Commercial retail developers are being forced to deal with fast-rising rising construction costs across the U.S. Franklin Street’s Nick Sanfilippo, Senior Vice President of Project Management, explains how project management services can significantly reduce construction costs for builders.
What factors are driving construction costs higher?
Rising labor costs continue to be the single biggest factor in higher construction costs. We are seeing a lack of skilled workers to replace an aging work force. The social pressures to earn a four-year degree, coupled with the negative stigmas of trade jobs, is creating a void in the labor market. There is a myth that trade jobs are not aspirational, however, data shows workers that specialize in a specific trade can earn six figures.
In addition to rising labors costs, I am starting to see a trend in material costs as well. There has been a steady increase in aluminum, cement, and drywall costs. I don’t see this this easing any time soon and predict this will be the new norm throughout 2019.
How can project management help developers cut their costs?
Project management can help control and cut costs through the design, bidding and construction phases. We can value engineer a site and incorporate changes into the design set. During the bid phase, we can properly qualify a bidder’s proposal to ensure proper scope and accurate pricing. The most effective cost savings tool is change order mitigation. It is easy for a contractor to submit an attractive budget, but finishing the project within that budget is the challenging part. A good project manager will mitigate the change orders through proper bid qualifying and pushing back on egregious change orders. Project managers can intercept many issues before they become a problem.
What are some common misconceptions about project management?
Most retail developers have a basic understanding of the life cycle of a project, which leads them to believe they can undertake the project management component of the project. However, the time and technical expertise required is often underestimated, leaving the developer with extended timelines, busted budgets, and more time dedicated to the project than they initially envisioned. Developers, retailers, and business owners should focus on what they do best and let the project manager focus on the management of the project.
What should developers look for when choosing a project manager?
Developers should consider whether the candidate is a good fit for their operation. Will the project manager work well given the parameters set forth by the developer? A good project manager will set expectations such as timeline, known risks, and budgets. They also should choose a project manager that has excellent communication and response time.
About Franklin Street: Celebrating more than 10 years in the business, Franklin Street is a family of full-service commercial real estate companies focused on delivering value-add solutions to meet the evolving needs of clients. Through a collaborative philosophy of leveraging the resources, expertise and experience of each of its divisions – Real Estate, Capital, Insurance, Property Management and Project Management – Franklin Street offers unmatched value and optimal solutions for clients nationwide. Learn more about Franklin Street at FranklinSt.com.
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Nick Sanfilippo serves as Senior Vice President of Project Management for Franklin Street. In this role, he provides comprehensive project management and consulting services for both investor and occupier clients while leading the project management division across all markets. He has more than 15 years of experience in building and leading project management teams, consistently creating value for his clients ranging from tenant build-outs, to redevelopment projects, to new developments. Reach him at [email protected]
