ancient cities

216 Developer
retail, for example—in an effort to maximize the
limited capacity of the firm and gain competitive
advantage through experience.
Developers can be found in the for-profit, nonprofit,
and public sectors, although real estate
development as an industry is typically associated
with the private sector, where for-profit developers
seek to maximize financial returns. In the 1970s
and 1980s, nonprofit developers, such as community
development corporations, entered the development
industry in response to the dwindling
availability of public funds for neighborhood revitalization
and low-income housing. In fact, community
development corporations have become
central to the building of affordable housing in
many cities. During the same time period, local
governments began to emphasize economic development
activities that would enhance their municipality’s
ability to attract and maintain a constant
flow of private investment. These shifting motivations
and changing institutional structures have
expanded the opportunities for collaboration among
sectors. Public–private partnerships, for instance,
have become a common method of leveraging public
funds with private investment and expertise.
Metrotech Center in Brooklyn, New York, offers
an early example of a large-scale project developed
using such a partnership. When the government
acts as a developer or development partner through
public or quasi-public agencies, it can provide regulatory
relief, tax abatements, and other incentives to
stimulate and shape private development schemes.
Real Estate Markets and Planning
Developers are sensitive to market fluctuations,
demand, and risk. In an effort to minimize risk and
respond to demand, development firms perform
extensive market and feasibility analyses that are
used to determine and verify conceptual plans. The
availability of debt financing or equity investment
also heavily influences the nature, pace, and location
of real estate development activities, as do the
risk management efforts of lending institutions.
When capital is abundant and markets are
relatively unfettered, speculative development—
building without specific tenants—is often the
result. The overbuilding associated with speculative
development has historically precipitated
downturns in real estate market cycles.
Real estate developers operate in a highly regulated
environment where local zoning laws and
planning requirements determine allowable uses,
densities, and the scale of individual site development.
State and federal regulations, particularly in
the form of environmental laws, also affect most
development projects by increasing potential cost
and uncertainty during the project approval process.
This regulatory landscape has created an
often contentious relationship between real estate
developers and government officials and planners.
Interestingly, it was developers, in an effort to
minimize competition from speculators and reduce
risk, who were a significant force in the creation of
zoning laws and subdivision regulations in the
early twentieth century.
The role of the developer varies significantly
from country to country, based on differing political
and economic systems. While the institutional
structure of development in the United Kingdom,
for example, is similar to that of the United States,
national governments in continental Europe, and
in many parts of Asia, play a more substantial and
direct role in the development of land. Public officials
and government agencies often limit the discretion
of private firms by determining the location,
type, timing, and scale of new projects.
Emerging Trends
For developers, the future may require significant
changes in business activities and organizational
structures. Increased scrutiny of real estate development
projects and evolving measures of success
will necessitate greater collaboration between sectors
to achieve outcomes that are economically
efficient, socially equitable, and environmentally
sustainable. However, conflicts arising from the
homogeneity encouraged by increasing standardization
within capital markets and the contextual
development demanded by local communities may
serve to exacerbate the tension between developers,
community groups, and planning agencies. In
addition, tighter regulatory environments, sophisticated
alternative sources of capital, and economies
of scale will change the complexion of the real
estate industry. This could force smaller organizations
out of the market or into joint ventures with
other developers. Finally, the convergence of real
estate asset markets across countries, supported by