Not every development opportunity deserves to be rescued.

Developers are used to solving problems.

Planning issues, difficult land assembly, neighbouring interests and funding pressures are all part of development.

But the ability to solve a problem does not automatically make the opportunity worth pursuing.

Sometimes the commercially sensible decision is to walk away.

That decision becomes harder once you have spent time negotiating the acquisition, instructed advisers and built a development strategy around the site.

The more time and money you have invested, the easier it can become to focus on finding ways to make the opportunity work rather than reassessing whether it still works.

That is where commercial discipline matters.

How many things need to go right?

One difficult issue does not necessarily make a development unattractive.

The warning sign is when several favourable outcomes are required at the same time.

• You need the expected planning outcome.
• You need the neighbouring agreement.
• You need the land assembly to complete.
• You need the programme to hold.
• You need the funding assumptions to remain viable.

Each dependency adds another condition to the projected return.

At some point, you are no longer really testing the underlying opportunity. You are testing whether enough assumptions can hold for the projected return to work.

That distinction matters before significant capital is committed.

Some risks carry more weight than others

Development risk should not be treated as one category.

A planning issue which reduces development capacity can affect more than planning. It can affect valuation, costs and projected return.

A land assembly problem might prevent the proposed scheme from being delivered in its intended form.

Contamination might introduce remediation costs and extend the programme.

A delay might increase the period over which finance is required and push back the point at which capital is recovered.

The real commercial exposure often sits in the relationship between those risks.

One problem might be manageable. Three connected problems might fundamentally change the opportunity you thought you were acquiring.

Your margin needs to survive something going wrong

An appraisal which produces an attractive return under the expected scenario is useful.

The harder test is what happens when the development does not follow that scenario.

Planning takes longer. Development capacity is reduced. Funding costs increase. Completion moves.

The purpose is not to create an excessively pessimistic appraisal. Development involves risk, and developers expect to take it.

But the projected return needs to justify the risks required to achieve it.

If a realistic change to one or two key assumptions removes most or all of the commercial return, that deserves attention before acquisition rather than explanation afterwards.

Walking away is also a development decision

Good development decisions are not only about identifying opportunities worth pursuing.

They are also about identifying opportunities which no longer justify the exposure.

This is one of the areas I will explore in my upcoming webinar on identifying and assessing profitable development opportunities.

We will consider land, planning and finance together, including land assembly, planning permissions, contamination, neighbouring interests, valuation, funding options, alternative lenders and changing economic conditions.

The objective is not to find developments without risk.

It is to understand which risks you are accepting, how they interact and whether the potential return still justifies taking them.

The ability to solve a development problem does not mean you should inherit it.

If an opportunity needs everything to go right before the numbers work, be prepared to walk away.

Register your interest here: https://www.linkedin.com/events/7501621042897920002/