- More stringent regulations tended to be associated with longer planning times for commercial real estate projects.
- Accounting for construction cost, the average planning time for a commercial real estate project is 28 months.
- Planning times for commercial real estate projects tend to be longest on the coasts.
Before construction can begin on a commercial real estate project, a great deal of preliminary work has to take place. The developer must acquire the land, work with architects and engineers to draw up plans for the site and the building, hire the contractors, and navigate the many steps to obtain regulatory approval for the project. Developers know how long this process takes for their own projects and may have a general sense for other projects in their market. But, until now, there was no hard evidence on planning periods across the entire country.
Recent research, which I conducted with Jonathan Millar of the Federal Reserve Board and Daniel Sichel of Wellesley College, fills this gap by presenting the first comprehensive estimates of planning times for commercial construction projects across the United States. We analyze roughly 82,000 projects nationwide for which planning was initiated between 1999 and 2010, using data obtained from CBRE Econometric Advisors/Dodge Pipeline. The projects in the dataset include office buildings, retail stores, warehouses, and hotels. About 95 percent of these projects involve the construction of a new building; the remainder are additions or alterations to an existing building or conversions to a new use.
For our analysis, we define the planning period as the time between the hiring of an architect to draw up preliminary plans and the start of construction. Some planning surely occurs before an architect comes on board. If nothing else,the developer will have given the project enough thought to believe it’s worthwhile to incur the cost of an architect. Our dataset, however, provides little information on this initial stage of planning. Excluding the very beginning of the planning process means that the full timeline is even longer than what we find.
Read the full text of the letter here.