Building a commercial property from the ground up might seem complicated, but a little research can simplify the process and prevent hurdles along the way.
It doesn’t matter if you want to construct a new business premises, or upgrade an existing property to improve its functions, aesthetics, and value; you’ll need to consider various costs to protect your budget.
If you’ve never embarked on the process before, keep reading to explore the costs of commercial property development.
Design and planning
Before you can kick-start construction, you must have a firm understanding of your commercial property’s architectural design and engineering.
It is wise to spend some time learning about the various fees for hiring architects, planning consultants, engineers, and other professionals.
Bear in mind that a complex project will require more experienced professionals for a hassle-free experience.
Development finance
Development finance is available for commercial property developers building a property from the ground-up.
You could access up to 70% of the gross development value, helping you begin the process as soon as possible.
Once you have secured financing, you can use it for land acquisition, the design and planning process, and construction. Tranches of money will be released as the build progresses, these are known as ‘drawdowns’.
Land acquisition and build costs are the biggest expenses, and the location, site size, and whether or not the site has planning permission will determine its cost.
You will need to provide a lender with a development appraisal or schedule of works to confirm the development plans and their associated costs.
Be aware that that development finance is not regulated by the Financial Conduct Authority and your property may be repossessed if you do not keep up with repayments on debt secured on it.
Construction costs
Avoid unexpected bills as far as possible during development by factoring in every construction cost.
In addition to accounting for labour, equipment, and materials, you’ll need to consider how much money you’ll need for permits, subcontractors, and site preparation, excavation, and grading.
Also, the market conditions and the quality of materials, finishes, and labour will shape your overall budget.
Permit and approval fees
Next, you must contact your local authority to obtain permits and approvals before starting the project.
For instance:
- Planning permission
- Environmental assessments
- Building permits
- Utility connections
All the above can add up to a substantial sum, so you mustn’t overlook them when developing a budget.
Contingency funds
It is wise to create a 10-15% contingency fund to cover the cost of unexpected costs or unavoidable project delays.
The financial buffer will help your business bounce back from hurdles, ensuring a mistake or challenge doesn’t slow the project down.
Issues will occur during the development process, and you’ll be glad you had a contingency fund in place when they strike.
Marketing and sales
Once the commercial property is complete, you’ll need the money to effectively promote it to your target market.
For instance, you might need to factor in the cost of:
- Advertising
- Property staging
- Various marketing materials
- Sales commissions
It is an essential expense when building new homes, offices, warehouses, mixed-use properties, or retail units, as it could help you attract many buyers or tenants.
Ready to apply?
If you have experience in property development, or are working with a project team who do, you have had an offer accepted on the land you want to buy and you are ready to embark on a ground-up build, commercialtrust.co.uk can help you find the right development finance lender to get your project underway.
