Property development costs are at the highest they have ever been, and they can increase for many reasons if you don’t keep your eye on the wrecking ball! Fortunately, if you are careful and proactive, most unexpected costs can be accounted for. But what are the ones to watch for? From ongoing changes throughout a project to extended delays, here are some of the worst.

Unforeseen Conditions at the Site

There is a big reason why most construction and development companies pay for extensive land surveys. There can be hidden issues beneath the surface that only show up during construction if a comprehensive survey hasn’t been carried out, and even then, it can still happen. Halfway through an excavation, you can run into problems like unstable soil, hidden bedrock, and even pipes no one knew were there, causing unexpected and costly delays.

Making Changes as the Project Continues

One of the biggest cost inducers for a property development and construction project is making changes as the project continues. This, of course, extends the time laborers and specialists are on-site, increasing labor costs. But it also causes delays as you await permits and licenses or switched materials. Even something as simple as moving a wall or upgrading a fixture can cause massive delays and costs due to the red tape it can take to make even small changes.

Property Development Costs and the Supply Chain

Disruption to the supply chain can cost companies a lot of cash, especially in supplier-centric industries like construction and property development. In fact, supply chain disruption in the UK has left 86% of construction firms at risk of serious financial loss over the past few years. This is primarily due to the costs of materials fluctuating and becoming unpredictable, but also because of draconian business taxes, insane energy costs, and the cost of finding experienced labor. 

Extended Delays to the Current Project

A delay in a construction project is your worst nightmare. As they say, time is money, and this is especially true of property development projects. Every week, day, or even hour that a project is standing still costs your company money. A serious delay can result in financial losses so great that it kills the project entirely, and you may not be able to recover the money. Other costs include site security, finance holding costs, and interest payments, all of which will add up.

Improper Financial Planning Early On

Before a project even begins, you need solid financial planning and costing for absolutely everything. Flying blind on a property development project is a massive risk to available funding, additional investor financing, and jobs. This kind of risk isn’t worth it, and the chance of success without construction finance management in place is pretty low. Like a business plan, a project financial plan should cover everything, including legal fees, materials, labor, and of course, tax.

Summary

Unforeseen conditions at the site, such as hidden pipes, are a common reason why property development costs spiral beyond control. Your project can also be hit by unexpected supply chain issues, and a project can be delayed and damaged through improper financial planning.