Quick Answer
What exactly is commercial development, and how does the process work?
Commercial development is the process of planning, designing, financing, and constructing buildings for business use, including restaurants, retail centers, grocery stores, fuel and convenience stores with car washes, government facilities, healthcare and pharmacy locations, as well as mixed-use properties. The process typically involves six key phases: site selection and feasibility analysis, due diligence and permitting, planning and design, financing and budgeting, construction execution, and project closeout. Most commercial developments take between 18 and 36 months from concept to completion, depending on their complexity and scale.
Read on for comprehensive insights into each phase of commercial development and how strategic engineering partnerships can accelerate your project timeline while reducing costs.
Introduction
Commercial development creates jobs, brings services to communities, and transforms empty lots into thriving businesses. If you’re a developer eyeing your next project, an investor weighing opportunities, or a brand planning multiple locations, you need to understand how this process actually works.
At Sevan, we’ve guided countless clients through complex commercial developments across the restaurant, retail, grocery, fuel, convenience store, car wash, government, healthcare and pharmacy, hospitality, and residential housing sectors. Our experience spans every phase of the development process, working with major brands like McDonald’s, Walmart, Starbucks, Shell, and IKEA on multi-site programs worth over $1 billion annually. While we’re not developers ourselves, we serve as the strategic design, construction, and project management partner that makes development projects successful.
This comprehensive guide covers:
- The six essential phases of commercial development
- Current market trends and opportunities in 2025
- Common challenges and proven solutions
- How to select the right AEC program management partner early in the process
- Cost management strategies that protect your investment
The Current Commercial Development Landscape in 2025
Here’s what we’re seeing in commercial real estate this year. According to recent industry analysis, several key factors are reshaping the development landscape:
Market Stabilization: Interest rates have stabilized after the Federal Reserve’s rate cuts in 2024, though they remain higher than pre-pandemic levels. This creates both challenges and opportunities for developers seeking financing.
Supply Chain Improvements: Global supply chain disruptions have largely resolved, but developers are increasingly focused on domestically sourcing materials and components to maintain reliability.
Technology Integration: The commercial real estate industry is rapidly adopting new technologies, with firms expected to increase their technology spending in 2025, particularly in areas such as AI-powered project management and IoT-enabled building systems. Additionally, recent policy changes including the Opportunity Zones tax incentive program, potential tariff impacts on construction materials, and immigration policy effects on labor availability are reshaping project planning and cost considerations.
Sector-Specific Trends: Sector-specific trends impact design and construction markets as a whole. For example, industrial properties continue to show strong performance, driven by e-commerce and the reshoring of manufacturing. Multifamily developments remain in high demand, though some markets face concerns about overbuilding. Office spaces are evolving toward flexible designs with enhanced amenities.
The Six Essential Phases of Commercial Development
Each development phase brings its own challenges. Miss a step, and you could be looking at schedule delays, costly overruns, or worse.
Phase 1: Site Selection and Feasibility Analysis
Location isn’t everything—it’s the only thing. Pick the wrong site and even the best project will struggle.
Critical evaluation factors include:
Zoning compliance and future land use plans: Verify that current zoning regulations allow for your intended use and research any planned changes that could impact the property’s value or development potential.
Infrastructure accessibility: Can trucks reach your site? Is there enough power for your needs? We’ve seen projects delayed 18 months because utility capacity was not verified upfront.
Market demographics and competition: Analyze population density, income levels, and competing properties within the area. Understanding your target market drives design decisions and financial projections.
Environmental considerations: Conduct preliminary ecological assessments to identify potential contamination, wetlands, or other constraints that could impact development costs or timelines.
At Sevan, our early-stage feasibility studies help identify potential red flags before you commit significant capital. Our team’s extensive market knowledge across various sectors, including restaurants, retail, grocery, fuel and convenience stores, government, and healthcare, enables us to spot opportunities and challenges that others might miss.
Phase 2: Due Diligence and Entitlements
The due diligence phase protects your investment by uncovering potential issues before they become expensive problems.
Key due diligence components:
Environmental assessments: Phase I and potentially Phase II environmental studies identify contamination risks and regulatory compliance issues. These studies are typically required for financing and can reveal costly remediation needs.
Title and legal review: Ensure clear title and identify any easements, restrictions, or liens that could affect your development plans. Legal issues discovered late in the process can derail projects entirely.
Permitting and regulatory approval: Navigate local building codes, zoning requirements, and special use permits. The permitting process often takes 6-12 months and requires careful coordination with multiple agencies.
Utility capacity verification: Confirm that water, sewer, electrical, and telecommunications infrastructure can support your project’s requirements. Utility upgrades can add significant costs and delays if not properly planned.
Sevan’s permitting and entitlement expertise accelerates the approval process through established relationships with regulatory agencies nationwide. Our team understands local requirements across various markets, helping you avoid common pitfalls that can delay project approvals.
Phase 3: Planning and Design
The planning and design phase transforms your vision into buildable plans that meet regulatory requirements and budget constraints.
