Things in the world of property development are constantly changing, and there are times when someone in my network comes up to me and says "I got development approval for my site, but now I'm not sure it's the best solution - what do I do now?"
The normal reason is that escalating costs have made the original design too expensive, leaving no profit in the deal. It might also be that you see a potential site for sale but the existing plans and permits don't stack up.
Obviously nobody wants to stick with a project that's going to lose money, so "now what?" is a very valid question.
Let me start by explaining what the phrase "highest and best use" means. In property development, this concept is critical. Essentially, it's the most profitable way to legally develop a property, based on what can actually be built and what makes financial sense.
There are lots of different factors that play into defining the best use for a property development site. Whether it's market shifts, zoning changes, evolving community needs, or unforeseen economic factors, developers may find themselves holding approvals that no longer stack up.
One of my mantras when I'm looking at property is "Most amount of money, least amount of hassle, least amount of time". All of those factors matter and are part of determining the highest and best use of a site.
For example, I might be able to execute a strategy in 6 months reasonably easily and make $500k. The next stage will take another 12 months, and the total profit will be $800k.
So we now have a situation where stage 2 makes me more money in the end, but will require a lot more time and hassle. It's a value judgement for you as the developer, but at some point making more money just isn't worth it. Better to complete the deal after stage 1, take the $500k, then find another deal for your funds.
That example is about how far to take a particular project before it makes sense to move on, but for this article we're looking at a situation where there might be multiple different strategies possible for the one site. The same principle still applies though.
What Changed?
Residential development is highly sensitive to market dynamics. The type, density, and positioning of housing that made sense two years ago might not stack up today. Here are some scenarios where a DA may no longer be ideal:
When a DA no longer represents the highest and best use, continuing with the approved development can lead to suboptimal returns and missed opportunities.
Now What?
In many ways, this situation is the same as when you're first assessing a site's potential - go back to the numbers. So the answer to "Now What?" is to start again.
Work out all the potential ways the site can be developed and do some basic numbers on all the different strategies.
At the end of that process you will be able to see which strategies are profitable. Next start thinking about which of those are the easiest and quickest strategies to implement. Now you know what the highest and best use for the site will be.
Once the potential highest and best use is determined, you have several pathways forward.
Modify the Existing DA
If the new proposal is a minor or moderate change to the existing scheme such as adjusting internal layouts, increasing bedroom counts, or minor height variations, you can usually apply for a modification to the existing DA.
Submit a New DA
If you’re considering a complete redesign such as replacing a low-rise apartment block with townhouses, a fresh development application may be necessary.
Seek a Rezoning or Planning Amendment
In some cases, pursuing a planning scheme amendment or rezoning may unlock higher or different uses, particularly where strategic planning is evolving in the area.
Sell with Existing DA
If you're not in a position to pursue a new use or if your appetite for risk or capital investment is limited, consider selling the site with the existing DA in place. Sometimes, the approved scheme might appeal to a different developer or user even if it's not the highest and best use in your analysis.
To maximise sale price, package the site with concept plans, updated feasibility, and planning advice showing what could be pursued. Make sure you highlight the “latent potential” for an amended or alternative scheme.
In the dynamic world of property development, an existing DA is not a fixed asset - it’s a strategic position that needs regular reassessment. If your approved permit no longer reflects the best and most profitable use of the site, don’t hesitate to pivot. Modifying, redesigning, or replacing the design could unlock untapped value and align your project with a changing market.
The cost of inaction can be significant. A suboptimal development can tie up capital in a product that underperforms in value or market demand. On the other hand, the cost of change, though involving risk, can unlock long-term value, optimize site outcomes, and secure a profitable position in a competitive market.
In the ever-shifting landscape of planning and property development, adaptability is your greatest asset.
The normal reason is that escalating costs have made the original design too expensive, leaving no profit in the deal. It might also be that you see a potential site for sale but the existing plans and permits don't stack up.
Obviously nobody wants to stick with a project that's going to lose money, so "now what?" is a very valid question.
