overbuilding

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overbuilding

A situation that occurs when the rate of construction is faster than the market can absorb new construction.Developers often cannot anticipate the amount of competition until it is too late.The lead time between placing land under contract with a lengthy due diligence period to the first signs of excavation or construction that would alert people of new development can be as long as a year on small projects. The typical market cycle is a period of perceived need for “product”—offices,houses,malls,whatever—and then a seeming explosion of new projects “coming out of the ground”almost simultaneously.By the time developers see the signs of large numbers of competing projects,it is too late to back out of their own plans.As a result,all projects go full steam ahead and hope that something other than price will differentiate them from competitors, allowing the current project to fill up quickly while competitors go begging.This hope is usually misguided,and a price war results.

References in periodicals archive ?
The overbuild was a two night coordinated effort between USCarrier's Engineering, Field Technicians and NCC Technicians without an interruption in service to existing customers.
This latest addition will complete two thirds of USCarrier's overbuild projects throughout the four state network.
If you miss a local district by 1,500 kids, we could overbuild two elementary schools there,'' Tokofsky said.
To date, only Verizon has said it will undertake an overbuild project, while BellSouth and SBC are taking a "wait and see" approach.
Situations do exist where an overbuild might make sense, particularly if the existing cable service is charging high rates, providing poor service, offering limited programming, and lacks the financial resources to invest in new technologies.
The proliferation of these new and expanded service offerings will attract "noncable" companies to consider pursuing overbuild competition.
Since then, it has used the Broadband Loop Carrier (BLC) to overbuild a legacy TDM-based facility, providing IP transport for a transparent local area network (LAN) service requested by a commercial subscriber in the area.
Phase One of the Devil's Lake overbuild will begin this summer and incorporate approximately 1000 lines.
The cooperative aims to have its 100 square-mile overbuild completed by 2008.
This innovative architecture allows current GPON networks to be easily upgraded to provide higher bandwidth in the future, without billion dollar overbuilds or upgrades.
After spending billions to upgrade their networks to GPON Fiber-to-the-Premises (FTTP) architectures, telcos could be faced with yet another round of expensive and disruptive overbuilds in five to ten years.