Design development process:
Conceptual design and programming:
Define space requirements, functional relationships, and architectural character. This phase establishes the project’s overall vision and ensures stakeholder alignment.
Architectural design:
Create functional and aesthetically pleasing building designs that meet client requirements while complying with local codes and regulations. Thoughtful architectural planning optimizes space utilization and enhances the user experience.
Civil and structural engineering:
Develop site plans that address grading, drainage, utilities, and structural systems. Proper engineering during this phase prevents costly field changes during the construction process.
Regulatory coordination:
Collaborate with local planning departments to ensure designs comply with all applicable code requirements and aesthetic guidelines. Early coordination with approval agencies reduces the number of revision cycles.
Value engineering opportunities:
Identify cost-saving alternatives that do not compromise functionality or quality. Strategic value engineering can reduce project costs by 10-15% while maintaining design integrity.
Sevan’s integrated approach combines engineering and design expertise under one roof, eliminating communication gaps between disciplines and ensuring designs are both constructible and cost-effective.
Phase 4: Financing and Budgeting
Securing appropriate financing requires accurate cost projections and a thorough understanding of market conditions.
Financing considerations for 2025:
Construction cost factors: Labor shortages continue to challenge the industry, with 90% of contractors reporting difficulty filling positions. Material costs have stabilized but remain elevated compared to pre-pandemic levels.
Interest rate environment: While rates have stabilized, they remain higher than the sub-1% levels seen before 2020. Most experts expect rates to settle around 4.5% through 2025, requiring careful cash flow planning.
Alternative financing sources: Private credit markets are expanding to fill gaps left by traditional bank lending. These sources often provide faster approvals but at higher costs.
Cost management strategies: Detailed cost estimates during the design phase prevent budget overruns. Include contingencies of 10-15% for unforeseen conditions and permit-related changes.
Development Cost Category | Typical Percentage of Total | 2025 Market Factors |
Land Acquisition | 15-25% | Varies significantly by market |
Site Development | 10-20% | Increased due to utility infrastructure costs |
Building Construction | 50-65% | Elevated due to labor and material costs |
Soft Costs | 15-25% | Higher due to extended permitting timelines |
Working with experienced partners like Sevan early in the process provides more accurate cost estimates and identifies potential value engineering opportunities that protect your budget.
Phase 5: Construction and Project Execution
The construction phase requires careful coordination between multiple parties to deliver projects on schedule and within budget.
Construction management best practices:
Phased scheduling approach: Break construction into logical phases that allow for flexibility while maintaining overall project momentum. This approach helps manage cash flow and reduce risks.
Quality control systems: Implement regular inspections and testing protocols to ensure work meets specifications. Quality issues discovered late in construction are exponentially more expensive to correct.
Communication protocols: Establish clear communication channels between all project team members. Weekly progress meetings and real-time project dashboards keep everyone informed and aligned.
Change order management: Document all changes promptly and assess their impact on schedule and budget. Uncontrolled change orders are a leading cause of project overruns.
Sevan’s construction services offer comprehensive support throughout the building process, whether managing contractors or performing direct construction work. Our team conducts regular site visits, reviews contractor submittals, and responds to field questions that arise during construction, keeping projects on schedule.
Phase 6: Project Closeout and Occupancy
The final phase ensures all systems function properly and provides documentation for ongoing operations.
Closeout requirements:
Final inspections and certificates of occupancy: Coordinate with building departments to complete all required inspections and obtain occupancy permits. Missing permits can delay tenant move-ins and impact cash flow.
As-built documentation: Provide accurate drawings reflecting all field changes and installed conditions. These documents are essential for future maintenance and renovations.
System commissioning: Test all building systems to ensure they operate according to design specifications. Properly commissioned systems reduce operating costs and tenant complaints.
Warranty documentation: Compile all equipment warranties and maintenance manuals for the building owner. This documentation protects the investment and facilitates proper maintenance.
Sevan continues our partnership beyond project completion, providing support for future phases, expansions, or additional locations. Our ongoing relationships with clients like McDonald’s and Walgreens demonstrate our commitment to long-term success.
Common Commercial Development
Challenges and Solutions
Every project hits snags. Here are the three main issues we see repeatedly (and how to address them).
Permitting Delays and Regulatory Hurdles
The reality: Permits can add 6 to 12 months to your schedule. One client waited 14 months for approval on a simple retail project because the local fire marshal required three different engineering reports.
How we handle it: We start permit applications before you finalize the site purchase. Our team knows which agencies move fast and which ones need extra time. We submit applications early and follow up weekly.
Construction Cost Overruns
The reality: Material costs jumped 15-20% on projects that started in 2024. Steel prices alone increased $200 per ton between January and March.
How we handle it: Lock in material prices during the design phase. We also build 12-15% contingencies into every budget, not the optimistic 5% some consultants suggest.
