Early on in my career, I worked on a new office development where the decision was made to start construction having only pre-leased 25% of the building. (It may have actually been closer to 22% if my memory serves me correctly.)

Our big constraint at the time was that this first tenant had to be out of their current space by a certain date, and the only way we could meet their deadline was to immediately start construction. Otherwise, we knew we would lose them to another development or to an existing building.

To convince ourselves that this was a reasonable thing to do, we looked at all of the upcoming lease expiries in the market, and then came to the conclusion that there would be enough demand in the coming years to fill the rest of the building.

Still, we were taking a leap of faith, even if it was an informed one. And it meant running the project entirely on equity until we could secure a construction loan. Thankfully, in this particular instance, our hypothesis proved true. The lease expiries did end up creating the demand we were hoping for and so we were able to fill the rest of the building.

The project was a success.

But that was then. And in hindsight, this move feels scary. What would have happened had we made this exact same decision at the end of 2019? Things would have been very different. Not because of a fundamentally different decision on our part, but because of a black swan event that was truly impossible to predict. Our timing would have been bad.

This is just one example of the many risks associated with the building of buildings. Development never happens in a vacuum. You’re always solving for a long list of constraints. And sometimes you need to solve for things that you don’t even know exist yet.