When a real estate development project is on hold it has been paused, oftentimes because of a legal or financial reason. Legal reasons could include objections from neighbours, the municipality halting construction because of contraventions of building codes or physical accidents, among others. A financial reason for the halting of construction is often simply that the developer has run out of money and / or construction costs were higher than anticipated and a need for recalibration of the construction strategy has arisen.
What does on hold mean in the broader sense?
In the broader marker sense, the stock that can be considered ön hold” is the total projected rentable area (RA) of ALL projects that have been put on pause (suspended although not cancelled entirely) in the pipeline. This is useful for real estate analysts for determining projected stock in real estate markets, and therein determining demand-supply gaps that shine a light on new development opportunities.
What is the pipeline and new construction?
New construction is the most critical and important supply concept driving real estate markets. Projects that are on hold cannot be considered as new construction until they reach completion.
The term new construction refers to completions. The new supply of real estate has three stages, commonly referred to as the “pipeline.” These are marked by three project milestones:
1. Permit (or pipeline entry): the development receives the permit or permission of the authorities based on approved plans.
2. Start or startup of construction, which usually means that “shovels are in the ground” but can be more complicated.
3. Completion: the property is given occupancy certification.
