Commercial Construction, the Project Manager and Construction
Commercial construction is the backbone of our American economy. Anytime there is a commercial project, numerous jobs are created, including jobs created for contractors, project managers, heavy equipment workers, lenders, and many others.
When a construction project is planned, the project manager, or a developer, must first go through the development approval process, also known as the entitlement process. In other words, all aspects of the project must be approved before the construction can begin.
This is the first step of the project, and this generally takes place at the local level. The developer or project manager will hire legal counsel and engineers to put together the construction project and prepare it for presentation to the planning or zoning board.
This is the most rigorous part of the entitlement process as local boards are often very thorough and the construction project must often be significantly revised.
There are also what are known as outside agency approvals and these are any approvals outside of the scope of the local board. This includes county approval and approval of various state agencies, such as environmental and health agencies.
The whole entitlement process can often take up to two years, and during this process the project manager will often have the property tied up with an option contract. Once all required approvals are received, the entitlement process is complete and the project manager will close on the property. Now the developer owns the property outright and can start work on the construction site.
Prior to beginning the construction phase, the project manager often must secure the commercial loan. This is done by presenting the merits of the project to lenders. The project manager will explain the revenue that is expected to be generated by this endeavor and also explain any leases that will be attached to the property.
If the lenders are satisfied that this project will be profitable then the loans will be offered. The loan will typically fund the construction project, and the purchase or lease of heavy equipment that is required for the project.
Once the construction begins all of the infrastructure and site work will be completed first. Then, the most important part of the project will begin, and this would be the actual constructing of the buildings and structures.
In order to attract tenants in the very competitive world of real estate, construction and investments, project managers must offer fair rates and incentives, if possible. One way to reduce rents and attract good tenants is by reducing the tax burden levied on the construction project.
This can be done by working with the local government to secure a tax abatement or a payment in lieu of taxation. These are devices that promote economic development by attracting new business with commercial construction projects to a municipality. Any reduction in taxes can then be passed on to potential tenants.
So, as you can see, there are many steps in the process. The property is identified and locked up through an option contract and then the entitlement process begins. Then a lengthy entitlement process ensues, and once complete the property is purchased outright so construction may begin.
While this is going on, the developer or project manager is seeking tenants to make this a profitable venture. There are many steps and many professionals involved, this is a very interesting field to work in. This only outlines a massive industry that is a major factor in all economies. The commercial aspects of construction, lending, developers, investments, manufacturing, and transportation touch every avenue of commerce and the jobs created.
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