Succeeding in the real estate development market isn’t easy because it requires significant investments of time and money. Bringing a complex project to completion takes years of hard work involving managing hundreds of vendors and meeting the expectations of demanding stakeholders who expect a good return on their multimillion investments.
Operating in the sector has become more challenging in recent years due to rising inflation and a labor shortage. But like many other aspects of modern life, the advancement of technology has made many of the sector’s time-intensive tasks easier and faster to complete. But modern real estate development software offers many advantages beyond improved efficiency.
With the right intelligence platform, you can cut costs at each phase of the development process and make your entire organization more profitable.
Enables Real-Time Expenditure Tracking
Complex projects often exceed budgets because the teams working on them lack visibility into expenditure tracking systems.
Firms don’t end up with significant cost overruns because their spending isn’t recorded; it happens because important information isn’t centralized. For instance, what happens if a vendor submits a change order reflecting the recent 3% price hike in ready-mix cement? Once accounting receives this request, it’ll go through a multistep process approval process before hitting the project manager’s inbox. At that point, you will have to figure out how to cover the higher than anticipated cost without affecting other parts of the development process, and your options will likely be limited.
The big problem with that kind of manual workflow is that it forces decision-makers to make gut-driven, reactive choices that having all the data would have pointed you to and could have negative consequences down the line.
However, real estate development software enables project teams to work on their project proactively via real-time expenditure tracking. A modern platform can capture change order information as soon as the email is received and integrate the new detail into a centralized project database. Afterward, it will automatically generate forecasts showing how the higher costs will impact the budget several months into the future. And if the new data input creates a trend that will ultimately push the budget into the red, the AI system will send you a predictive alert.
With access to real-time project data, you can address problems like building material price hikes as they happen. Leveraging the granular insights provided by real estate development software can lead to you significantly cutting down on budget overruns.
Eliminates Expensive Data-Entry Errors
Eliminating the costs associated with data-entry errors is another transformational improvement developers experience when using software built with development teams in mind.
A recent survey of real estate developers found that 95% of respondents use spreadsheets to manage their portfolios, which is understandable but unfortunate. On the one hand, programs like Microsoft Excel are great at storing vast quantities of data regardless of domain. But like many groundbreaking software programs designed in the 1980s, it replicates an analog process rather than improving it.
Like traditional paper worksheets, spreadsheets are vulnerable to data-entry errors. No matter how skilled or experienced, anyone can mistype information or click the wrong button. That’s why researchers have found that 90% of spreadsheets have errors. Unfortunately, simple data-entry errors can have devastating financial consequences. In 2003, Canadian electricity company TransAlta lost $24 million to a cut-and-paste error, and a similar mistake cost JP Morgan $6 billion in 2012.
Using a spreadsheet program for project management makes you vulnerable to the same financial risk.
But real estate development software can protect organizations from the long-lasting consequences of data-entry mistakes. Thanks to their automated functionality, modern platforms remove the possibility of human error from the equation. Your team won’t need to spend nights hunting for typos when creating draw request packages. And you won’t have to worry about a single keystroke error wiping out millions in revenue.
Reduces Employee Disengagement & Turnover Costs
Real estate development firms that utilize a dedicated software solution to support their work can expect to cut costs on more than individual projects. In automating tasks like expenditure tracking, data entry, and report building, leadership frees their team from a lot of busy work. Instead of countless hours compiling and validating reporting data, staffers can focus on the high-level, strategic decision-making you hired them to perform.
As a result, your firm can significantly decrease employee disengagement and turnover.
Sending one email or looking through one spreadsheet file doesn’t take much time. But preparing a draw request package that can be thousands of pages long requires a ton of administrative work. When talented employees spend 30% of their workday on low-value tasks, their commitment to their jobs begins to waiver. Over time, persistent worker dissatisfaction satisfaction turns into disengagement, a problem that Gallup discovered costs the world’s businesses $7.8 trillion in productivity.
In addition, employee disengagement is a significant driver of staff turnover. When talent is no longer all in, they wonder if they can improve their personal and professional lives by working elsewhere. And once a team member decides to depart your organization, you’ll need to start the always-expensive recruitment process.
Talent assessment provider Chally reports that replacing an employee costs up to 30% of their annual salary. Job posting advertising, background checks, signing and referral bonuses, and onboarding expenses can represent a significant portion of an organization’s operating expenses. And that’s not even factoring in the losses associated with the fact that it takes six to eight months for a new worker to reach full productivity.
That said, it’s important to remember that employee disengagement and separation costs are often preventable.
Chally noted that companies could reduce their turnover rates by 29 to 59% of turnover can be reduced by keeping team members engaged with their work. And Gallup found that organizations that maintain cultures that prioritize engagement have 10% greater customer loyalty, 18% greater productivity, and 23% greater profitability than their competitors.
With all those advantages, the question isn’t if real estate development software can help your organization cut costs; it’s a matter of how much.
Download our Ultimate Guide to Commercial Real Estate Technology to learn how technology is helping the commercial real estate industry deliver consistent results.
