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Project Management in Real Estate Industry
Since it was discovered, project management has been applied to many different industries, even high-tech, and manufacturing operations. This method originally started in the construction industry, where it was first developed for controlling schedules, costs, and specifications.
Managing a big project can be challenging, but it's really all in the planning. Successful project management is the ability to connect each component to the others and how they fit together. There are a lot of different components that go into any real estate project, unlike any other domain.
What do you Understand By Real Estate Project Management?
Project management is booming, and project managers are employed across many different industries. The Project Management Institute (PMI), which certifies project managers, defines projects as both temporary endeavors with unique rules that require the hiring of a temporary team and the completion of a series of tasks within a defined timeframe. A project manager is someone who ensures all the diverse aspects of a project are brought together smoothly, and that all the necessary phases of work are completed effectively and within an appropriate budget. Sometimes, person may not be given the title "project manager" but is instead responsible for managing a project under someone's purview or for that particular piece of work within an organization or industry.
Estimating the Costs
Though there are various ways of estimating the costs for real estate projects, the unit cost for the bill of quantities is best. The easiest way to estimate this is to break down your project into tasks and assign a cost to each one.
After tasks are defined and resources are assessed, your next step is to compute the unit cost of each. The total cost is then determined by summing up the costs incurred per task. Various types of costs linked to any resource can be in terms of man-hours, material, labor, and expenses (overheads). One example is construction costs in a real estate project. These include design costs, bid prices, approvals, and control costs.
When designing a real estate project, there are three levels of design. The initial design plans provide an outline for the master design and detail design hours. Yet all three are critical components of a construction project, as they give direction on what changes need to happen during the construction process. After carefully considering the details and specifications, you can create a detailed scope of work. Once this scope has been created, it's easy to estimate costs.
While mapping the basic costs of construction projects, it must also be taken into account that there are joint costs involved. For example, an allocation factor for cost bifurcation is calculated to provide accurate estimates.
The length of the project must also be taken into account when measuring a construction project's cost. Remember that it can take 3-4 years to complete. To account for inflation, you should calculate and aggregate a price index. No matter what, though, remember to look at historical data in order to measure and then determine the cash flows. This will help you know how much money will be spent over a period of time - something that is very important when making a cost estimation.
Smart Project Management in Commercial Real Estate
Property transactions and construction initiatives demand many steps, lots of money, and input from multiple stakeholders. Think of buying a house: You secure a loan, find out what's available, choose and bid on a property, inspect it and get insurance. For commercial real estate, the process is similar but much larger scale.
The developer has to do a lot of work before completing the purchased property, including conducting research and securing financing, coordinating with engineering experts about project matters such as the property's site design or parking lot drainage, and submitting to city or county planning boards, and so on. All this planning is essential for managing any successful real estate project.
Why is it Important?
Managing a real estate project is no easy task. Large-scale projects are often expensive and require many different stakeholders to coordinate. This makes it important that companies look into developing systems for managing their own real estate projects or any other large building they happen to take on. Systems such as these can contain the following
As a project manager, you have many responsibilities. You'll need to manage multiple contractors, watch for cost increases thanks to changing orders, and keep an eye on materials and budget for vendors and financing. Follow these dozens of protocols to make sure the project stays on or below budget.
A project manager's duties are many and they must keep track of time as well. Waiting an extra few minutes to order supplies, not coordinating between contractors, or forgetting to pull a permit that takes weeks may slow the project down. As a result, this can then increase costs for the client - even if it's extras that aren't directly related to the project. For example, if a company's new office headquarters isn't ready on time, this could mean being forced to extend the lease for their current headquarter until it's finished.
Projects are never without some level of risk. A project manager's job is to reduce this risk by hiring only qualified professionals and securing adequate project insurance. They'll also design and manage contracts that clarify everyone's responsibilities. This will save you money and keep you protected in the long run.
Big, complicated projects might require public comment periods, community resistance or community notice requirements, and public outreach. Additionally, if there are any collaborations on the project, explain your "story" to make sure that local leaders approve zoning and permitting for you before construction. It's also advised in case there are any exceptions - like a zoning exception - made for you that will help to assure the project continues as planned without any hiccups in construction.
How it Differs from Portfolio Management?
A project is a temporary commitment to complete a set of tasks in the future. They can be completed once, or they might need to be done over an extended period of time. Operations are never-ending projects that occur within a business. A company needs a project manager to complete construction on a new office building, but operations take place once the building enters service. Tasks such as servicing the building's elevators and HVAC systems, managing cleaning crews or landscaping professionals, and repairing minor issues all fall under the category of operations.
Portfolio management practices can be difficult to maintain since they involve ongoing operations and managing multiple assets. For example, if you're the manager of an apartment complex, you may need to make adjustments to rent prices in order to keep occupancy levels in range or evaluate whether it's worth improving certain apartments in your target zip code. This is a more specific example of reconciling portfolio management with performance optimization.
Why do Companies need Project Management in Real Estate?
There are hundreds of consulting firms that focus on global real estate projects. They have staff in major cities with local knowledge about the specific requirements, so they usually get business from large corporations. These companies can assign a project manager to your project, assemble a team of experts, and manage the project until the results align with your vision.
As a company, you may be considering hiring an external project manager. However, you should keep these four things in mind
The company can approach project management by staying organized and developing a timeline for your project. This will help keep you on track and let you see where you're deviating from the plan so that problems can be identified as early as possible.
What is the staff strength at your company?
In the past, has the firm handled any new construction, remodels, or large-scale upgrades?
Who are some of your clients? How do you handle your client relationships?
Project Management: Types
As in any industry, a project is simply a series of tasks with a start and end. This can be a number of different things, including −
Project management acquisitions − As a project manager, purchasing commercial property for development implies following a carefully-devised process. This can include site identification and assessment, researching necessary zoning or entitlements, organizing financing or securing tiers of financing, going through the purchase process, and coordinating with the public and media.
New Construction and Development − When a site has been acquired, a developer will create a business plan around a project to finish quickly so that it can enter service and begin generating income quickly
Existing corporate relationships − When a business owns a multi-site network of locations, like a retailer with stores or gas stations in many cities, for example, they often need to undertake an array of different projects. For the average multi-site project, it might involve making environmental upgrades and getting LEED certification. It might also include rolling out new branding - perhaps after an acquisition - which could mean updating their store signage as well as redesigning their interior spaces at dozens of locations. Other common projects are converting old spaces into office-specific features such as sound baffling or introducing changes to their HVAC system.
Commercial Projects − Industries like medical facilities, hospitals, factories, data centers, distribution centers, and high-sensitivity communication facilities. These projects typically require specialized skills such as those that might be found in a contractor who can meet technical demands or at a subcontractor with urban planning experience. For example, a factory that is going to ship and receive large parts and oversee distribution will require special access roads or an extra turn lane on a highway to make the work smoothly.
Project managers must define their projects carefully. Planning a project is key, and for an acquisition project, it’s important to understand how much time the due diligence process will take. This will determine how long tasks can be pushed back within the timeline of the project. Depending on this, a manager may adjust the size or scope of team hiring, scheduling, budget, and design and engineering required for the project.
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