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Americans are conspicuously familiar with the idiom “There is no substitute for hard work.” Hard work is a uniquely American pastime. Since World War II, labor productivity growth has contributed 2.2% annually to economic growth and driven 1.7% annual gains in real income. Labor is the biggest line item on a company’s balance sheet and its most important asset. People define an organization; they execute core objectives and drive growth and expansion. Labor is the foundation of every successful company.
Yet, commercial real estate developers are facing innumerable challenges in building teams to support business operations. In particular, developers have faced decades of difficulties optimizing productivity, managing stakeholders, and effectively utilizing professional resources, and now, labor shortages are exacerbating the problem.
In today’s market, Mark Twain’s perspective on labor is a better fit: “Thunder is impressive, but it is the lightning that does all of the work.” Automation and robotic intelligence is lightning in a bottle for CRE developers. It’s the workhorse behind successful teams, providing support to streamline workflows and reduce administrative tasks. Here are three key ways that technology is tackling labor challenges for developers.
Productivity, according to McKinsey, has been the “engine” of the American economy for decades, but as other industries have evolved and increased output, real estate construction has remained productively stagnant for decades. And from 2005 to 2015, the sector’s productivity declined due to labor shortages.
Construction is also the industry with the lowest adoption of digital tools. “It is pretty remarkable,” says William Sankey, CEO of Nothspyre. “You've had this transition to the knowledge-based economy, the total transformation of our world—but real estate development and project delivery, especially at the owner and real estate developer level [has stayed the same.”
Today, much of the development industry operates on email and Excel spreadsheets. Outside of those now-dated technology tools, Sankey says the industry largely operates as it has since the 1970s. One reason is that the cost-versus-upside of digital adoption hasn’t been possible for developers who are often already operating on thin margins, but new cloud-based technologies are cost-effective and utilize better digital tools to create meaningful improvements in productivity.
Research from McKinsey shows a 70% correlation between a company’s adoption of digital tools like AI and automation and productivity growth. Unsurprisingly, businesses with the highest adoption of digital technology—information, wholesale trade and finance, and insurance—are also the most productive.
The construction industry can reap the same benefits. At Northspyre, automation and robotic learning are used to handle 80% of a developer’s administrative tasks, like monthly reports and invoicing, upload data, and reduce errors that ultimately derail productivity. Increased productivity has a net positive impact on the bottom line. The collective business community estimates that automation results in cost savings of 45% to 70%. At Northspyre, clients are saving as much as 66% on budget overages on a single project by leveraging automation.
Tap into Professional Resources
Developers spend a lot of time building the right team, from scouting top talent to interviewing to onboarding new professionals. This is a lengthy and expensive process, and the reward—theoretically—is the addition of professional expertise that can guide strategy and support successful project outcomes.
It’s really unfortunate when that valuable asset is instead spending an outsized portion of their job on repetitive administrative tasks—but all too often, that is the reality. A report from Camunda found that 90% of workers are burdened by repetitive tasks.
Sankey notes that often, the outcome of these tasks is not even beneficial to the company and can be error-prone. “Not only are people completely bogged down in these sorts of administrative, low-value, tedious tasks, but you get information about where your project was two months ago, not where it is today, and not where it's going to be with certainty in the future.”
However, those are important facts that managers need to know to make course corrections that support the successful outcome of a project. This can only happen when professionals have access to accurate and timely information and have the time to think creatively and strategically about that data. Machine learning and automated processes are delivering those proactive intelligence capabilities to developers.
The technology doesn’t only handle low-value tasks, but it can also augment intelligence. Often project managers are fielding hundreds of comments, requests, and invoices from dozens of vendors and project stakeholders. “Even the best project leads can only focus on so much,” says Sankey. Automation helps to manage this deluge of information so that project managers can make actionable decisions.
Tackling Labor Shortages
The upside of productivity and automated tasks is true in any market. Technology allows workers to do their jobs better, more accurately, and focus on the work that matters—but today, developers are suffering from an acute problem: a national labor shortage. In the annual compensation survey by CEL & Associates, commercial real estate firms continue to report challenges finding talent, and as a result, companies have increased wages year-over-year by 5% to 7%.
Automation and increased productivity help companies run on tighter and leaner teams to offset staffing shortages, or for developers looking to pause new hires in light of economic uncertainty, this technology helps maintain the status quo.
In either scenario, companies are looking for ways to be more effective and more efficient, according to Sankey, with the current headcount, but that has to be done without affecting project timelines or productive output. “You want to take your team out of the weeds and just be more focused and strategic in how you operate,” he says. “And you want a machine proactively serving up insights to help you do that.”
A report from the Government Accountability Office expects automation will eliminate 9% to 47% of jobs in the future, but it also predicts that jobs requiring soft skills, like communication and interpersonal skills, and jobs with active learning and critical thinking skills are predicted to grow the fastest. The research illustrates how development companies will be able to structure teams and professional resources by integrating new technologies.
Automation isn’t a replacement for professional talent, but it is a valuable tool. With it, real estate developers can gain the most out of their team. Learn more about how Northspyre can help your team navigate uncertain waters and optimize your project delivery with a demo today!
Tag(s): Real Estate Technology
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