What is predevelopment in real estate?
Predevelopment is the phase between site control and construction start. Definition, workstreams, and why soft costs run 5 to 9 percent of total project cost.
Predevelopment is the phase of a real estate development project between site control and construction start. It covers feasibility analysis, design and engineering, entitlements and zoning approvals, environmental review, permitting, and assembling construction financing. Research on multifamily projects delivered between 2003 and 2022 found the planning phase averages 15.3 months, longer than the 12.3-month average construction phase, and predevelopment soft costs commonly total roughly 5 to 9 percent of total project cost before land.
Where predevelopment starts and ends
Predevelopment begins at site control: the land is under contract, under option, or closed, and the developer has decided to pursue a project on it. It ends at construction start, which in practice means three things have converged: permits in hand, construction financing closed, and notice to proceed issued to the general contractor. Everything between those two points is predevelopment.
The phase is distinct from what surrounds it. Acquisition due diligence answers whether to buy the site. Predevelopment answers whether and what you can build on it, and assembles the legal and financial machinery to do so. Construction then executes a plan that predevelopment fixed. Built's project lifecycle guide frames the stage as covering site acquisition, entitlements, zoning, and detailed design and engineering, and notes that a mid-rise multifamily project typically takes 24 to 36 months from concept to certificate of occupancy, with predevelopment consuming a large share of that.
What makes the phase strategically distinct is its risk profile. Predevelopment dollars are spent before the project has approvals or committed financing. If the rezoning fails in month fourteen, the feasibility studies, design fees, and legal bills are gone. Developers accept that exposure because this phase is also where most of a project's value is created: an entitled site is worth substantially more than a raw one.
The workstreams inside predevelopment
Six workstreams run through the phase, heavily overlapped rather than sequential:
- Feasibility. Market studies, competitive supply analysis, preliminary pro formas, and site capacity tests. The output is a go or no-go on the concept and a program (unit count, product type, rent assumptions) the rest of the phase designs to.
- Design and engineering. Schematic design through construction documents, plus civil, structural, mechanical, and geotechnical work. Design runs in loops with entitlement feedback and cost estimating, and each loop costs weeks.
- Entitlements and zoning. Rezonings, variances, conditional use permits, site plan approval, subdivision. This is the workstream with public hearings, community engagement, and political risk, and it is usually the critical path.
- Environmental review. Site assessments plus, in some states, a formal review regime such as CEQA in California, with its own studies, comment periods, and litigation exposure.
- Permitting. Building permits and agency sign-offs once design and entitlements support them.
- Financing assembly. Lining up construction debt and equity, negotiating term sheets, and satisfying lender conditions so the financing can close when permits land.
The coordination burden is the defining management problem: a zoning condition changes the site plan, which changes the civil drawings, which changes the cost estimate, which changes the pro forma the equity committed to.
What predevelopment costs in commercial real estate
HelloData's breakdown of typical predevelopment costs puts numbers on the line items, expressed as shares of total project cost. On a $50 million project they scale as follows:
| Line item | Share of total project cost | On a $50M project |
|---|---|---|
| Feasibility studies | 1 to 2 percent | $500,000 to $1,000,000 |
| Design and engineering | 1 to 2 percent | $500,000 to $1,000,000 |
| Legal fees | About 1 percent | About $500,000 |
| Permitting and approvals | 0.5 to 1 percent | $250,000 to $500,000 |
| Project financing costs | 1 to 2 percent | $500,000 to $1,000,000 |
| Marketing and sales preparation | 0.5 to 1 percent | $250,000 to $500,000 |
Summed, that is roughly 5 to 9 percent of total project cost, or $2.5 million to $4.5 million on the $50 million example, before land and before a shovel touches dirt. HelloData notes the ranges swing widely with project scope and location, and entitlement-heavy jurisdictions push the legal and permitting lines well past these figures.
The number worth internalizing is what that capital is: at-risk equity with no collateral behind it until approvals land. Staging the spend against milestones (concept-level dollars before entitlement filing, full construction documents only after approvals are probable) is the standard discipline for containing it.
