost analysis before investing in commercial land development. This includes a detailed breakdown of all expenses, including (but not limited to):
- Site plan approval
- Design fees
- City, County and State licensing fees
- Site preparation
- Site improvements
- Utility needs
- MOT / DOT
- Construction costs
- Landscaping
- Signage
- External Lighting
- Sidewalks
- Parking
To avoid these types of mistakes, you should work with a reputable local construction company or construction manager who can help you evaluate and assess potential sites, problem areas and risks, and provide accurate cost estimates and future potential costs ahead of time.
For example, are all the utilities you need available at the intended site? Sometimes, utility infrastructure must be installed or improved, depending on the type of facility being built, which can increase costs significantly from the estimated prices for a building at a specific location.
As noted in a previous blog, a location that seems ideal for a restaurant may not have easy access to gas lines. Locating and tapping into these utilities can add time and costs to a project that were not anticipated when the location was decided.
Danto recently had a multifamily developer who was made responsible, by the city, to install a fire line from blocks away for, basically, the whole neighborhood. They also unexpectedly had to increase the elevation by quite a bit more than originally planned, and had to build an exfiltration system.
Because there can often be these “hidden costs” before a project is started, it’s important to have a contingency plan in place, such as a reserve or access to additional financing, just in case. This will help you to address unexpected expenses that may arise.
If you’d like to be sure that you don’t make any critical mistakes in planning a new land development construction project in South Florida, be sure to reach out to Debbie Danto at Danto Builders.