Ownership Brings Opportunity and Complexity
For retailers, healthcare providers, and industrial users, owning their facilities can bring major financial and operational advantages. These include building equity, controlling long-term costs, gaining tax benefits, expanding faster, and creating a space that fits your needs. But developing a building, whether from the ground up or through a renovation, is complex and risky. Without the guidance of a skilled commercial real estate developer, many owner-users run into delays, cost overruns, and even deal failure.
This article explains why hiring a qualified commercial real estate development firm is a smart move for any owner-occupied project. It covers site selection, due diligence, entitlement approvals, team coordination, financing, cost controls, and structuring ownership for tax savings.
Construction Financing: Structuring the Right Capital Stack
Getting the right construction financing is key to a successful project. Without solid funding, even a great site and design can fail. Construction loans are short-term, draw-based, and depend on future project milestones. Lenders will look closely at your experience, your budget, project status, and how risks are managed. A commercial real estate developer can prepare the loan package and present it to banks, private lenders, or other funding sources.
Building the capital stack—the mix of funding sources—is another important step. It might include senior loans, mezzanine debt, preferred equity, or common equity. Each part has its own cost and control level. Owner-users often use a simple stack: a senior loan plus equity from the business or a related entity. But even in simpler cases, it’s important to know how leverage, interest reserves, and lender rules affect your deal. A good development advisor will build the stack to keep costs low and protect the project through every phase.
Site Selection: Beyond Just Location
Choosing the right site is one of the most important steps. A commercial real estate developer will look beyond just the address. They’ll review zoning rules, general plan use, traffic access, and utility connections.
Site issues like slope, soil, flood zones, and available power or water can greatly affect both costs and long-term use. For example, a site that lacks sewer access may need expensive offsite work. An experienced team will check all of these issues early and confirm the site fits your goals and budget.
Due Diligence: Evaluating Site Viability from All Angles
The due diligence process confirms a property’s suitability for development and identifies risks early. Physical due diligence includes commissioning ALTA surveys to verify boundaries and easements, conducting geotechnical studies to assess soil conditions, and performing Phase I (and if needed, Phase II) environmental site assessments to ensure no harmful contamination is present.
Financial due diligence involves preparing preliminary project budgets and underwriting models that include land acquisition, soft costs, hard costs, and contingencies. Legal and title reviews help uncover any encumbrances or restrictions that could impact development rights. The development team should also evaluate the political and community context, including neighborhood plans, design guidelines, and potential stakeholder opposition.
Entitlements and Third-Party Approvals: Navigating Bureaucracy
Entitlements are among the most uncertain and timeline-sensitive aspects of any commercial development project, especially in complex jurisdictions like California. Navigating municipal approvals requires technical documentation, strategy, experience, and local relationships. A skilled commercial real estate developer will lead early meetings with planning departments to confirm land use compatibility and define the optimal path through the entitlement process.
Entitlements may include site plan review, use permits, variances, or rezoning. In jurisdictions governed by CEQA (California Environmental Quality Act), developers must address environmental impacts, traffic studies, and mitigation measures. Coordination with engineering departments, utility districts, fire marshals, and environmental agencies is often necessary. Conditions of approval and impact fees must be reviewed carefully to avoid unexpected financial obligations. A well-planned entitlement strategy mitigates risk and expedites timelines.
Consultant Team Assembly and Oversight
A critical success factor in commercial development is the integration of a capable, well-managed consultant team. The developer serves as the central coordinator, aligning scope, deliverables, and schedules across all disciplines. Key team members typically include:
- Civil Engineers – Grading, drainage, and utility design.
- Architects – Building plans, permitting, and code compliance.
- Geotechnical Engineers – Foundation design based on soil reports.
- Surveyors – Boundary, topographic, and ALTA surveys.
- Dry Utility Consultants – Coordination of electrical, gas, and telecom services.
- Biological/Environmental Consultants – Habitat studies, CEQA compliance.
- Special Inspectors – Materials testing and inspections.
- Traffic Engineers – Access analysis and impact reports.
Failure to manage these consultants effectively can cause errors and permit delays. A seasoned commercial real estate developer drives accountability and anticipates interdependencies to ensure seamless coordination.
Financial Controls and Lender Draws: Managing Capital with Discipline
Establishing rigorous financial management and reporting is just as important as securing financing. A comprehensive pro forma and budget—accurately reflecting all soft and hard costs, fees, and contingencies—is essential for project discipline.
This includes:
- Creating detailed budgets by phase and category.
- Implementing consistent accounting codes.
- Managing invoices and soft cost tracking.
- Submitting accurate draw requests to lenders.
- Securing lien releases and proofs of payment.
- Tracking budget vs. actuals in real time.
Platforms like Northspyre provide automation, transparency, and centralized data. These tools support informed decision-making throughout the project lifecycle by enhancing accountability and mitigating disputes.
Tax and Ownership Structuring: Maximizing Long-Term Value
Ownership structure has long-term tax and estate planning implications. Owner-users can benefit from cost segregation studies that accelerate depreciation and reduce taxable income. Structuring real estate ownership through a properly formed entity also enables future 1031 exchanges and tax deferral opportunities.
Bonus depreciation and a long-term hold strategy allow significant early-year tax advantages. Additionally, planning for a stepped-up basis upon inheritance can provide meaningful estate tax benefits. A knowledgeable commercial real estate developer works alongside your CPA and legal team to align ownership structures with broader wealth management goals.
5 Reasons to Hire a Commercial Real Estate Developer
Why do owner-users need a commercial real estate developer? Here’s a step-by-step overview of how hiring one reduces risk and enhances success:
- Site Vetting and Acquisition – The developer ensures zoning, access, and infrastructure align with your needs.
- Feasibility and Budgeting – Expert financial modeling and risk analysis guide smart investment decisions.
- Entitlement Strategy – Developers navigate permitting, CEQA, and city reviews with efficiency.
- Construction and Consultant Oversight – Coordinated project teams reduce delays and rework.
- Ownership and Tax Planning – Advisors structure deals for long-term value and tax optimization.
The Risks of Going It Alone
While self-performing development may seem appealing for control or cost-saving purposes, it often leads to avoidable and expensive mistakes. Common issues include:
- Acquiring sites with undisclosed encumbrances.
- Underestimating soft costs.
- Mismanaging consultants or permitting.
- Submitting incomplete plans.
- Poor contractor oversight.
- Inability to secure financing.
Without a packaged, professional presentation, many owner-users struggle to obtain timely or competitive construction loans. These risks are significantly reduced when an experienced commercial real estate developer is engaged from the outset. For clients who want expert oversight while maintaining ownership control, our fee development services offer a flexible, low-risk path forward.
Capital Rivers Commercial: Your Development Partner
Capital Rivers Commercial offers full-spectrum development advisory services tailored to owner-users in the retail, industrial, and healthcare sectors. We specialize in complex, multi-jurisdictional projects where design, entitlement, financing, and execution must be flawlessly integrated.
Acting as an extension of your team, we bring municipal insight, established vendor relationships, and hands-on execution experience to ensure project success. From site identification and feasibility analysis to project management, lender coordination, and facility delivery, Capital Rivers Commercial provides the strategic leadership and technical expertise required to transform your development vision into a successful, long-term investment.
To learn more about collaborating on a development project, contact our team.
