Project managers play a key role on your development team, ensuring vital benchmarks are met and projects come in on time, on budget, and up to high-quality standards. Every complex development project has risks, from scope gaps to regulatory or compliance concerns, but these issues don’t have to derail your timelines and finances. By understanding common project management obstacles, your team can be prepared to overcome these challenges. Implementing risk mitigation strategies as early as pre-development can help your project managers keep operations running smoothly and ensure project success.
Here are some common pitfalls your project managers might encounter, as well as the risk mitigation techniques necessary to overcome obstacles and deliver projects on time and on budget:
Common Project Management Pitfalls in Real Estate Development
Project managers tackle many tasks over the lifecycle of a complex development project, and some pitfalls are more common than others. Without the proper planning and strategies, errors in scope, regulatory concerns, and miscommunication can derail your project and lead to budget overruns. Let’s take a closer look at why these issues arise in the development process, and the workflows that may be making your team more susceptible to such errors:
Scope Gaps
A scope gap occurs when a task required to complete a development project isn’t captured in any contractor’s scope of work. When the gap is discovered too late, change orders are often needed to address the additional work required. Scope gaps can delay timelines as contractors complete the missing work on the project, and miscalculations in initial budgeting can lead to cost overruns when your team doesn’t have adequate contingency.
Project managers are more susceptible to scope gaps and subsequent change orders when thorough budgeting hasn’t occurred in the pre-development phase. Ensuring project requirements are understood and feasible and that budgets have contingency built in is a vital stage of a project’s lifecycle. Development teams that manage budgets in outdated and error-prone spreadsheets are more likely to miscalculate scope and face budget issues further down the line.
Regulatory and Compliance Errors
The regulatory process on a development project - from zoning requirements to complex financing structures - can be complicated and time-intensive. Understanding the steps your firm needs to take to be compliant with regulatory requirements is essential for preventing unnecessary delays or hold ups during construction. Every state and market will have unique requirements, so conducting research in pre-development is an important first step toward compliance. Projects with complex source structures and requirements - such as Low-Income Housing Tax Credits (LIHTC) affordable housing - often have additional requirements your team will need to meet as well.
Regulatory and compliance errors are among the most common mistakes on a development project. Errors in compliance can have major consequences, impacting your project’s delivery date or stalling capital deployment. Building positive stakeholder relationships with local planning boards or other relevant parties can also be a valuable practice. Local governments are often responsible for permitting, and pre-existing positive relationships with these planning authorities can help you navigate the process more smoothly.
Lack of Transparency + Miscommunication
Development teams organizing projects with out-of-date and error-prone spreadsheets often struggle with siloed project data, and lack of transparency can lead to miscommunication. Key stakeholders on a project - including contractors or subcontractors - shouldn’t be left in the dark about project details or data, as this can lead to delays in construction. Budgeting issues can also arise when your project and accounting teams aren’t aligned on financial data in the development process.
Investors will also want to have eyes on key project data, and lack of transparency around project operations can negatively impact your ability to secure capital for future projects. Increasing visibility with strategic reports and facilitating communication across the development process is key for building trust and bolstering your reputation in the larger community.
Vendor Issues
The vendor selection process is a critical step in breaking ground on a development project, and it's crucial for your team to choose experienced and reliable contractors. Instituting robust quality control measures and assurance processes is also an important practice. Poor vendor selection can cause project delays, as unreliable contractors who can’t deliver materials or services on schedule will derail project timelines. Vendors who don’t deliver quality materials and work can also negatively impact returns in the long term, as the building will require additional maintenance and upkeep after stabilization.
Risk Mitigation Techniques for Project Managers
Project managers play a key role in identifying, assessing, and mitigating obstacles over the lifecycle of a development project. Implementing effective risk management strategies and leveraging modern tools will ensure you avoid common obstacles. Here are a few risk mitigation techniques you can use to avoid project management pitfalls and keep your projects on track:
Accurate Budget Forecasting
Budget forecasting can help you more accurately determine the financial feasibility of a project and prevent overruns or scope gaps over the life cycle of a project. Project managers who have accurate budget insights will be able to anticipate expenses and allocate budget for labor, materials, and other needs. Proper allocation can also give your team more control over contingency, allowing you to plan for any potential scope gaps that occur during construction.
Modern real estate development software like Northspyre is designed to inform you about all aspects of a project, including opportunities to save money and eliminate overspending. The platform notifies you of potential exposures, spend forecasting, and remaining contingencies, allowing you to proactively address concerns before things get out of hand. You can worry less about the potential for human error in the budgeting process, and move forward more confidently as a project breaks ground.
Due Diligence & Pre-Development Planning
Due diligence is essential for keeping a project on track and ensuring you are meeting compliance benchmarks. Project managers looking to conduct thorough due diligence should prioritize property and title review, physical inspection, legal or financial assessments, and environmental review to ensure a project’s feasibility. You should also look into market and occupancy trends to ensure a project’s ability to deliver high returns after stabilization. High-level understanding of a project’s regulatory and financial requirements in the pre-development stage is essential to avoid errors down the line.
Leverage Technology to Boost Transparency
Development teams no longer need to rely on outdated and error-prone spreadsheets to compile key project data. Northspyre can help organize valuable project data from contracts, proposals, change orders, lien waivers, and more, into detailed and searchable dashboards. The platform is purpose-built for your project management needs, enabling you to quickly and easily manage projects in one simple platform. The platform provides unmatched visibility, allowing you to quickly view project progress and historical data across your portfolio, giving secure access to your projects at any stage at any time.
Northspyre can also help you communicate more effectively with accounting or finance, centralizing and standardizing project data across your development team. Data automation and integration with accounting systems like MRI, Yardi, and Sage Intacct, and more ensure your data is accurate and organized across projects. You can also facilitate communication with investors or other business partners, as the platform allows you to generate reports faster and without a complex training process. As a result, your team can continue to inspire confidence and investment in your business without burdening project managers with significant manual uploads and administrative tasks.
Data-Driven Vendor Insights
By relying instead on historical data around past contractors, your team can make more informed decisions around vendor selection and ensure positive performance on your development projects. Luckily, you no longer need to rely on gut instinct or simple word of mouth to find reliable vendors who do high quality work. Northspyre’s platform features a vendor directory, offering a simple and effective way to manage vendors across multiple projects, including contacts, notes, and files related to individual vendors. When you click into a particular vendor, you’ll be able to write notes about the relationship, track files shared between you and the vendor, see how each vendor is impacting the budget lines they are associated with, and store their contact information.
Learn more about Northspyre for Project Managers
Northspyre can be an essential tool for project managers looking to mitigate risk on complex development projects, facilitating impactful and data-driven decision making. The platform will increase your productivity, making it easier to manage administrative tasks like data uploads and document management. Cloud-based workflows enable you to work effectively across every stage of the development process, and acts as your command center for data analytics. The software helps you automatically generate investor reports, stakeholder links, and draw requests simply and effectively. Leveraging Northspyre on your complex development projects can play a significant role in avoiding pitfalls, allowing for accurate and speedy decision-making.
Book a demo and learn more about how Northspyre can help your project teams deliver complex development projects and ensure high returns.
