Before You Break Ground: 3 Critical Realities Developers Must Address First

In today’s California market, real estate development is not for the faint of heart. Projects are larger, capital is more selective, entitlements are more complex, and the margin for error is razor thin, and we’ve been in this space long enough to see what separates a successful commercial deal from one that stalls midway through or never makes it past site control.

Before committing to a new project, especially one with commercial or mixed-use elements, Developers must take a hard look at three critical areas. These aren’t just checkboxes. They’re the foundation of viability in this environment. And in every conversation we have with seasoned Developers, these same questions keep surfacing – because they matter.

1. Financing Certainty and Capital Stack Integrity

The first question isn’t about location or design. It’s about funding. Can the project secure the capital it needs from start to finish, under real-world conditions – not just optimistic projections?

With rates now in the 7 to 10 percent range for construction and bridge debt, the capital stack has become a living, breathing risk point. We’re no longer in a world where you can plug in 4.5 percent interest and call it a day. Every basis point counts, and so does every layer of funding, from acquisition to predevelopment, interest reserves to contingency.

We’ve seen too many good projects stall because funding was cobbled together from multiple sources that weren’t aligned or fully committed. Traditional lenders are pulling back, and many institutional equity partners have tightened their criteria.

Before moving forward, Developers need to ask:

• Do we have committed capital for all phases of the project?
• Have we modeled for refinance risk, especially if this loan will mature in 2–3 years?
• What happens if lease-up or sales take longer than projected?

Understanding those answers early doesn’t just protect your investment – it protects your time.

2. Entitlement and Regulatory Exposure

The second concern is often underestimated, especially by those building in new municipalities or trying to scale into more complex projects. Entitlement risk is very real, and in California, it can be the most unpredictable part of the process.

Even by-right projects can get tangled in local politics, CEQA lawsuits, shifting zoning interpretations, or community opposition. Mixed-use developments, especially those involving ground-floor commercial or added density, are magnets for scrutiny. If your development needs discretionary approval, plan on longer timelines, added legal costs, and increased soft costs.

At Evoque Lending, we work with Developers who have learned, sometimes the hard way, that entitlement isn’t just a paperwork issue. It’s a strategic risk that must be priced and timed correctly in the capital stack. That’s why we offer flexibility in structuring bridge or predevelopment loans, giving you the runway needed to navigate local approval processes without rushing decisions or taking on premature risk.

Developers must ask:

• Is this project fully entitled, or are we relying on local discretion?
• What is the municipality’s track record with similar projects?
• Is the local political climate likely to shift during the development cycle?

If these questions can’t be answered with clarity, then it’s not time to finalize your funding or break ground.

3. True Market Demand and End-User Alignment

The third concern is about the product itself. Who is this development for? Are the rental rates, absorption timelines, or exit valuations based on current data – or wishful thinking?

We’ve seen demand evolve dramatically in just a few short years. Office is no longer a plug-and-play model. Retail must be curated. Even residential must reflect post-pandemic preferences – more space, flexibility, and amenities that support remote work or multigenerational living. Building the right product at the wrong time is still building the wrong product.

When evaluating projects, Evoque Lending works closely with our borrowers to understand not just their capital needs, but their market thesis. We want to know: who’s the tenant? Who’s the buyer? What happens if the market softens during lease-up? The best Developers aren’t just builders. They’re operators, forecasters, and strategists.

Every Developer should be clear on:

• Is the projected rent or sale price supportable by local comps?
• Are there comparable projects currently in lease-up or recently delivered – and how are they performing?
• Are you designing for what the market wants now, or what it wanted three years ago?

In this market, underwriting to reality, not just vision, is what protects long-term success.

The Evoque Lending Perspective

At Evoque Lending, we know that every development is different. But we also know that the best Developers ask the tough questions before the first dollar goes in. Our role is not just to lend capital, it’s to support smart, experienced sponsors who understand the complexities of this market and are planning accordingly.

We fund where others hesitate. We move when others stall. And we bring decades of California real estate experience to every deal we touch.

If you’re evaluating a commercial project, we encourage you to take a beat and make sure you’ve truly assessed these three areas. The right capital partner doesn’t just provide financing, they help you protect your downside and maximize your upside.

Let’s build something real. Together.