From infrastructure and sitework to permitting and fees, it’s important to have a realistic estimate of development costs before making any purchases.
This is especially true for developers looking to subdivide large tracts of land.
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Key Components of Land Development Costs
Land development costs can be significant and should be estimated accurately in order to plan and budget for a successful construction project.
Below, we discuss the key components of land development costs:
Impact Fees and Their Regional Variations
Impact fees are charges levied by many municipalities on new construction projects to fund public costs associated with the increase in population caused by the development.
These fees are assessed by local government, usually at the time of permit application, and can vary widely by state and municipality.
In the San Francisco Bay Area, for example, impact fees can range from $1,000 to over $100,000, depending on the location and size of the project.
They are assessed to cover the cost of public infrastructure, such as roads, parks, libraries, and schools.
Developers should factor in impact fees when assessing the feasibility of a project and obtain accurate information regarding the fees from the applicable city or county authorities.
Site Development Costs: Clearing, Grading, Excavation, and Landscaping
Site development costs include everything that must be done to prepare the land for construction, such as clearing trees and brush, grading and leveling the ground, excavation, and landscaping.
Site development work can be extensive, and costs can range from $1 to $2 per square foot, depending on the site’s topography and location.
Other site development costs can include well and septic system installation, grading and earthwork, foundation perimeter drains, swales, culverts, subsurface drains, curtain drains, and landscaping.
These costs can also vary significantly depending on the site’s characteristics, such as the extent of excavation required, access to utilities, and the local cost of labor.
Utility Connection Fees and Their Components (Trenching, Line Fees, Tap Fees, etc.)
Connecting to utilities such as gas, water, and electricity can be a significant cost in land development. In addition to the cost of installation, which can be expensive, utility companies charge various fees, including trenching costs, line fees, and tap fees.
These fees can range from a few hundred dollars to several thousand dollars depending on the location and utility company.
Developers should consult with utility companies and obtain accurate information regarding these charges.
Legal Fees and Their Role in the Development Process
Legal fees are also an important component of land development costs. They can include costs associated with a land survey, a title search, variance requests, boundary disputes, and title insurance.
Developers should ensure they engage knowledgeable subject matter experts who can provide advice regarding the legal processes involved and obtain accurate information regarding these costs to plan and budget for a successful project.
Estimating Sitework and Land Development Costs
The importance of accurate cost estimation cannot be overstated when it comes to developing a piece of land. Underestimating costs can break a project and lead to financial losses.
Here are the factors to consider for a more precise estimate and best practices for improving the quality of conceptual site development plans.
Factors to consider for a more precise estimate include:
- Soil conditions: Perform a geotechnical survey to understand the composition of the soil, which can impact earthwork, excavation, and foundation costs.
- Utility lines: Identify the locations of existing utility lines (electric, water, sewer, gas, etc.) to estimate the costs of extending these services to the site.
- Municipal requirements: Familiarize yourself with the local municipality’s guidelines and requirements, including permits, fees, zoning regulations, and mandatory land development improvements.
Best practices for improving the quality of conceptual site development plans include:
- Engaging with the governing municipality early in the process, which can help identify potential issues, streamline the permitting process, and reduce the risk of regulatory curveballs.
- Familiarizing oneself with the governing Unified Development Ordinance (UDO) to ensure that your project adheres to local land-use regulations.
- Leveraging subject matter experts such as civil engineers, land planning consultants, and contractors to help quantify costs, assess site-specific challenges, and create a detailed development plan.
Tips for Managing Land Development Costs
Managing land development costs effectively can mean the difference between a successful project and a financial disaster.
Let’s see what are strategies to mitigate unexpected expenses, the importance of engaging with governing municipalities and subject matter experts, and the value of continually refining estimates as new information becomes available.
Strategies to mitigate unexpected expenses:
- Perform thorough due diligence on the land, including soil testing, wetland mitigation assessment, and boundary survey to uncover potential issues early in the process.
- Consider alternative systems for utilities, such as gravity sewer systems or on-site stormwater detention, to reduce infrastructure costs.
- Explore off-site improvements that may be required by the municipality, such as traffic lanes and rights-of-way, and account for these costs in your estimate.
Engaging with governing municipalities and subject matter experts:
- Consult with local officials to understand potential zoning or permitting issues, which can save time and money in the long run.
- Collaborate with experienced professionals, such as civil engineers and contractors, who can help navigate site-specific challenges and provide accurate cost estimates.
Continually refining estimates as new information becomes available:
- Update your cost estimates as you gather more information about the site, such as soil conditions, utility availability, and municipal requirements.
- Be prepared to adjust your development plans as needed to stay within budget and address any unforeseen issues that may arise during the development process.
Developing a piece of land involves various costs, from site improvement and local fees to permits and utilities.
By accurately estimating sitework and land development costs, employing strategies to mitigate unexpected expenses, and engaging with governing municipalities and subject matter experts, developers can improve the likelihood of a successful and cost-effective project.
