Fee Development in Commercial Construction
Fee Development is a project delivery method where a developer manages the entire real estate development process on behalf of an owner or investor for a predetermined fee. The developer does not assume financial risk but provides expertise in planning, design, permitting, financing, construction, and leasing.
Key Responsibilities of a Fee Developer
Site Selection & Acquisition
Identifies and acquires suitable land.
Feasibility & Due Diligence
Conducts market research, financial modeling, and risk assessment.
Construction Management
Oversees contractors, schedules, and quality control.
Design & Permitting
Manages architects, engineers, and permits.
Financing & Budgeting
Develops pro formas, secures financing, and controls costs.
Leasing & Disposition
Handles tenant negotiations or sale of the completed project.
How Fee Development Works
- Owner/Investor Hires a Developer – A property owner or investor hires a fee developer to oversee the project.
- Development Agreement is Signed – The contract outlines scope, responsibilities, timeline, and fees.
- Developer Manages the Project – The developer handles everything from preconstruction to project completion.
- Owner Retains Ownership & Risk – Unlike traditional development, the owner bears financial risk and retains all profits.
- Fee Developer is Paid a Fixed or Percentage-Based Fee – Compensation can be structured as:
- Flat Fee – A predetermined amount for services.
- Percentage of Total Development Cost (e.g., 3-7%).
- Incentive-Based Fee – Performance bonuses for meeting budget and timeline goals.