Lowering costs and creating efficiencies during new construction, renovation, or relocation Featured

9:13pm EDT March 31, 2012
Lowering costs and creating efficiencies during new construction, renovation, or relocation

Most business owners are not in the real estate or contracting business. So, when they’re relocating, building or renovating, they probably have limited resources or knowledge when it comes to managing this time-consuming process. They have a choice: go it alone or align with a professional that has the technical expertise to manage the delivery of the project within clearly defined scope, schedule and budgetary requirements.

“Whether it’s a ground-up new building construction project or the renovation and remodeling of space, project managers are subject matter experts that can drive value in their ability to identify opportunities and mitigate potential project risk events,” says Eric Verh, director of Project Management at CBRE, Cleveland. “They can properly manage and coordinate teams of multidiscipline design, construction and vendor professionals and provide strategic consulting through all phases of the project’s lifecycle.”

Smart Business learned more from Verh about the value of project management, whether you’re facing a new building construction project, renewing a lease and renovating, or looking for new space and considering landlord turnkey or tenant-controlled improvement projects.

When should a user or owner of real estate hire a project manager to assist in the design and construction process for a proposed project?

The simple answer is the sooner you bring a project management professional in to manage a project the better. During the pre-construction phase, typically where only 20 percent of the project cost is incurred, 80 percent of the value creation can be realized in value engineering, design efficiencies and speed to construction that a project manager can lead if brought on board at the conception of an idea for new space or renovation or contraction. Full-service companies such as CBRE offer strategic consulting through business and conceptual planning stages of a project before the design actually takes place. CBRE Project Management offers clients up-front assistance during their space and building search. By providing comprehensive financial and qualitative analysis of alternative sites or buildings, our clients understand overall budget and scheduling implications associated with each site and, therefore, are better positioned to negotiate more advantageous lease or purchase terms with prospective landlords and sellers.

Further, through proper planning and strategy development early on there are many unforeseen scheduling and budgetary missteps that can be avoided. Understanding roles and responsibilities of those involved in a project and clearly defining the approval process for critical issues are often overlooked. If understood early on, extra time can be planned into the schedule and an expedited process for time-sensitive matters can be developed by a project manager to reduce time and expense.

What types of building owners or tenants are best served to retain the services of a project management professional?

Small, medium and large companies that have single building project needs to corporate and institutional owners and users of real estate on a regional, national or global basis can benefit from the services of a project manager. For example, companies looking to lease or own real estate can focus on their core business while allowing the project manager to oversee their best interests in managing a specific construction project that aligns with the company’s expectations in terms of quality, cost and timing of delivery.

On the other hand, corporations that may be rolling out national rebranding initiatives that either fully outsource or supplement their existing staff with a project management representative can benefit from local market experience and relationships. It runs the full gamut, from small companies to large corporations, whatever their real estate project management needs may be.

Even on small lease renewal projects involving simple renovations of just new carpet and paint, users of real estate may not understand the full implications of what that may mean.  For example, the type of carpet selected can lead to the need to tear down, reinstall and re-cable workstations and the moving of employees and their contents, all of which can significantly add to project costs and employee disruption. Project managers can help companies identify these implications up front and to make decisions for alternative material selections or scheduling adjustments to mitigate such costs and disruption. So even on small projects, it’s beneficial.

Does the value offered by a project manager offset the associated costs for these services?

It is a win-win situation in the sense that a full-service project manager can represent a client’s best interest, while concurrently offering value engineering suggestions and efficient project planning, scheduling and design consultation from project inception through furniture, fixture and equipment selection and move services. For instance, at CBRE, our project management platform often saves our clients on average $2-$3 for every dollar spent on project management fees. It’s our ability to offer up strategic project solutions and best practice methods, as well as our preferred national vendor pricing for building materials and systems that are passed through to our clients in the form of cost savings from day one.

How can a business reduce operating costs through project management?

It comes down to details and aggressive and proactive planning in design early on that the project manager can help manage that process to reduce operating expenses within a tenant space. Selecting appropriate types of construction materials and design, as well as types of finishes, lighting, building controls and water usage can all lead to a more efficient building, which costs less to maintain and operate. Sustainability is big these days. For instance, LEED-certified projects can include environmentally friendly solutions that provide cost savings over time. Project management can not only help clients get into a new building or space, but also going forward have the savings of operational efficiencies.

Eric Verh is director of Project Management at CBRE, Cleveland. Reach him at (216) 363-6455 or eric.verh@cbre.com.

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