Project Development

Project development refers to the entire process of planning, preparing, and executing real estate projects-from the initial concept through land acquisition to completion and marketing. Project developers combine location, capital, and a use concept into a profitable construction project, while bearing the entrepreneurial risk. In a broader sense, the term also encompasses the revitalization of existing properties and infill development in established urban neighborhoods.

Phases of Project Development

Professional project development is divided into several consecutive phases. In the initiation phase, the location and property are analyzed, market potential is assessed, and initial usage concepts are outlined. The design phase involves feasibility studies, building volume studies, and a preliminary profitability analysis. This is followed by the planning phase (zoning plan, building permit, architectural services) and finally the implementation phase, which includes awarding the construction contract, construction supervision, and final inspection. The marketing phase typically runs in parallel, during which residential units or commercial spaces are sold or leased in advance (forward sale, pre-leasing).

The initiation phase is often underestimated: A careful site analysis, the developability of the property (building rights, infrastructure status, contaminated sites), an examination of planning law requirements, and initial market research determine whether a project is even economically viable. Experienced project developers deliberately invest time and money in due diligence during this phase before making any significant down payments. This protects against costly mistakes that would only become apparent years later.

Risks and Success Factors

Project development involves significant risks: rising construction costs, delays in the permitting process, interest rate hikes during the construction phase, or changing market conditions can greatly impact profitability. Key success factors include a solid site analysis, realistic cost planning with sufficient buffers, early engagement with authorities and neighbors, and an experienced project development team. A professionally structured project control system monitors costs, schedules, and quality throughout the entire development period.

In particular, interest rate risk has put many project developments under pressure since 2022. Projects calculated on the basis of low-interest-rate scenarios faced significant financing difficulties following the shift in interest rates. Professional developers hedge this risk through interest rate hedging instruments or by keeping the financing term as short as possible through rapid pre-leasing and prompt building permits.

Project Development and Revitalization of Existing Properties

In addition to new construction projects, the revitalization of existing properties is gaining importance. This involves converting old commercial or industrial facilities into residential, office, or mixed-use spaces. This so-called conversion poses special challenges regarding contamination assessments, historic preservation, and urban integration. Especially in dense urban areas where vacant lots are scarce, the revitalization of existing buildings offers significant potential.

An important tool in this process is the so-called building rights granted by a zoning plan: Many conversion projects require the creation or amendment of a zoning plan to enable the new use under planning law. This entails close collaboration with the city planning department, often spanning several years. Those who engage with the Nuremberg City Planning Office early on and propose an urban development agreement (Section 11 of the German Building Code) can expedite the process.

Existing building revitalizations also require an intensive examination of sustainability: energy retrofitting, accessibility, and the integration of renewable energy are not only legal requirements but also significantly influence the marketability of the finished units. Projects that achieve a high energy efficiency standard can access KfW funding and command significantly higher prices on the market than energy-inefficient renovations.

Profitability and Market Risks

Project developments in Nuremberg face a specific cost situation: high land prices, increased construction costs due to rising material and labor costs, as well as stricter energy efficiency requirements make cost calculations more challenging. Project developers must therefore rely on a solid pre-sale or pre-lease rate earlier than ever before they begin construction. In the metropolitan region, pre-sale rates of 30-50% are considered a prerequisite for banks to grant loans. At the same time, the increased demand for barrier-free housing and energy-efficient new buildings has structurally supported the market.

Practical Tip for Property Owners in Nuremberg and Franconia

Nuremberg has been experiencing brisk project activity for years-ranging from infill development in Wilhelminian-style neighborhoods to large-scale conversion projects such as the former AEG site in Maxfeld or the area surrounding northern Nuremberg. Owners of older apartment buildings or commercial properties should assess whether their property offers potential for infill development-whether through adding stories to the existing building, developing backyards, or complete replacement construction. We would be happy to work with you to analyze whether adding a story, building a new structure in the garden, or a complete revitalization makes economic sense-and we recommend experienced project developers and architects from the metropolitan region who have successfully carried out such projects.

For owners who wish to sell their property to a project developer, we recommend obtaining an early assessment of the potential under planning law. The actual sale price you can achieve depends largely on what use and floor area are permitted under planning law. A property with secured building rights is worth considerably more than one that still requires a zoning plan process. We help you realistically assess your property’s potential and approach the right development partners.

Frequently Asked Questions

What distinguishes a project developer from a property developer?

The project developer bears the development risk in all phases, from the purchase of the land to completion, and is responsible for the overall concept. The property developer, on the other hand, is, in the narrower sense, the company that constructs buildings on its own land and sells the residential units in accordance with property development law. In practice, many companies assume both roles.

How long does a typical project development take?

Depending on the project size and the complexity of the permitting process, it takes between three and eight years from the initial site analysis to the handover of keys. Large-scale projects involving changes to the zoning plan can take even longer. Nuremberg’s City Planning Office offers an easily accessible consultation service for preliminary inquiries, which can help expedite the process.

What returns do project developers achieve?

Typical developer margins, before taxes and debt costs, range from 15 to 25 percent of the total investment volume-depending on the risk level, project duration, and market conditions. In a tight market like Nuremberg, marketing risks are manageable, but land prices and construction costs are high.

What subsidies are available for project development in Bavaria?

KfW federal subsidy programs (BEG, Climate-Friendly New Construction) offer low-interest loans for energy-efficient new buildings. BayernLabo supports subsidized housing construction with low-interest construction loans. In Nuremberg, there are also municipal parking space buyout schemes and inner-city development programs that favor infill projects. Those who check their project’s eligibility for funding early on and comply with the relevant standards can significantly improve a project’s profitability.

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