Real estate investors see buildings mainly as investments that must yield profits. The fact that investment in the construction sector is so very profitable is not a matter of course.
To do this, construction on the market has to meet demand, both in terms of its quality and price. For investors, therefore, capital is merely a means of production which, like a machine, must function and produce what it needs to: namely, yield.
The business is very risky, because the chances of making a good profit are great only if you are willing to risk a lot.
In order to be successful, investors need to get everything they need out of their projects. Risk management plays a major role in this process and provides the decisive competitive advantage compared to traditional investors. For the builders, risks and profitability already begin with the acquisition of a plot of land. If the business is to be interesting, the value of the soil must rise above the expected normal.
As far as construction costs are concerned, the profits are basically the difference between what investors are willing to pay for the services they claim, and what they achieve on the basis of the usual market prices themselves for the objects they produce.
The ability to make this difference and to make it as large as possible is one reason for the profitability of its operation, and a further advantage compared to construction production, such as the public sector. It also plays an important role in the allocation of planning contracts to architects and the remuneration of their work. In comparison, the architectural quality of a design is no more than one of many factors of the second order. In fact, the lucrative nature of a project depends only a limited extent on the efficiency of the groundwork and the economy of the construction. What can be earned by clever financing, scheduling and marketing is still much more than what can be achieved by a great deal of planning effort. In this respect too, the architectural form plays only a limited role in yield building. Their weight grows only where they have a positive effect on the long-term placement of the buildings.
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