Development Process Overview

When I hear the question "How Do I get Started as a Developer?"  it is usually followed by a string of questions which amount to "Can you draw me a map that will guide me through every detailed step to becoming a developer?"

People who are interested in this line of work come from a wide range of starting points.  A lot of them already have a fair amount of skill in one aspect or another of the built environment.  They may be very accomplished in one or more specialized areas as a contractor, broker, planner, activist, architect, or property manager.  They know enough about how things work to recognize that they have a lot to learn outside of the field that originally led them to development.

So let's group the skills a developer needs into 7 groups:

1. Urban Design, Site Selection, Site Planning and Civil Engineering.

2. Building Design.

3. Deal Architecture, Pro Formas and Finance.

4. Entitlements.

5. Construction and Construction Management.

6. Marketing, Sales, Leasing and Property Management.

7. Communication and Follow Through.

Very few people master all of those skills.  If you start with small projects, you can gain an overview, and understanding when they are needed at the various stages of a project.  You get a sense of the basics for each skill set.  If you don't have the skill which the project requires, you can't go without.  So you should borrow or rent the needed skill.  Look for people who are genuinely interested in your project and who are actually happy to teach you about their specialty.  I figure a developer does not have to know everything, but they should have a good idea who to call before it is too late.

After a number of Small Developer Boot Camp (calendar here) Jim Kumon and Gracen Johnson have put together the graphic above which has three types of skills and activities allocated over 5 phases of a development project.  I think it is a substantial improvement over the list of 7 skills because it give the reader a sense of when they need to know what, or when they have to find help as they move their first project from idea into an actual building.  This is a work in process, so comments and critiques are welcome and needed.  What do you think?

 

If you have been reading this blog you know that I am always pushing for the creation of smaller development enterprises, building smaller and simpler buildings (without elevators for the most part), using off-the-shelf financing, and the delivering smaller units for the smaller households that make up a big portion today's local markets.

I think we can do a much better job of connecting the housing unit to the list of consequential stuff people consider in their decisions to rent if we can deliver flexible unit configurations, competitive rent + transportation math, and locations close services, food and drink.  Here is a list of stuff I shot off in an email to a colleague this morning:

• It is important to shift the approach to development projects to a smaller, more incremental scale.

• Re-imagine the development enterprise as a smaller outfit that can compete without economies of scale, recognizing the constraints in economies of means.  If a municipality wants to revitalize a neighborhood, cultivate multiple small operators and roll out a Pink Zone.  Don't do a big lumpy Public Private Partnership.

• A small outfit can aggregate several small projects into a portfolio within a decent neighborhood structure.  This will provide a platform with significantly reduced downside risk and enhanced upside benefits.

• It is time to take the Arthur C. Nelson's work seriously.  There is a significant lack of supply of housing in walkable urbanism and half of new housing needed between now and 2030 will need to be rental housing.  (See Dr. Nelson's Book  and  video).

• With construction production at less than half of 2005's peak, builders of single family homes, apartment complexes and commercial buildings are experiencing shortages of skilled trades all over the US, so small developers will need to cultivate a local base of small trade contractors to avoid the labor shortages.

• Small developers are positioned to help local entrepreneurs create local wealth and local jobs among their trade base and their local tenants.  Small, cheap workspace needs to be provided at modest scale within the context of a neighborhood.

• The small developer business model needs to be accessible to younger people, immigrants, and folks who already have one or two of the skill sets needed (brokerage, leasing, property management, finance, entitlement, design, construction management, communications).  We will need to develop training, tools and templates and a network of early adopters to reduce the learning curve of rookie developers.  There is a lot of interest in training and tools from the leadership of Congress for the New Urbanism and the Incremental Development Alliance.  I am active in both of these and recommend that anyone interested in this work do the same.

• Many of the project management, construction management and property management advantages that were once only available to large outfits that could achieve economies of scale have been disrupted by technologies like BaseCamp, BlueBeam, AutoCAD360 for the iPad, QuickBooks, ClearNow.com, PayYourRent.com, YouTube, and the smartphone.

The market demand is large enough and the supply of anything remotely resembling walkable urbanism is small enough that all kinds of lousy half-baked projects are going to get built and get rented or sold in the next 15 years.  This mismatch between very low supply and very high demand provides lots of room for dumb projects, but it also presents the opportunity to re-scale the development business.

I read this piece in Fortune this morning and it got me thinking:

Equity for Coffee Farmers

The article describes how coffee roasters in the US are working closely with coffee farmers to reduce the risks born by the farmer and increase their margins on the coffee they grow and sell.  This goes beyond the minor bump in price that farmers see through Fair Trade or Organic branding.

I have also been reading William Cronon's excellent book Nature's Metropolis which describes the early market structure and logistics of  the grain and lumber trades in Chicago.  The lumber market in Chicago used to depend upon unloading the white pine milled in Michigan and Wisconsin from ships on Lake Michigan and sending it to lumber yards in the prairie states by rail.  The mills concentrated on white pine because that species was light enough to float logs to the mills.  When the white pine forests were depleted the whole operation changed when railroads were extended into forests of hardwoods and heavier conifers which cut out the lake carriers and greatly reduce the volume of lumber that arrived on the docks of Chicago.

Both of these writings feed into what I have been thinking lately about how to engage local building trades and disrupt the conventional building and development model.  Specifically, how does a small developer compete for the increasingly scarce resource of skilled construction labor with larger operators building bigger projects?

The answer contained in both of these readings is to figure out a way to get close to the source so you can help the other party do better.  How to improve communications and logistics so that the small developer can provide a steady work flow for the trades that want to work close to home and with less volatility.