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A combination of skyrocketing inflation and rising interest rates are pushing the United States toward recession, a development that will hurt the commercial real estate market. The Mortgage Bankers Association anticipates borrowing and lending in the sector will fall to $733 billion, down 18% from 2021. Until the threat of economic contraction passes, investors will be wary of putting their money into long-term bets in a volatile segment.
However, developers can fortify their companies against the oncoming storm by utilizing cutting-edge real estate development software. Here’s a look at how a purpose-built platform can help you recession-proof your projects with improved forecasting, tighter workflows, and greater operational resilience.
Enables Better Project Forecasting
A recent Bisnow article pointed out a major disconnect between investors and real estate developers is their decision-making processes. Investors pour over large and diverse datasets to identify trends shaping the global marketplace. Financers want to predict the future to ensure the best possible ROI from their endeavors. By contrast, developers create forecasts using a combination of the information collected from past projects and gut instincts.
With a recession looming, potential stakeholders don’t have much enthusiasm for multimillion-dollar investments that lack defined roadmaps. Gemstone Partners Managing Partner Jason St. John told Bisnow that canceled contracts are piling up as economic instability is eroding lender confidence.
Project managers can’t stem the recession tidal wave, but they can batten down the hatches using real estate developer software. One of the key benefits of using an artificial intelligence-powered analytics solution is being able to see your project’s anticipated costs 3, 6, or even 12 months into the future. That way, you can see potential budget overages before they happen and reallocate funds to keep your overall budget on track.
Having greater project visibility will help you make proactive rather than reactive decisions. In turn, making smarter, data-driven choices will affirm your stakeholders’ trust regardless of larger economic turmoil.
Eliminates Time-Consuming Administrative Tasks
Collecting and collating information for monthly cost reports is essential to commercial real estate development. It’s also time-consuming and incredibly tedious.
Checking in with different departments to gather bids, invoices, and change orders to pull together a draw package is a hassle, especially for organizations that employ a remote workforce. Exchanging emails and phone calls eats up time that development teams could spend focusing on the strategic health of the project. And once all the salient project information is collected, there’s tiresome work of entering that data into one single report.
Moreover, while humanity has an infinite capacity to innovate, our capability for making typos is just as boundless. That is a big problem for development teams as a single mistake in a monthly cost report that includes thousands of pages can result in its rejection. Afterward, staffers must take time away from more important work to correct the error. Though entirely understandable, data entry blunders can disrupt meticulously plotted schedules and shake investor confidence.
However, real estate development software provides a better way forward by automating the entire reporting process. Integrating your firm’s email-based workflow enables a next-generation solution to capture and index incoming project-related information. Consequently, project managers don’t need to hunt down important documents stored by different people in different departments. Being able to create comprehensive but easy-to-digest reports frees team members from having to repeatedly complete tedious administrative tasks.
During a recession, maintaining employee morale is very important. If staffers are consumed with doubt about what tomorrow brings, their uncertainty will inevitably hurt their job performance. But developers can instill confidence in their teams by giving them the tools that will make their path to success as straightforward as possible.
Builds Resilience to Macroeconomic Shocks
Finally, state-of-the-art real estate development software can help firms make their operations recession-proof by increasing their resiliency.
The last few years have proved that macroeconomic shocks can strike without warning and spark cascading crises across the world due to the interconnected nature of the 21st century. In 2020, the coronavirus outbreak turned into a pandemic that disrupted everyday life worldwide. Subsequently, COVID-19’s disruption of major semiconductor production hubs created a chip shortage that negatively impacted dozens of industries and caused inflation rates to spike.
Accordingly, commercial real estate firms must prepare for the unexpected by making their operations as efficient as possible. To start, your company should work to increase its operational agility to better manage unforeseeable disruptions. For instance, let’s say a vendor submits a change order in response to a sudden materials cost surge.
Traditionally, you or a member of your team will have to sort through a mountain of documents to determine if your contingency can cover the shift or if a redesign is necessary. But relying on real estate development software lets you see how the price bump will impact the project, so you make the most financially prudent move.
Those data-driven insights will help you keep your project running smoothly even as external factors create bigger and bigger bumps in the road. That’s the core of resiliency: being able to recover quickly from life’s inevitable difficulties. In times of economic uncertainty, organizations need to be as informed, efficient, and decisive as possible because hesitating in the middle of a crisis is a mistake no company can afford to make.
Find more ways to help your business become more resilient by downloading The Complete Guide to Commercial Real Estate Data and Analytics today.
Tag(s): Real Estate Technology
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