Real Estate Development Services in Germany: Business Model and Success Factors

The Real Estate Development business in Germany is currently undergoing major structural changes caused by continuing weak real estate market conditions and tightened lending guidelines (Basel II) by the financing banks. As a consequence, traditional speculative development is increasingly replaced by alternative forms of development. In addition to cooperative forms such as Joint Ventures and equity partnerships, developers begin to focus on real estate development service, i.e. they offer their professional skills as services for institutional investors seeking to profit directly from real estate developments and corporations planning to extend their facilities. This service alternative brings about a change in the developer's perspective from an entrepreneurial towards an agent's point of view and poses new challenges for the developer's business model. Of special concern is the risk allocation within service development projects. While speculative and cooperative projects involve equity financing by the developer and therefore lead to an alignment of interests, service development projects require different measures such as transparency and close collaboration. Thus, the purpose of this paper is to introduce a service-orientated business model for real estate development which includes methods and tools to cope with the specific requirements of real estate development services. The main focus is on the identification of the performance elements and the definition of process steps and modules as key success factors for development services. Furthermore, the client's role in the development process will be analyzed and suggestions will be given as to which extent he or she can be integrated into the process.