Managing risk isn’t easy when you’re relying on a spreadsheet. The lack of intuitive solutions for commercial real estate developers has created a massive problem in the built industry. Risk in the CRE industry has dramatically increased over the past few years, yet processes have not evolved to mitigate the growing exposure.
When a contract goes bust, the real issue isn’t time management or attention to detail. The problem lies in the processes that the CRE industry has been relying on for decades. These outdated methods of managing projects can’t alert developers to potential risks; they can’t provide visibility into the health of a project. A spreadsheet isn’t going to send you a message that your contingency reserve is low!
At the bare minimum, real estate developers need a solution that can provide:
- Automated alerts that flag potential overruns
- Automated costs-to-agreements tracking
Automated Alerts that Flag Potential Cost Overruns
A project’s contingency reserve, change orders, and reallocations all play a part in tracking budgets for risk mitigation. CRE-focused software can alert development managers about potential overruns the second the system identifies the risk. These platforms have a budget management functionality that ties together all of the project budget data in one central location. Budget management functionalities might have features that allow users to upload supporting documentation, user approvals, and contextual details about the budget.
Using CRE software with budget management functionality is a game changer for flagging potential overruns. Excel isn’t capable of “telling” users anything; it’s simply a repository for data. Real estate development managers need a solution that centralizes their data and uncovers what that data can tell them about a project. This allows proactive decision-making rather than reacting to issues as they arise.
Automated Costs-to-Agreements Tracking
Like overrun alerts, CRE software automatically tracks costs-to-agreements. As price materials fluctuate and the unstable built industry evolves, tracking cost-to-agreements is trickier than ever. Smart development managers are investing in software that can track anticipated costs from vendors, change orders, exposures, and out-of-contract costs. If you’re tracking these details in a spreadsheet, you might be unpleasantly surprised at the end of a project.
As the economy gets tighter, lenders and equity partners are looking for developers who go above and beyond to mitigate risk. Development managers who set a high standard for transparency in risk mitigation will be the ones lenders prioritize when the market is booming. It’s not about being cutting-edge and tech-savvy—utilizing software that automates costs-to-agreements tracking and alerting for cost overruns is essential for managing risk in the real estate development industry.
Ready to take control of your CRE projects? Request a meeting with our team to discover how our automated software solutions can help you mitigate risks and streamline your processes.
