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Most commercial real estate projects exceed their budgets and go beyond their timelines. A recent survey from IDC revealed that 75% of owners were over their planned budgets, while 77% were late.1
What’s causing this?
Teams tend to depend on legacy software and spreadsheets which are time-consuming and prone to human error. Spreadsheets make it hard for teams to analyze past project data, track which vendors cost them the most (and least), and build an efficient, repeatable process.
These traditional methods also contribute to hiring difficulties and today’s labor shortage by scaring away modern, highly-skilled project managers. According to the IDC survey, about 70% of respondents said trade and labor shortages were the greatest impediment to getting projects done on time—especially since about 39% of construction projects are still managed with manual processes.1 Simply put, without a high-functioning team, the projects take much longer, leading to higher costs.
According to GlobeSt.com, the labor shortage is pushing projects over budget more frequently than ever, 1 and while budget overruns are often normalized, they can have deeply negative impacts on a real estate team. These include:
- Loss of investor respect
- Loss of trust for the project manager
- Loss of development team reputation in the marketplace
- Less return on investment (ROI)
- Lack of new business
Thankfully, existing real estate development software can relieve teams of all these consequences and provide a multitude of budget benefits.
Here are the three ways real estate development software helps keep commercial real estate projects under budget.
Decreases Costs Tied to Time-Consuming Tasks
With any manual process, there are bound to be human errors. Even just one or two small mistakes can compound into a significant problem down the road. If someone on the team enters a wrong number to a budget line in a spreadsheet, project leads will make decisions based on that incorrect data.
Because spreadsheets are often managed and stored on an individual's hard drive, it causes a lack of team visibility, and makes tracking down the error long and taxing. It takes hours for the team member to scour the spreadsheet and analyze the calculations to find where they went wrong.
Real estate development software leverages AI and automation to eliminate human errors and cut the cost overhead of burdensome administrative tasks. AI can automate 80% of physical work, 70% of data processing and 64% of data collection tasks. Teams no longer have to waste hours manually entering data or organizing invoices, proposals, and change orders that can slow a project down and lead to miscalculations, disorganization, and budget oversights.
Drives Better Cost-Related Decisions Through Analytics
Budgets can start to go off track as early as the planning stage. Without accurate or past project performance data, your team will have a tougher time anticipating project costs. They also won’t give leeway for any unexpected costs that may pop up throughout the project.
Real estate development technology smartly indexes, maintains, organizes, and provides insights on past project data to help inform planning. With real-time access to critical project data, teams can make more strategic, accurate, and proactive budget decisions right from the beginning. This is a great way to predict costs and avoid unnecessary expenses.
Serves up opportunities for savings
Proactive intelligence gives teams the advantage of predictability, helping teams stay not only on top of but ahead of budget overruns. It constantly combs through project data and alerts a team when budget lines are trending to go over, so the team can make changes, keep the overall budget on track, and even cut costs for greater returns.
Proactive intelligence also secures access to comparative data and insights, ensuring teams are making proactive decisions. For example, it'll help you keep track of which vendors issue the most change orders and end up costing more in the long run.
Exceed Expectations with Real Estate Development Software
Ultimately, it’s your team's job to hit the budget, so if they’re going over, they’re failing. And if this is happening, your meant-to-be high-performing team is likely overburdened with administrative work that is distracting them from strategic decision-making that lends itself to successful project delivery.
Commercial real estate technology that is purposely built for developers will help your team work proactively, make data-driven decisions, spot budget overruns earlier and mitigate risks. A modern real estate team that adopts this kind of technology can reduce the time it takes to run a real estate project by 30-40% and save 6% on project costs—ensuring every project is on time and comes within budget.
1 Most CRE Owners Managing Construction Projects Are Behind and Over Budget, GlobeSt.com https://www.globest.com/2021/08/12/most-cre-owners-managing-construction-projects-are-behind-and-over-budget/
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