3 Ways Developers Are Engineering Value In Their Redevelopments Before Construction Begins
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While value engineering can be used at any point in a construction project, more developers are evaluating value engineering opportunities early in the construction process. With labor and materials costs rising, this early planning can make or break a construction budget, especially with adaptive reuse projects where speed to market is the primary driver.
Here are three ways developers are value engineering their construction projects early and often.
Identify The Scope Of The Project Immediately
Baum Revision principal Scott Goldman, who is one of the moderators for Bisnow's Chicago Repositioning and Adaptive Reuse event July 25, said with a lack of competition because of a shortage of skilled labor, it is important to identify the scope of a repositioning, labor and materials, then engineer it to be most efficient by getting the contractor and architect involved as soon as possible.
"A couple of years back, we may have received several bids for electricians for a job. Now we only see two or three bids," Goldman said.
Pinpointing the structural limitations unique to a building's shell, especially when it comes to maintaining a building's historical attributes, is a core portion of Baum Revision's business.
Even with this early planning, it is hard to account for inflation, which has forced Baum into cost overruns and into making adjustments throughout the lifespan of a redevelopment.
"On the flip side, the economy has been strong and we've been fortunate to exceed rent projections. It's a macroeconomic issue everyone is dealing with today," Goldman said.
Using Software Platforms To Determine What Is Necessary
Enodo CEO and co-founder Marc Rutzen said software platforms like Enodo can be used to determine the optimal mix of a development and the footprints of individual units. For repositionings, users can upload PDFs of rent rolls, analyze pricing by floor plan and test renovation scenarios for individual unit types to determine the best renovation strategy.
Users may also track amenity values throughout the life cycle of a project. Platforms like Enodo help owners determine how the market has changed since development started, and if features and amenities need to be cut to value engineer the project, they can ensure the lowest premium amenities are cut first.
"This level of analysis allows developers to build to the original plan, but adjust accordingly if anything changes throughout the course of the project," Rutzen said.
Bristol Design Group CEO Randy Langer said most of the cost overruns in a development occur near the end of construction, when finishes like countertops, vanities and cabinets are installed. The margin for error with repositionings is greater versus ground-up developments, because the lead time is shorter. Langer said Bristol begins discussing the types of finishes a developer wants for an adaptive reuse project six months before construction begins, versus a two-year lead for new buildings.
Langer found building a model kitchen or bathroom while bidding on a job gives developers an idea of what the finished product will look like. Langer will combine different lighting or cabinet styles to give developers flexibility in pricing before the finishes come in to play.
To learn more, attend Bisnow's Chicago Repositioning and Adaptive Reuse event, 7:30 a.m. July 25 at 1006 South Michigan Ave.