Development Spread

The development spread in real estate refers to the difference between the total cost to develop a property (including land acquisition, construction costs, financing costs, etc.) and the property's market value upon completion and stabilization.

It is usually expressed as a percentage and represents the profit margin for the developer. For instance, if a project costs $10 million to develop and the market value upon completion is $12 million, the development spread would be 20% ($2 million profit on a $10 million investment).

The development spread is a crucial indicator of the profitability and risk of a development project. A higher spread indicates a more profitable project but also usually involves higher risk.

It's important to note that the actual profit realized by the developer may be different from the initial spread due to changes in construction costs, financing costs, market conditions, and the actual income generated by the property. As such, it's crucial for developers to regularly update their financial projections throughout the development process.