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.
When I talked to the FCC, I said I can't overbuild another cable company, because then I could never buy it, because you always block those," Rutledge (http://www.
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.