Let me start by explaining what the phrase "highest and best use" means. In property development, this concept is critical. Essentially, it's the most profitable way to legally develop a property, based on what can actually be built and what makes financial sense.
There are lots of different factors that play into defining the best use for a property development site. Whether it's market shifts, zoning changes, evolving community needs, or unforeseen economic factors, developers may find themselves holding approvals that no longer stack up.
One of my mantras when I'm looking at property is "Most amount of money, least amount of hassle, least amount of time". All of those factors matter and are part of determining the highest and best use of a site.
For example, I might be able to execute a strategy in 6 months reasonably easily and make $500k. The next stage will take another 12 months, and the total profit will be $800k.So we now have a situation where stage 2 makes me more money in the end, but will require a lot more time and hassle. It's a value judgement for you as the developer, but at some point making more money just isn't worth it. Better to complete the deal after stage 1, take the $500k, then find another deal for your funds.
That example is about how far to take a particular project before it makes sense to move on, but for this article we're looking at a situation where there might be multiple different strategies possible for the one site. The same principle still applies though.
What Changed?
Residential development is highly sensitive to market dynamics. The type, density, and positioning of housing that made sense two years ago might not stack up today. Here are some scenarios where a DA may no longer be ideal:
- Market Shifts - Demand may have shifted from small apartments to family-sized dwellings or townhouses
- Policy or Zoning Changes - New planning overlays, rezoning opportunities, or increased allowable height or density
- Economic Conditions - Construction costs or interest rates may render a previously approved project financially unviable
- Environmental or Social Shifts - Sustainability trends or community expectations may now favour a different type of use
When a DA no longer represents the highest and best use, continuing with the approved development can lead to suboptimal returns and missed opportunities.
Now What?
In many ways, this situation is the same as when you're first assessing a site's potential - go back to the numbers. So the answer to "Now What?" is to start again.
Work out all the potential ways the site can be developed and do some basic numbers on all the different strategies.
At the end of that process you will be able to see which strategies are profitable. Next start thinking about which of those are the easiest and quickest strategies to implement. Now you know what the highest and best use for the site will be.
Once the potential highest and best use is determined, you have several pathways forward.
Modify the Existing DAIf the new proposal is a minor or moderate change to the existing scheme such as adjusting internal layouts, increasing bedroom counts, or minor height variations, you can usually apply for a modification to the existing DA.
- Advantages - quicker approval, less risk, often fewer notification requirements.
- Limitations - must remain broadly consistent with the original DA so may not allow for a complete change in use or scale.
Submit a New DA
If you’re considering a complete redesign such as replacing a low-rise apartment block with townhouses, a fresh development application may be necessary.
- Advantages - flexibility to align entirely with market demand and planning advantages.
- Limitations - longer timeframes, potential community objection, and re-exposure to planning risks and approval uncertainty.
Seek a Rezoning or Planning Amendment
In some cases, pursuing a planning scheme amendment or rezoning may unlock higher or different uses, particularly where strategic planning is evolving in the area.
- Examples - upzoning from low-density to medium/high-density residential.
- Considerations - these changes can be time-consuming and politically sensitive, but can dramatically uplift land value.
Sell with Existing DA
If you're not in a position to pursue a new use or if your appetite for risk or capital investment is limited, consider selling the site with the existing DA in place. Sometimes, the approved scheme might appeal to a different developer or user even if it's not the highest and best use in your analysis.
To maximise sale price, package the site with concept plans, updated feasibility, and planning advice showing what could be pursued. Make sure you highlight the “latent potential” for an amended or alternative scheme.
In the dynamic world of property development, an existing DA is not a fixed asset - it’s a strategic position that needs regular reassessment. If your approved permit no longer reflects the best and most profitable use of the site, don’t hesitate to pivot. Modifying, redesigning, or replacing the design could unlock untapped value and align your project with a changing market.
The cost of inaction can be significant. A suboptimal development can tie up capital in a product that underperforms in value or market demand. On the other hand, the cost of change, though involving risk, can unlock long-term value, optimize site outcomes, and secure a profitable position in a competitive market.
In the ever-shifting landscape of planning and property development, adaptability is your greatest asset.
