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The success or failure of a commercial real estate project can depend on the development team’s level of preparation. If an organization begins a project without its ducks in a row, it will inevitably run into delays, cost overruns, and other serious problems. And that's not even considering external factors like rising inflationary pressure and mounting fears about a global recession.
Mitigating those risks requires a thoughtful strategy and a firm grasp of all the variables involved.
Developing a watertight plan, comprehensive project visibility, and accurate forecasting is essential to achieving a predictable project outcome. And a crucial step toward achieving that goal is creating and cultivating a repository of commercial real estate historical data. Making that information easily accessible can circumvent problems, improve efficiency, and help ensure better and more profitable project outcomes.
After all, the best way to prepare for the future is to understand the past.
Allows for Better Decision-Making
One of the most important benefits real estate firms will gain from maintaining a database of historical information is more informed and better decision-making.
Traditionally, developers use spreadsheets as a project management system and make critical decisions based on gut feelings. That happens because spending time sifting through an ocean of cells and columns is at odds with the fast-paced world of commercial real estate. And to a point, that approach makes sense. Over time, developers hone their instincts by working with various vendors, asset types, and lenders. But the big problem with that approach is that it lacks perspective and visibility.
Having friendly one-on-one interactions with a vendor’s representative creates positive associations with that company, which can lead to automatically approving their invoices and repeatedly re-hiring them. But you can make more informed and better decisions by maintaining commercial real estate historical data.
Does the vendor make low-ball bids to get a contract only to hit you with a series of pricey change orders down the road? Are those change orders legitimate, or are they for things that should've been factored in earlier? Is the vendor honest about the progress of their job? Or are they focused on getting their invoices approved as quickly as possible? Are they trending over their commitment? How much retainage should be subtracted from their invoices?
Big data analytics can answer those questions, help cut costs, and eliminate common problems associated with vendor procurement. That way, you can create more accurate forecasts and keep your projects on time and on budget. Remember, those who don't learn from the past are doomed to lose money.
Improves Operational Efficiency
Maintaining commercial real estate historical data isn’t just an excellent way to keep costs down; it can also significantly improve operational efficiency.
The process of collating information for draw request packages is tedious and time-consuming work, regardless of a development team’s size. There is no easy or fast way to combine information separated by spreadsheets, legacy systems, or departmental data silos. Even then, manual workflows open the door for human errors that eat up time and take energy to fix.
On the contrary, utilizing a software solution that automatically stores and organizes your firm’s historical data gives you more time to focus on high-value strategic tasks. Instead of taking days to assemble a massive monthly cost report, an artificial intelligence-powered system can prepare those documents in seconds.
Similarly, imagine a stakeholder asking a question about a complex multimillion-dollar project. Traditionally, fulfilling that request means sorting through a staggering amount of paperwork, especially if the project is several years into development. But with a digital system, you can find the answer quickly and get back to work on high-value tasks.
You can always resubmit draw requests and improve interdepartmental communications, but lost time is irreplaceable.
Mitigates Disruptions Created by Departing Team Members
Here’s a devastating common problem: midway through a project, a valuable member of your team leaves the company unexpectedly. In addition to losing a key staffer, you’re also losing their institutional knowledge and portfolio familiarity. Even if their colleagues step up to fill the gap, your productivity will take a big hit if they don’t know how to find key pieces of information.
Thankfully, there is a way to mitigate this problem before it becomes a significant disruption – by keeping a repository of your commercial real estate historical data.
Having a single source of truth for your entire portfolio will keep things on track when disruptive events occur. If your team members can find contracts, invoices, certificates of insurance, and other documents with just a few clicks, you can mitigate personnel-related operational delays. Invoices will get paid on time, contracts will be renewed on schedule, and client and funding partner questions will be answered immediately.
Plus, using a cloud-based digital filing cabinet to complete your projects means crucial information won't get lost on a single, possibly inaccessible laptop.
Staff turnover is an inevitable problem for all businesses. But maintaining an internal cloud-based historical database will prevent breaks in your operational continuity and eliminate key personnel risk.
Provides a Competitive Advantage
If the state of the commercial real estate market could be summed up in one word, it would be volatile.
Macroeconomic instability, ongoing supply chain issues, and a labor shortage in the construction sector make long-term forecasting very difficult. For that reason, developers should embrace every available competitive advantage to navigate the precarious current landscape.
As it happens, historical data can provide just such an advantage. Actually, it can provide you with multiple meaningful advantages.
First off, it can help bolster your customer satisfaction. If a client calls or emails wanting an update on a project's costs, you can generate one to their specifications in seconds or provide them with a real-time dashboard. You affirm your team's competency and trustworthiness by not making them wait or offering excuses about why the information isn't available. And those happy customers can tell the story of their positive experience with your company to other potential clients.
By the same token, always having your firm’s project data on hand can impress investors. They want to know that their funds are used wisely and that all expenditures are meticulously documented. If you can provide that reassurance with a real-time project update, your backers become more amenable to funding your future projects.
Being conscientious in your dealings with customers and investors will help you establish a strong reputation that will cultivate long-term partnerships and attract new clients.
Another advantage is forming a lasting relationship with dependable vendors. Tracking a vendor’s performance across your portfolio over time gives you insights into which providers offer the best services. And by bringing them on board on future projects, you will get easier, more predictable outcomes.
Moreover, monitoring your company’s commercial real estate historical data can help increase your earnings.
As your firm completes more projects with different investors and vendors, you'll better understand the commercial real estate market. That knowledge will help you make better choices, avoid costly pitfalls, and mitigate disruptions. Consequently, your income will not just become more consistent; it will become more robust.
If you want to learn more about the historical data that you should be tracking, download The Complete Guide to Commercial Real Estate Data and Analytics today.
Tag(s): Real Estate Technology
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