The 5 Most Overlooked Red Flags in Real Estate Development

In real estate development, success isn't just about spotting the next big opportunity. It’s also about recognizing when to walk away. The best developers aren’t just dealmakers they’re disciplined decision-makers who know that avoiding the wrong project can be just as valuable as landing the right one.

Some red flags are obvious: environmental contamination, poor soil conditions, or comps that just don’t support the numbers. But others are easier to miss. They’re tucked into zoning code footnotes, buried in planning agendas, or revealed through subtle shifts in the neighborhood.

These overlooked warning signs can quietly derail a project delaying entitlements, inflating costs, or stalling your exit. This post breaks down five of the most commonly missed red flags in real estate development, and how to spot them before they become your problem.

1. Outdated Zoning That Hasn’t Been Touched in Decades

It’s easy to get excited about a property with the right size, price, or location, but zoning can quietly kill that excitement if you're not careful. A site locked into outdated zoning, especially from decades past, may not allow the kind of density or flexibility your project needs to pencil out.

What to look for:

• Zoning codes or maps that haven’t been updated since the 1980s or 90s

• Low-density residential zoning (like R1 or RS) in neighborhoods that are otherwise evolving

• No mention of mixed-use overlays, form-based codes, or recent city planning efforts

Why it’s risky: Old zoning doesn’t reflect current land use goals. You could be looking at a lengthy rezoning process, expensive variance requests, or a political fight with local opposition. In the meantime, you’re holding land with no clear path forward.

What to do: Start by checking if the parcel appears in your city’s Housing Element rezoning plans or any upcoming Specific Plans. These often show where increased density is being planned.

2. Strong Anti-Development Sentiment in the Community

A site might check all the boxes on paper—zoning, infrastructure, pricing, but if the neighbors are organized and opposed to new development, you could be in for a long, expensive fight. In many cities, public pushback is one of the most underestimated sources of risk, especially in politically active neighborhoods.

What to look for:

• Yard signs with messages like “Stop the Rezone” or “No Density Here”

• Appeals or lawsuits targeting other developments in the area

• Vocal opposition during public comment at city council or planning commission meetings

Why it’s risky: Strong local resistance can derail even by-right projects. You might face months of delays in entitlement hearings, be forced into major design concessions, or risk the project being killed altogether. Entitlement risk is real, and it rarely shows up in the underwriting.

What to do: Show up early. Attend a planning commission or city council meeting in the area even if your project isn’t on the agenda yet. Listen to what the community is pushing for or pushing back against. Scan recent meeting minutes for appeals or objections to nearby projects. And if you’re serious about a site, talk to a city planner or a local architect who’s been through the process they’ll often tell you what the climate is really like.

3. Infrastructure Bottlenecks No One Is Talking About

You’ve found a site with solid zoning, no community opposition, and a promising location, but what happens when the infrastructure can’t handle your project? Sewer lines, storm drains, and roadways may not be the flashiest part of development, but they’re often the hidden bottlenecks that make or break feasibility.

What to look for:

• Narrow streets in poor condition that could limit construction access or fire clearance

• Signs of outdated or overloaded sewer and stormwater systems

• Utility infrastructure with no planned upgrades or expansion capacity

Why it’s risky: If your project puts additional strain on aging infrastructure, you could get hit with costly mitigation fees, delays during plan check, or even be forced to downsize your design. Worse, if the city doesn’t have the funding to support upgrades or expects you to fund them you may inherit more risk than expected.

What to do: Start by reviewing the city’s Capital Improvement Plan (CIP) to see what infrastructure upgrades are already in motion or funded nearby. Then, bring in your civil engineer or utility consultant early. A quick capacity study can save you from major surprises during entitlement or permitting and help you avoid sites that look great on the surface but can’t support what you want to build.

4. Low Permit Volume Despite Favorable Zoning

Just because zoning allows development doesn’t mean it’s happening. Sometimes a neighborhood gets upzoned, the headlines sound promising, and still no one builds. When you see zoning potential without actual activity, it’s worth digging deeper.

What to look for:

• Upzoned parcels that remain vacant months or years after legislation passed

• Infill lots that have sat untouched despite strong housing demand nearby

• Large sites with no evidence of subdivision maps, entitlement filings, or permit requests

Why it’s risky: If developers aren’t building, there's probably a reason. It could be economics construction costs that outpace achievable rents or sales prices. It might be political unclear permitting pathways or slow plan approvals. Or it could be a zoning mismatch, where what’s allowed on paper doesn’t actually work in practice.

What to do: Start by comparing recent permit filings against zoning designations. If an area has favorable entitlements but low permitting activity, ask around. Local architects, engineers, or entitlement consultants can usually tell you what the real friction points are whether it’s financial, procedural, or cultural. Use that intel to decide if the risk is manageable or if you’re better off elsewhere.

5. Long-Term Retail Vacancy with No Turnover

Retail turnover can be a sign of growth, but long-term vacancy is something else. If storefronts sit empty for years, even as zoning and infrastructure improve around them, it could mean the local economy isn’t ready to support growth yet.

What to look for:

• “For Lease” signs that have faded in the sun

• Empty retail in newer mixed-use buildings

• A lack of foot traffic in areas that should feel more active

Why it’s risky: Persistent retail vacancy signals weak demand. It might point to low purchasing power in the neighborhood, poor site selection by developers, or a lack of anchor tenants to draw consistent traffic. Retail that sits empty doesn’t just hurt cash flow it can also depress the perception of a neighborhood and stall the broader momentum you're betting on.

What to do: Talk to commercial leasing brokers active in the area. Ask about recent lease comps, concession packages, and why spaces aren’t moving. Look up historical listings to see how long spaces have been vacant. If the retail story doesn’t match the development narrative, proceed with caution it might be a sign the area isn’t ready for the scale of investment you’re planning.

Final Thought: A Good Deal Starts with a Clear Picture

Ask any experienced developer they’ll tell you that spotting a great opportunity is only half the job. The other half is knowing when to slow down, dig deeper, or walk away. The red flags we’ve covered outdated zoning, anti-development sentiment, infrastructure bottlenecks, low permit volume, and long-term retail vacancy aren’t always deal-breakers. But they are signals. They point to hidden friction, delayed momentum, and risks that don’t show up in a basic underwriting model.

And too often, they get ignored.

Maybe they’re buried in a 200-page planning document. Maybe they don’t show up in comps or zoning summaries. But overlook them, and they can cost you time, capital, and credibility.

Build a Smarter Process

The best developers don’t just chase green lights they pay attention to the red ones. Not to stop everything, but to make better decisions. To underwrite more precisely. To anticipate pushback. To stress-test assumptions.

By building these red flag checks into your early-stage due diligence, you stop reacting to what the market gives you and start shaping what you choose to take on.

So the next time a site looks like a no-brainer, pause. Zoom out. Ask yourself:

What’s missing from this picture? What am I not seeing yet? And how can I find out before it’s too late?

That’s not hesitation. That’s strategy. And that’s the difference between a deal taker and a market shaper.