Engage your Consultants Early
This isn’t a sales pitch! In an ideal world the property developer wants to know the maximum value of the project as early as possible. A “roundtable” feasibility discussion with relevant consultants will arguably add significantly more value, cost certainty and risk identification to a project than a single designer and provides competitive edge if at pre-acquisition stage. This would also allow for a more accurate project timeline and cash flow model to be developed earlier which will help with defining any lending requirements and drawdown schedules.
This doesn’t have to cost an arm and a leg. Consultants that regularly act for property developers will be aware of the cash flow model and should be open to agreeing flexible fee terms to suit drawdown schedules or project milestones. Any costs incurred would arguably be outweighed by the value that has been added to the scheme.
Keep your Cost Model Updated
It is highly unlikely that your initial predicted project costs will turn out to be reality. As the design for the scheme develops proposed materials, construction methods and areas of works will change. These costs should be tracked within the development cost model. It is common for construction costs to uplift as the design becomes more detailed due to additional requirements from statutory bodies or specialist design elements.
Where contingencies have been built into the scheme at the initial stages, make a list as to what areas of the project are unknown or design is not developed as these will most likely be the areas where cost assumptions have been made. As the project progresses attempt to “design-out” these items and include an agenda item at project team meetings titled contingencies to purposely discuss these items.
Be Creative with your Procurement Strategy
However small, large, simple or complex your project is, your number one priority should be to ensure some form of build contract is in place. Tendering every project is also key to ensure cost competitiveness. Tendering is a useful tool as it will allow multiple contracting firms to look at the scheme and offer insight into areas which need further risk consideration, design information or value engineering options.
Where your building project is a refurbishment, conversion or works to an existing building it is common for a separate strip-out or enabling works contract to be put in place. This will allow for any hidden elements of the property to be viewed and provide more certainty to budget and programme.
There are a wide range of different contracts available that can be implemented and a discussion with your Project Manager, Architect or Quantity Surveyor should be able to provide various options outlining the differing design control, risk proportion and handover mechanisms.
If you are new to property development I hope my advice provides you with a good starting point.