How Real Estate Developers Think: Design, Profits, and Community

The City in the Twenty-First Century

by Peter Hendee Brown

Cities are always streets, infrastructure, public spaces, and buildings are constantly being built, improved, demolished, and replaced. But even when a new project is designed to improve a community, neighborhood residents often find themselves at odds with the real estate developer who proposes it. Savvy developers are willing to work with residents to allay their concerns and gain public support, but at the same time, a real estate development is a business venture financed by private investors who take significant risks. In How Real Estate Developers Think , Peter Hendee Brown explains the interests, motives, and actions of real estate developers, using case studies to show how the basic principles of development remain the same everywhere even as practices vary based on climate, local culture, and geography. An understanding of what developers do and why they do it will help community members, elected officials, and others participate more productively in the development process in their own communities.

Based on interviews with over a hundred people involved in the real estate development business in Chicago, Miami, Portland (Oregon), and the Twin Cities of Minneapolis and St. Paul, How Real Estate Developers Think considers developers from three different perspectives. Brown profiles the careers of individual developers to illustrate the character of the entrepreneur, considers the roles played by innovation, design, marketing, and sales in the production of real estate, and examines the risks and rewards that motivate developers as people. Ultimately, How Real Estate Developers Think portrays developers as creative visionaries who are able to imagine future possibilities for our cities and communities and shows that understanding them will lead to better outcomes for neighbors, communities, and cities.

Genres: Urban Planning, Architecture, Business, Geography

336 pages, Paperback

First published April 1, 2015

Reviews

[Phillip · Rating 5 out of 5]

I am a professional civil engineer and I was interested in learning more about real estate development.

This book does an excellent job describing strategies that different real estate developers use to develop successful projects. It is informative, clear, simple, and entertaining. I highly recommend this book.

[Taaj Francois · Rating 5 out of 5]

I've been in and around much of my families real estate for almost a decade now - more recently I've played active roles in managing many of the properties and currently in the midst of closing my first deal. ABC.

Peter definitely did an amazing job in writing the many stories of the multifaceted pioneering developers mentioned throughout his book.

It's broken down nicely into chunks discussing different pioneering developers such as Gerald Fogelson who led the re-development of the Central Station residential neighborhood of Chicago, which formerly housed a train station. James Loewenberg who first established himself in the Chicago real estate industry by developing and designing a host of high-rise apartment buildings along Lake Shore Drive including the Aqua which is an 82-story mixed-use residential skyscraper in the Lakeshore East development in downtown Chicago, Illinois.

Peter makes sure to give a well-balanced view of how successful a developer can become as well as how much they're susceptible to failure.

I'd definitely recommend this book to anyone currently looking to get into real estate development or have the interest in doing so. You'll learn and hopefully avoid some of the mistakes made by past developers + learn many ways developers truly think.

[Denny Troncoso · Rating 5 out of 5]

If you are an aspiring developer read it. If you are a professional serving the needs of developers read it. Government employee in planning read it. Community member looking to influence the development process read it. Numerous stories of successful developers and bad ones too. Great business book. Be a good person and do business with the same. Companies with visions other than money actually make more money than those with the opposite. Go with the product that the market gives you. Specialize in one or two products. Location, Location, Location but don't forget Value, Value, Value. Innovate a couple degrees to the right and left of existing product. Highest and best use needs to have demand. Entrepreneur high self esteem and belief in internal locus of control. Get contractors in the room in the beginning. Finding unit mix market analysis, marketing professionals and trusted sales agents. Sometimes bigger rooms lower dollar psi costs and more bedrooms become cheaper.

[River · Rating 1 out of 5]

This book is pretty dry. I saw it promoted on a few progressive/liberal new urbanist websites and thought I'd check it out. It gives some insight into how developers make decisions on where and when to invest, their relationship with the government, etc. However, I was must struck by the fact that it recommends total resignation as a path to community members. The author argues that it is fruitless to oppose a development and that instead community members and activists should drop their wholesale opposition (when that is happening) and instead restrict their objections to minor details and debates over building materials.

It was interesting on some level, but as one might guess, it really fails in its discussion of poverty, race, etc.

