Retail Property Development
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Developer Selects a Property
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In the early stages of retail property development, developers select a piece of land that offers some potential for successful retail business. The selection of property may involve a number of factors, including highway or foot traffic, proximity to other retail establishments, proximity to large housing developments and local tax laws in the county or municipality where the property is located. In some cases, aggressive developers review property appraiser data and housing forecasts to determine which areas are likely to undergo large residential developments in the near future, then purchase nearby properties for retail development purposes. Because the development process can be lengthy in some cases, developers sometimes purchase properties years or even decades before any apparent development activity begins.
Developer Acquires the Property
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Once a developer has identified a property with high retail potential, the property must be purchased or otherwise secured so other developers cannot take advantage of the opportunity. In most cases, property developers simply purchase the property, though this process involves a number of variables that can draw out the process. Depending on the size and financial resources of the developer, financing may need to be arranged through a financial institution, partnership or outside investor. If financing cannot be arranged, the developer may have to pursue other properties or attempt to raise funds in order to acquire the property intended for retail development.
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Legalities Must be Addressed
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Once a property has been identified and obtained, the developer must work with the city council or other local governing body to ensure retail business is permitted on the property. Local zoning laws vary from area to area, but the process of having a property zoned for retail business generally involves petitioning the municipal government for a zoning change. In some areas, the developer must attend a hearing, and some municipal government officials may require the developer to answer questions regarding the type of retail business that will be conducted, considerations on impacts to local wildlife, traffic disruptions and any number of other questions related to retail use of the property. Developers must also obtain various permits for developing the property, and it is not uncommon for developers to acquire requisite permits during the zoning process.
Construction
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Once zoning and permit legalities have been addressed, the developer is allowed to begin construction. The construction process varies from site to site and depends largely on the type of retail business to be conducted on the property. Single stores, like those used by large chain retailers, may be constructed more quickly than strip malls intended to house a large number of clients, though these arrangements are typically less profitable for the developer.
Profits
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Once the property is built, the developer is in a position to generate a profit by leasing or selling the completed space to retail clients. While some developers sell their properties to retail business clients, most retain ownership of the building and property in order to produce a recurring profit by renting out the completed spaces. As retail businesses move into the property, spurred by the same factors that garnered the developer's interest as described earlier, the retailers make monthly lease payments that contribute to the developer's profits.
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