What is a development multiple?

A development multiple tells us how much development potential there is on any given property. It is an abstraction of how much room there is left for development.

A development multiple tells us how much development potential there is on any given property. It is an abstraction of how much room is available for development. At scale, development multiples tell us how much a city region can grow.

We divide the total buildable area by the existing building area to get development multiple.

How are development multiples used for acquisition?

At Deepblocks, we use development multiples to identify properties best for development versus value-add or core.

A development multiple of 1X, for example, means you can build the same area as the existing building. The cost of demolition in these cases would be high in proportion to the development cost—a development multiple of 20X means you can build twenty times the existing building.

New Development (Opportunistic) Example:

  • Existing building area: 3,000 SF

  • Total buildable area: 47,000 SF

  • Development multiple: 15.6X

A 15.6X development multiple means you can build more than 15 times the area of what is currently there. This is an example of acquisition for development instead of value-add or core.

Value-Add or Core Plus Example:

  • Existing building area: 40,000 SF

  • Total buildable area: 47,000 SF

  • Development multiple: 1.6X

A 1.6X development multiple means the building is very close to maximizing the zoning ordinance’s allowable buildable area. Unless the condition of the existing building is dilapidated, this is an example of acquisition for core or value-add.

Can we analyze risk using development multiples?

We combine development multiples with population trends to designate development risk metrics and compare across neighborhoods. For example, if the average development multiple is low and the population has a positive trend, the area is highly developed, and any new development would likely be absorbed.

On the other hand, if the area’s average development multiple is high and population trends are negative, the risk of developing is high.

Understanding development multiples at scale provide incredible strategic insights across markets.

More will be revealed,
Olivia

Olivia Ramos is the CEO of Deepblocks, an AI-powered software that automates the process of site selection for developers and investors. 

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