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 ?
Charter CEO Tom Rutledge agreed at the time to fulfill the requirement to overbuild, but said in a 2016 speech that he would only overbuild in areas where telephone companies-not cable companies-are the primary internet providers.
The company said that it will be rolling out the capacity overbuilds over the next six months with some segments ready for service by May 2010.
To date, only Verizon has said it will undertake an overbuild project, while BellSouth and SBC are taking a "wait and see" approach.
"I would simply say, you cannot overbuild your system.
FCRC will also build and maintain the overbuild platform.
At the National Press club in August 2011 he said he would not overbuild HFC; on Radio National on 7 March this year he said he will overbuild; which is it?
At the beginning of the third quarter, we observed the region's development community had avoided the temptation to overbuild during the market's previous three boom years.