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Real estate development is a capital-intensive, high-risk business that’s extremely competitive, which makes launching a new company within the space daunting. Establishing a reputation with owners and investors isn’t easy.
The multitude of variables impacting the market – like the cost of building materials – can unexpectedly turn a rock-solid deal into a major money loser. And managing all the factors is even more difficult during periods of macroeconomic volatility.
Even with those challenges, you can succeed in the U.S. market by being tenacious, creative, and harnessing the power of modern technology solutions.
Be Resourceful When Unexpected Complications Arise
When starting a new real estate project, you should hope for the best and prepare for the worst. In practical terms, that means researching the project’s geography, local inventory and demand, and recent developments within the asset class. Once your team has gathered that information, you can act quickly and decisively in response to sudden headwinds.
For example, let’s say your real estate development firm is working on a new storage facility for a national museum that will house a large collection of irreplaceable and fragile artifacts. Accordingly, you contract an architect with experience in that domain to design a purpose-built facility with mechanical humidity and moisture control systems. But after receiving the blueprints, your client expressed concerns about the project’s utility bills related to the country’s soaring electricity cost.
On its face, the problem might seem insurmountable. After all, real estate developers cannot control how electric companies set their rates. Nevertheless, telling a client you can’t resolve a big pain point early in the process could lead to the project getting canceled. But this is where all the extensive research your team conducted pays off.
You could suggest that it’s possible to mitigate the project’s high utility costs through the integration of a groundbreaking sustainable building material called hempcrete. Made with chopped-up hemp cores and lime, hempcrete is an environmentally-friendly and highly versatile alternative to concrete. Because of its hydrothermal properties, it’s highly effective at buffering heat and moisture, meaning facilities made with hempcrete need less ventilation and electricity to remain cool and dry than sites constructed with traditional materials.
In addition, the recently passed Inflation Reduction Act of 2022 offers major tax incentives for real estate projects that utilize energy-efficient features.
Ideally, the hempcrete solution will resolve the museum’s pain point and make the project more profitable. That ingenuity will show your client that your team can handle any bumps in the road.
Equipping Your Team with Modern Technology
Making resourcefulness a core value of your company isn’t easy, but it’s essential to building a genuinely indispensable real estate development firm.
The process starts by assembling a skilled and hungry team of professionals that are eager to take on complex projects. It progresses when leaders work to make their teams feel comfortable enough to speak up if they can see a better way forward. And it involves providing your staff with real estate development software that lets them make decisions with minimal friction. That last point is crucial because your employees will only act on their creative instincts if they have access to tools that help them realize their ideas.
Returning to the museum storage facility scenario, successfully implementing the hempcrete solution requires a lot of background work. As a developer, consult with your architect to determine if a significant redesign would be needed to accommodate the unusual building material. You’ll also need visibility into the hempcrete supply chain to see if there are any issues affecting production or distribution. That data inform how the building material change will impact your budget and schedule.
Performing high-level analysis isn’t easy if an organization uses a spreadsheet program to run projects. Its design makes it difficult to collate information gathered by employees on various teams. And once that information is collected, it has to be indexed manually, which eats up valuable time and slows down the decision-making process. Working around spreadsheet software’s limitations means that your project workflows are less agile and slower to react to new opportunities to cut costs.
But software built specifically for real estate development teams can solve many of these common problems. These platforms enable users to make changes to their projects and see how their costs will change several months into the future. They also eliminate data silos by automatically combining all salient project data into a single source of truth.
By equipping your employees with the tools that enable them to operate at a higher level, you help them realize their full potential.
Prepare for the Future by Analyzing the Past
Even with a client-centric outlook and team, real estate firms can find success elusive due to the sector’s volatility. Researchers found that the coronavirus pandemic caused office building property values to fall by nearly 30 percent. Unlike past downturns, developers had no warning about the global health crisis that precipitated the ongoing decline of the office building market segment.
While it’s impossible to anticipate every development that could negatively impact your business, you can gain visibility into the future by analyzing the past.
You should maintain an extensive reservoir of information to uncover predictive insights that will help your company grow. The centralized database should include all the bids, invoices, and change orders connected to your past projects. That way, you can take a 30,000-foot perspective on your business and identify key trends that can help you significantly reduce your project costs. You’ll be able to compare vendor performance and see if any building materials are becoming prohibitively expensive.
However, creating that database by sorting through a mountain of spreadsheets and emails won’t empower your team’s decision making.
Thankfully, this is another area where your firm can benefit by utilizing modern real estate development solutions. Automation can capture and make pertinent information searchable as it comes in, ensuring you have the latest data to make key project decisions. Accordingly, you and your team can apply the lessons from the past to your current and future developments to achieve better and more predictable outcomes.
By leveraging insights generated by modern technology, in tandem with a client-centric culture and world-class team, your firm can reach a level of performance that will make it essential to partners.
Download our Complete Guide to Commercial Real Estate Data and Analytics to discover more tips on using data to give your firm a competitive edge.
Tag(s): Real Estate Technology
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