News, announcements and articles from Profica
Ensuring the Success of Public Property Development Projects
As a leading property solutions company, Profica has committed itself to the evolution of public sector property development and for helping public authorities optimise value from their property holdings.
Public Authorities in South Africa are in possession of large tracts of land (estimated at 17% of all land in the 2017 Land Audit completed by the Department of Rural Development and Land Reform). This land if developed correctly can have a major impact in spatial, economic and fiscal transformation of our cities. There is a growing sense that more value can be extracted from public land.
The central question for public authorities wanting to realise the transformative potential of public property has however been: “how to engage with the property development value chain which has for so long seen to be the exclusive and sometimes mysterious domain of the private sector.
As part of its commitment to Public Property Development, Profica is an active member of the Public Land Development Research project (PLDR) housed in the Nedbank Urban Real Estate Research Unit (URERU) UCT Department of Construction Economics and Management. The Unit was established to provide research into issues in public property development and to build and share knowledge in the emerging public land development profession.
One of the first studies completed by the unit to try to analyse a portfolio of awarded public sector property development projects understand the factors affecting the success or failure of awarded projects to reach construction.The study found that 39% of the awarded projects studied did not reach construction phase.
The study mapped project success or failure against a set of available data on each project in an effort to identify the most significant factors affecting success. Analysis of the top ten factors for success in projects highlighted the importance of market demand in the success of projects ( location, sector and timing) – with this factor featuring five times in the top ten.
Ensuring land preparation (“shovel ready” development sites prior to engaging developers was also identified as a key success factor with 64% of projects with zoning in place succeeding of compared to a 29% success rate for project which did not have the correct zoning in place at time of award.
A focusing on smaller projects rather than “mega” projects also reported higher success rates. All Top Ten Factors affecting success are summarised in the table below:
Top 10 Success Factor in Public Sector Property Development Projects
The initial finding of the study suggested that following key recommendations for public property projects to ensure increased success:
1. Focus on identifying demand drivers (Proven Market Demand in Location, timing and development type to match demand)
2. Focus on Smaller projects (Optimally less than R50Million)
3. Ensure land preparation (Shovel ready land)
4. Lease agreements can perform as well if not better than sale agreements
5. Emerging developers can perform as well as established developers
6. Investigate ways to improve procurement process to emulate private sector direct negotiations.