Join CRE teams already running their deals on MotionCRE.
Why predevelopment timelines run long
The data on timelines is unambiguous: planning is now the longer half of development. Research by Cunningham and Orlando summarized by the Urban Institute, covering multifamily projects from January 2003 to December 2022, found the planning phase averages 15.3 months from when a project is first announced to when construction begins, against a 12.3-month average construction phase, for 27.6 months total. Planning takes 3 to 4 months longer than the building itself.
The same research maps where the drag concentrates. Projects in the Northeast average about 3 months longer than the Midwest and projects in the West about 5.7 months longer. Buildings over 50 units run longer, mixed-use projects with a retail component take roughly 3 more months to deliver, and delays cluster in permitting.
Approval pathway is the biggest single variable. Discretionary processes, where a project needs hearings and votes rather than code compliance alone, add revision cycles and political risk that by-right projects skip entirely. California offers a measured example: after the 2025 CEQA reform exempting qualifying infill housing, Voit Real Estate Services estimated the change reduces the entitlement timeline by 12 to 18 months, with one of its multifamily brokers noting that major projects that previously took six or seven years might now take three or four. Read in reverse, that is a direct estimate of what one layer of environmental review had been adding.
The industry's self-report matches. Built cites an NMHC survey in which 79 percent of builders cited ongoing delays driven by permitting, design standards, and other regulatory hurdles. Blowouts are the base case to plan for, and the carrying cost is concrete: every month of predevelopment is another month of land carry, option payments, and consultant burn before a dollar of revenue exists.
A milestone map for the phase
Because predevelopment workstreams overlap, the useful mental model is a milestone map rather than a step list. Six gates, each a real go or no-go decision with a defined spend level behind it:
- Site control executed. Spend to date: pursuit costs only.
- Feasibility confirmed. Market study and capacity test support the pro forma. Kill here and you have spent concept-level dollars.
- Entitlement application filed. Design is far enough along to submit. The clock that the 15.3-month average measures is mostly this gate to the next one.
- Entitlements secured. The political risk is retired. An entitled site has a different value than the one you controlled at gate one.
- Permits issued and financing closed. The two usually land within weeks of each other because lenders fund against permits.
- Notice to proceed. Predevelopment ends; construction carries the schedule from here.
Teams that manage to this map stage their capital, revisit the kill decision at every gate, and know exactly which gate each project in their pipeline is sitting at. Teams that manage predevelopment as one long to-do list find out in month nine that the traffic study nobody owned is now the critical path.
Tracking predevelopment across a portfolio
One project's predevelopment is survivable with a spreadsheet and a sharp project manager. A development pipeline of five projects at different gates is where tracking breaks: dozens of consultant deliverables, hearing dates, submittal deadlines, and financing conditions, each owned by a different person and none of it visible in one place.
MotionCRE gives development teams a pipeline board with custom stages that mirror the milestone map above, and each project's workspace holds the development fields, entitlement key dates and construction milestones with status tracking, consultant contacts, and stage-triggered task templates, so filing an entitlement application spawns the same checklist every time. The team standup runs off the board instead of five status emails. More on the development-specific setup at MotionCRE for development teams.
For the approval workstream specifically, the entitlement, zoning, and environmental items in the commercial due diligence checklist are a working seed list for your own gate reviews, and the deal flow definition covers how the predevelopment pipeline connects to the acquisition funnel that feeds it.
Browse more playbooks, templates, and definitions in the MotionCRE resource library.
- 1.HelloData, What Are Typical Predevelopment Costs in Real Estate (accessed 2026-07-01)
- 2.Urban Institute Housing Matters, What Factors Affect How Long It Takes to Build and Convert Multifamily Housing (accessed 2026-07-01)
- 3.Voit Real Estate Services, What the CEQA Exemption Means for Multifamily and Industrial Developers (accessed 2026-07-01)
- 4.Built, Real Estate Project Lifecycle, The 6 Stages of Development (accessed 2026-07-01)