[Seth Hadenfeldt · Rating 3 out of 5]

The author provides a good general summary and description of real estate development. At times it seemed more like a sales pitch from a college program trying to attract students than an unbiased book. It focused a lot of time showcasing the real estate developer as creative successful director, while glossing over some of the less glamorous aspects of the field.

[Nick · Rating 3 out of 5]

(This book is written by the professor of my Private Sector Development course, and this review was written for our book review assignment. It is posted here, unedited, for public consumption).

The premise of “How Real Estate Developers Think” is to explain just that to an inexperienced community member so they may more productively engage with developers and shift development to align with their priorities. In this respect, “How Real Estate Developers Think” is a helpful tool that effectively educates non-developers on what constraints and opportunities developers are facing.
Brown begins by describing common characteristics of developers, including personality traits and backgrounds that point people towards becoming developers. This is explained as important because it allows the reader to better empathize with the supposed developer. Then the book begins to walk the reader through developers’ decisions, beginning with financial considerations around returns, loan financing, and equity options. The bulk of the middle of the book considers design as a concept and the developer’s relationship with architects, sales and marketing ideas, and market cycle timing, before turning to developers’ other interests or sense of purpose, and development’s impact on neighborhood and culture. Finally, Brown returns to the perspective of the community member, elaborates on the many (often conflicting, or weakly founded) priorities for development that commonly conflict with those of the developer. Brown reconciles this by explaining that the developer is also incentivized to collaborate with community members and may even learn something that improves the project, so a tactical approach by community members may result in some modest positive changes, even while the developer works within the constraints of larger systems.
What this book does not sufficiently acknowledge is that above all else, development is shaped by financial considerations that are outside of both the developer and the community member’s control. Market cycles shifting financing terms (interest rates and underwriting requirements) are subject to global markets and developers seeking loans are simply navigating a few relatively similar options at any given time. Despite developers' interests in art or architecture, the lowly city planner’s passion for urban design, the community member’s genuine pleas for certain neighborhood amenities, projects simply pencil or do not pencil with any of these aspects based on market conditions. Similar to financing conditions, no one project or developer can fundamentally shift the market of rents or sales prices that buyers or renters will pay. These factors control what even the most amenable developer can get done. In some sense, this makes “How Real Estate Developers Think”’s premise faulty - the community member cannot dream of changing a project in any way that would render it unprofitable.
This leads into the other major failing of “How Real Estate Developers Think” - there is no questioning of the outcome or efficacy of these systems and conditions. The phrase “housing crisis” does not appear in any substantial way, despite the acknowledgement that Americans overwhelmingly rely on private developers to produce housing. Statements like “Most real estate is a discretionary buy. You don’t need it - you want it” (pg 161, Herb Emmerman) fundamentally ignores the idea that housing specifically is a human need. With that framing, and acknowledging that housing is an imperfect market, it’s easy to understand why renters and buyers end up in imperfect homes - either too costly, burdening their spending, or cheaper and worse quality than they would like, because of a lack of availability. This is not a niche issue - the housing crisis is universal in America, and manifests at all price points as a lack of market or luxury production interrupts the cycles of filtering that a healthier housing market would exhibit. Brown does not respond to the idea that the housing crisis is a product of this system of private development, and any community member seeking to address that fundamental issue is not served by “How Real Estate Developers Think”.

[Dylan Marma · Rating 5 out of 5]

Author did a terrific job portraying how investors think by telling the stories of real life investors from all different backgrounds who go on to deploy unique strategies throughout their careers. Truly elucidates both the opportunity/glory as well as the risk involved in real estate development. Recommend for anyone in or interested in the real estate world..

[Jonathan · Rating 4 out of 5]

An enjoyable intro. It follows a handful of developers with distinct approaches. I particularly appreciated the wisdom on mitigating risk and achieving sustainable outcomes. Real estate is quite context-specific, though, so it won't give you much insight into other cities that may be interesting (e.g. NYC).

[marcos penados · Rating 5 out of 5]

Obligado para desarrolladores inmobiliarios

Libro obligatorio para cualquier desarrollador inmobiliario. Mucha experiencia que absorber para tener éxito en sus proyectos y minimizar problemas en los proyectos.

[Zack Hodges · Rating 4 out of 5]

Good Read

[Christopher Catrambone · Rating 5 out of 5]

I'm a developer and not many books on development so giving this 5 stars