Commercial real estate development can be incredibly profitable, but it often comes with many challenges. The real estate market is constantly shifting and changing, and keeping track of the legal implications of these changes sometimes prevents potential developers from even trying to break into the market. However, when real estate development is handled skillfully, it can lead to an incredible payout for developers. Often, doing the work to understand and navigate the market well can lead to incredible rewards.

An experienced Louisiana real estate attorney from Business Law Group can help navigate and explain the legal complexities of the commercial real estate market. Consider scheduling a consultation today with one of our experienced Louisiana real estate attorneys by calling (504) 446-6506.

Fundamentals of Real Estate Development

The foundational principle of commercial real estate development (CRE) is taking something that already exists, whether that be a plot of land or a preexisting structure, and recreating it into something of a higher value. This could involve building a home on an empty plot of land to sell to a single family, or it could mean renovating an old industrial building to become a restaurant. 

The effort required generally depends on two factors. The first factor is the condition of the plot. Purchasing an already functioning restaurant to expand its operations will not require as much effort and investment, as it is already in good condition for the task. Renovating a dated home for new buyers may involve removing dated materials, redoing electrical and plumbing systems, and updating to match current housing trends. Therefore, it would require much more effort.

The second condition is the work the developer intends to put in. Smaller updates will require less work than big ones. Building a new apartment complex on an empty plot of land will require much more work than simply updating a preexisting complex. The less effort a developer puts into a commercial real estate development, the lower the risk. However, investing more effort and financial resources can lead to exponentially greater payouts.

Significant Trends By Sector

For those pursuing CRE, understanding relevant trends in the market can help in the decision-making process. Staying aware and up to date can provide key insights into which properties may be most profitable in the future, which is valuable due to the long-term investment that real estate development requires. Listed below are several recent trends that may impact varying sectors of the market.

For more detailed information regarding the commercial real estate market, consider speaking with a skilled real estate lawyer from Business Law Group. 

Office

Since the shakeup of the office landscape during the 2020 pandemic, the future of office development has remained unclear. Many companies are still navigating the new available options of having work-from-home employees or hybrid employees. This may have contributed to the high office vacancy rate. However, demand for A Class office developments has not seen the significant decrease that B and C Class offices have.

Retail

E-commerce has had a significant effect on the retail market in recent years. However, it still only accounts for approximately %15 of all retail spending, according to the United States Census Bureau. Despite this, smaller neighborhood retail outlets are still easily accessible by the community and are generally considered to be viable. 

Industrial

Since the e-commerce boom in 2020, the industrial sector has been performing very well. Fulfillment centers and warehouses are a continuing necessity for shipping and other e-commerce functions, but there may be signs of slowing growth in this sector. While there do not seem to be indicators of a decrease, many suspect that the industrial sector is reaching a new steady state. 

Multifamily

Multifamily developments continue to profit, particularly in growing urban areas. Due to increasingly high mortgage rates, many expect a sustained need for multifamily units. While recent developments have contributed to a higher vacancy rate, the market still seems favorable to these developments. However, according to the National Multifamily Housing Council, the costs associated with building codes and other regulatory standards may have an impact on the expenses required for development in this sector. 

Single-Family

In Louisiana, the housing market has slowed due to the impact of inflation and the Federal Reserve Rate increase. In addition to that, the difficulty of finding affordable insurance in all sectors of commercial real estate development has led to more difficulties in this sector. However, Louisiana has seen some success in the development of high-end condominium properties. 

Legal Factors to Consider

In addition to the fiscal concerns, commercial real estate developers must also consider the legal implications and complexities of purchasing and developing properties. This is of particular importance to growth-stage businesses that are looking to expand. Listed below are some of the common legal complications that arise. 

Zoning Laws

In most states, land is zoned for a specific purpose by the government to promote the growth and well-being of the community. However, if a developer's plans for a plot do not align with the zoning designation of the plot, they may not be allowed to proceed. To proceed with the development, an individual or business may need to get the land re-zoned to match their intentions, which requires dealing with the state or municipal government. 

Commercial Leasing Issues

There are many different kinds of commercial leases in use, and the terms and effects of these may vary widely. Depending on the type of lease, the buyer may be restricted to a certain use of the property or restricted in other ways. Ensuring a developer has the proper lease may be challenging, and changing a preexisting lease may be even more so. 

ADA Compliance

All businesses that serve the public in the United States or with fifteen or more employees are required to comply with ADA standards. The Americans with Disabilities Act is a part of US law that advocates for the well-being of and accessibility of disabled persons. Depending on the type of property or business structure, the law may require certain changes to accommodate people with disabilities. 

Contact a Louisiana Real Estate Lawyer Today

Despite the challenges and the constantly shifting nature of commercial real estate development, there is a significant profit to be made by those who navigate it well. Understanding the legal and financial complexities may often be the key to success. For more information on the benefits and challenges of engaging in property development, consider consulting with an experienced real estate attorney from Business Law Group by calling (504) 446-6506.