Nearly 100 development managers say rising costs are driving budget overruns and project delays that could negatively impact new deliveries in 2023
A recent survey commissioned by Northspyre, a leading cloud-based intelligence and project delivery automation platform for real estate developers, reveals that commercial real estate developers and project managers across the country are overwhelmingly concerned about the impact of inflation on new deliveries and project budgets.
“With inflation and supply chain disruption driving a significant rise in construction costs, project managers overseeing complex developments are increasingly looking to technology to help manage budgets and remain organized throughout the development process”
The survey, completed by 100 project managers overseeing developments across all asset classes, points to inflationary pressures, inadequate productivity and uncertain project outcomes as the largest concerns plaguing project leads heading into the new year.
Real estate development project managers are overwhelmingly concerned about the coming downturn’s effect on project timelines and budgets, according to the survey. Findings reveal that common obstacles to keeping a project within budget include supply chain disruption, changing orders, mistakes in construction, soaring building costs, inaccuracies in the original budget, clients altering the planning process, and overall unforeseen issues.
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Below are several key findings identified in the report, The Biggest Challenges and Opportunities Facing Commercial Real Estate Project Managers in 2023:
- Inflation: Development firms and their project managers are increasingly concerned about inflationary pressures on projects underway. More than half of the 92 project leads surveyed believe that inflation will have a moderate-to-major impact on their roles. Roughly 85% of project managers believe they will need to be more careful and strategic when it comes to purchase decisions as a result of surging inflation.
- Budget Risks: Managing CRE developments and completing projects on budget has long been a challenge. In today’s environment of uncertainty and heightened risk post-pandemic, project managers are increasingly worried about the coming downturn and its effect on project delivery. More than 60% of project managers surveyed say the biggest challenges they face today are:
- Too much time spent on administrative tasks
- Keeping projects on budget amid surging inflation, supply chain disruptions and rising interest rates.
- Making sense of disjointed, out-of-date or irrelevant data
- Software: Many project managers are either using multiple systems to facilitate their work, causing increased disorganization, or are not aware of how technology can aid in eliminating error and increasing real-time access to the status of project budgets. Approximately 45% of project managers use a combination of real estate development software, account platforms and spreadsheets in their work.
- Approximately 60% of those surveyed identify “disorganized data” and “laborious reporting” as the most pressing challenges with their current software solutions.
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“With inflation and supply chain disruption driving a significant rise in construction costs, project managers overseeing complex developments are increasingly looking to technology to help manage budgets and remain organized throughout the development process,” said William Sankey, Co-Founder and CEO of Northspyre. “With the right technology, goals and expectations can be adequately tracked throughout the project lifecycle, offering project managers a better work-life balance and helping to drive more favorable project outcomes.”
Northspyre partnered with research firm, NewtonX, to conduct this in-depth survey of real estate project managers who operate in the United States. To create a geographically diverse dataset, the research company interviewed nearly 100 project managers based in the Northeastern, Midwestern, Southern, and Western regions. The survey also selected participants who work in varying real estate industries such as retail, hospitality, office, industrial and mixed-use buildings.
Northspyre is the real estate industry’s first purpose-built operating system for real estate owners and developers managing complex projects such as ground-up developments, fitouts and major renovations across all asset classes, including multifamily, office, retail, hospitality and mixed-use. Northspyre began servicing customers in the New York and Boston markets four years ago. Since then it has developed a national footprint, attracting the attention of developers overseeing projects in every major metro area in the country, including Atlanta, Chicago, Dallas, New York and San Francisco. In the past year Northspyre expanded to more than thirty new high-growth markets, including San Diego, Charlotte and Phoenix.
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