The next thought management column is from Charlie Shares, Head of Challenge Administration at W. P. Carey. The views expressed herein are the writer’s personal.
There’s no query that the present actual property growth market is difficult. Inflation stays at its highest degree in 40 years, rates of interest are projected to maintain rising and supply-chain bottlenecks proceed to disrupt commerce, resulting in spikes in development prices and longer lead occasions for supplies and gear. In the present day’s development hurdles are being compounded by restricted stock of vacant actual property for sure property sorts, leaving firms with restricted choices for extra sq. footage or property upgrades.
The excellent news is that firms that lease their constructing could also be in luck because of a high-value service some landlords are providing: a devoted undertaking administration workforce. Challenge administration groups are available in all sizes and styles, however they’ve the potential to deal with all kinds of growth initiatives (e.g., expansions, renovations and build-to-suits) in addition to ship turnkey options. REITs and different longer-term traders will usually spend money on these groups, priding themselves on being a associate to their tenants all through the lease and past.
Challenge administration groups handle every little thing from conceptual planning to design to development administration, assembling a workforce of architects, consultants and contractors. This holistic service is especially priceless since most tenants don’t have the assets—be it the capital, relationships or experience—to execute these initiatives themselves. And leveraging their landlord’s undertaking administration workforce is commonly extra environment friendly and cost-effective than hiring a third-party developer, and allows them to give attention to their core enterprise, which is probably not actual property growth.
In as we speak’s market, accessing a devoted undertaking administration workforce with a shared curiosity of their tenant’s enterprise and the experience to successfully navigate present challenges is extra priceless than ever. Right here’s why:
Renovate, modernize or convert an present constructing
Challenge administration groups can adapt an present constructing to mirror the tenant’s evolving actual property wants. This might embody a full renovation and modernization of an outdated constructing or changing one property sort to a different (e.g., workplace to R&D) to mirror a altering enterprise mannequin. Furthermore, with costs persevering with to extend having a undertaking administration associate that may finance the upfront prices related to these initiatives is important. As well as, working with a undertaking administration workforce that understands the ins and outs of a tenant’s enterprise together with with the ability to supply a tailor-made strategy means the ultimate product will likely be ideally suited to the tenant’s long-term wants, compared to if the tenant labored with a third-party developer.
Broaden an asset to accommodate a necessity for extra space
As a way to proceed rising, many tenants have to broaden their actual property footprint to make room for extra gear, stock and extra. Nevertheless, record-low availability of actual property implies that many tenants can’t discover the extra area they want. An in-house undertaking administration workforce may help by working with tenants to broaden their present area to accommodate rising enterprise wants. An enormous good thing about this strategy is that tenants can sometimes proceed working of their present services throughout an growth, providing minimal disruption to day-to-day operations.
Retrofit an present area to make it extra sustainable
With vitality prices persevering with to soar, there’s by no means been a greater time for tenants to replace their properties to make them extra sustainable. In-house undertaking administration groups can work on quite a lot of sustainability initiatives together with renewable vitality alternatives – similar to photo voltaic panel installations – vitality effectivity retrofits and inexperienced constructing certifications. These sustainable initiatives can scale back tenants working prices and assist scale back scope 1 and a couple of emissions to align with their sustainability targets.
Conclusion
For landlords, investing in a undertaking administration workforce is a win-win. Turnkey undertaking administration options add worth for tenants by adapting their property to fulfill their long-term wants, serving to improve lease renewals whereas additionally bettering the general high quality of the portfolio. From an funding perspective, having a undertaking administration workforce additionally offers a gradual pipeline of enticing inside funding alternatives, whereas enabling the owner to have undertaking oversight on offers the place they’re additionally serving because the capital supplier.
