By Ron Agababian, vice president,
Business Development, McGowan
Today, New York City continues to enjoy a strong level of real estate development, fueled by the marketplace’s appetite for new residential, municipal and commercial construction activity.
In the past, the term “developer” exclusively referred to familiar names like Durst and Rudin, iconic family developers associated with New York City’s new construction projects.
Their projects were typically conceived from the developer’s vision as they skillfully orchestrated the array of activities required to successfully add another office or residential building to their already impressive portfolios.
Construction firms active in New York City have often had long histories working alongside these developers to provide pre-construction services and allow for a better understanding of the construction costs for each project.
This was a process both the developer and the contractor were quite familiar with, having gone through these critical project steps together many times.
A new wave of developers has arrived in New York City’s real estate market.
They are not only first-time participants in the City’s development arena, but are often also firms whose primary business is rooted in the financial services industry, including real estate investment groups, opportunistic hedge funds and wealthy private investors.
Construction activity in both the residential and hospitality markets today continues at historically high levels fueled by ascending condominium property values, and some of the highest hotel room rates and levels of occupancy the City has ever seen.
This enticing and seemingly ever ascending real estate price valuation presently ongoing in one of the world’s most stable real estate property ownership markets has caused many financial firms to determine that now is the time to become an owner and/or developer in the New York City real estate marketplace.
These financial firms now entering the City’s development scene are armed with well-funded capital reserves and focused on getting their projects off the ground.
After a project’s design and scope are established, and project financing secured, the project team looks to better understand the process of actually constructing the property by engaging with a construction services firm to provide pre-construction organizing services, value-engineering input, project approach and logistics strategies, cost budgeting, and schedule input.
The development team then interviews contractors to determine which firm can provide the best compliment of construction experience, chemistry with the project team and construction approach.
The contractor’s proposed cost to execute a project is always a primary consideration for selecting a construction firm.
However, given the increasing project cost and labor challenges in today’s construction marketplace, clients soon realize that a project’s final development cost and schedule will be adversely impacted should a contractor not be able to perform in a productive and efficient manner due to co-ordination issues with the project design team.
Successful real estate development in today’s challenging deal making market places additional demands on a project team as it strives to maintain the project’s cost budget and construction schedule.
When a project’s budget and schedule are not adhered to, the developer’s calculations to determine a project’s financial success can be negatively impacted. The contractor’s ability to be accountable for a project’s cost and schedule are critical to its successfully completing a project.
In addition, given today’s fast-paced business climate, new developers are most interested in receiving real-time communications between all project team participants to enable their overseeing and participating in productive interactions.
Today’s new developers, with their strong financial services acumen, are looking to their contractors to provide daily project updates, including weekly project cost and schedule input, in a transparent manner, as these factors impact the project’s financial viability.
A contractor’s project responsibilities include organizing the project’s construction activities, managing subcontractors and coordinating project team interactions.
In order to achieve the best project organizing results, many contractors today are utilizing sophisticated cloud-based project management programs that provide this desired level of detailed reporting access to all project team participants.
Appreciating that many developers today often do not possess actual “hands-on” project experience, contractors are being called on to provide more immediate project management reporting to allow for clients to be fully apprised of their project’s daily activities.
Contractors must provide today’s new developers with greater project control and daily reporting to be successful in their role to build their projects.
Providing more transparent project communications promotes a better understanding of project activity, oversight and understanding.
As the project nears completion, the contractor’s project activities culminate in organizing the project close-out and administering the project’s final change-orders, along with the final punch-list of construction finishing details including overseeing the commissioning of the building’s significant mechanical systems.