Site Constraint Discovery
The reality: Surprise underground storage tanks. Contaminated soil. Utilities are mapped in the wrong location. We’ve seen all of these add $500,000 or more to project costs.
How we handle it: Spend the money upfront on a thorough site investigation. Yes, $75,000 for geotechnical and environmental studies sounds expensive until you compare it to a $2 million cleanup bill.
The Strategic Value of Early Engineering Partnership
Most developers treat engineering like insurance—something you buy and hope you never need. That’s backwards thinking, which can cost millions.
How Early Engineering Involvement Adds Value
Risk identification and mitigation: Experienced engineers spot potential problems before they become expensive issues. Site constraints, regulatory challenges, and design conflicts are much cheaper to address during planning than during construction.
Accurate cost estimation: Detailed engineering input during feasibility analysis provides realistic construction budgets. This accuracy is crucial for financing approval and investment decision-making.
Schedule optimization: Coordinated engineering and permitting services reduce project timelines by eliminating communication gaps and revision cycles between disciplines.
Value engineering opportunities: Engineers identify cost-saving alternatives that maintain functionality while reducing expenses. These savings often exceed engineering fees by a factor of 5-10.
Sevan's Integrated Approach
Unlike traditional project delivery methods that treat engineering as a separate service, Sevan integrates all technical disciplines under one unified process. This approach provides several advantages:
Single point of accountability: You work with one team that coordinates all project and program aspects, reducing management overhead and communication complexity.
Streamlined approvals: Our established relationships with regulatory agencies nationwide accelerate the permitting process through proper preparation and proactive coordination.
Cost predictability: Integrated services provide better cost control and eliminate markup between separate consultants.
Schedule reliability: Coordinated execution reduces delays caused by poor communication between disciplines.
Commercial Development Market Opportunities in 2025
Smart developers are finding opportunities while others sit on the sidelines waiting for “perfect” conditions. Here‘s where we’re seeing action:
High-Growth Property Sectors
Restaurant and Quick-Service: The restaurant industry continues to evolve with drive-thru optimization, delivery integration, and enhanced customer experience designs. Multi-site restaurant brands are focusing on prototype development that maximizes efficiency while maintaining brand consistency across locations.
Healthcare and Pharmacy: An aging population and increased focus on accessible healthcare are driving demand for neighborhood clinics, urgent care centers, and specialized pharmacy locations. These developments require specialized engineering for medical equipment, HVAC systems, and regulatory compliance.
Fuel and Convenience with Car Wash Integration: Modern fuel stations are evolving into comprehensive service centers that combine fuel, convenience retail, quick-service restaurants, and automated car wash facilities. These complex, multi-use sites require sophisticated engineering coordination for fuel systems, environmental compliance, and traffic flow optimization.
Government and Public Sector: Government facility development includes military housing, public safety buildings, and administrative facilities. These projects require specialized knowledge of government procurement processes, security requirements, and compliance with federal and state building standards.
Mixed-Use Developments: Combining residential, retail, and office components provides diversified revenue streams and appeals to tenants seeking convenience and community amenities.
Adaptive Reuse Projects: Reuse projects convert obsolete buildings, such as former retail spaces, into grocery stores, healthcare facilities, or mixed-use developments, often provide better returns than ground-up construction while supporting sustainability objectives.
Geographic Opportunities
Secondary and tertiary markets continue to attract investment due to lower land costs and growing populations. Cities like Boise, Austin, and Nashville offer development opportunities with less competition than major metropolitan areas.
Making Your Next Commercial Development Successful
Want your next development to actually succeed? Stop making these common mistakes:
Start with thorough market analysis: Understand your target tenants, competition, and local market dynamics before committing to a site or design approach.
Engage qualified professionals early: The cost of experienced engineering and planning services is insignificant compared to the risks of poor execution.
Build in appropriate contingencies: Unexpected conditions and changes are a normal part of development. Plan for them rather than hoping they won’t occur.
Focus on long-term value: Design and build for lasting performance rather than just initial cost savings. Quality construction and proper engineering reduce operating costs and increase property values.
Maintain flexibility: Market conditions and tenant needs are constantly evolving. Design systems and spaces that can adapt to changing requirements over time.
Ready to Start Your Commercial Development Project?
Reading about development and actually executing a successful project are two different things.
Sevan Multi-Site Solutions brings decades of experience partnering with developers and major brands to navigate complex projects from initial concept through successful completion. As strategic design, construction and project management partners rather than developers ourselves, we provide the technical expertise that makes development projects successful. Our integrated approach combining engineering, design, permitting, construction and project management services has delivered over $1 billion in successful developments for industry-leading clients.
Whether this is your first project or your fiftieth, our job is to make sure you don’t learn expensive lessons the hard way.
Ready to discuss your project? Contact Sevan to see how we can help you avoid delays, control costs, and deliver on time.
This article provides comprehensive guidance on commercial development. For specific project consultation, contact our team of experts who understand the unique challenges and opportunities in today’s dynamic market environment.