CREJ

August 2019 — Multifamily Properties Quarterly — Page 27 www.crej.com rmg-engineers.com info@rmg-engineers.com STRUCTURAL ENGINEERING CIVIL ENGINEERING ARCHITECTURE CONCRETE MATERIALS TESTING GEOTECHNICAL ENGINEERING Building Long Term Relationships Through Creative Solutions, Practical Design & Reliable Service For Over 30 Years! LET RMG GUIDE YOU THROUGH THE CRITICAL PHASES OF YOUR BUILDING PROJECT Denver • Fort Collins • Evans / Greeley • Colorado Springs • Monument Construction T he process of project devel- opment and construction is changing. Those willing to adapt the traditional mindset will continue to see successful projects in a tighten- ing landscape. Those who do not, will struggle to find the necessary returns to compete. In Colorado, the era of land spec- ulation with significant upside are largely limited throughout most of the major metro areas on the Front Range. The seemingly nonstop activity in the market has resulted in all marketed, and most off- market, parcels with a meaningful building yield largely have been evaluated by some of the most creative development strategists in our industry. From our perspective, this has created parity between buyers as it relates to acquisition price, and we believe this could represent a positive shift in the continued development of the mul- tifamily sector as a whole. It is this significant pressure on the land acquisition side of the equation that has put stress on the “traditional” project development process. In today’s environment, the opportunity for creating and realizing meaningful develop- ment efficiencies (read: profit) in the acquisition process no longer exists to anywhere near the same extent as it once did. The great- est opportunity to help potential projects pencil now lies in engag- ing the various engineering, design and build teams as early in the preconstruction and development process as possible. The concept of an extended effort, engaging multiple entities to bid estimates for comparison, are largely over. More and more, market demand is the largest driver of these expenses and relative big pricing is gener- ally in alignment with the current market, and avail- able comparable trend estimates. In our experience, and at other general contracting firms across the Front Range, we are finding that clients who select and engage their project team, including the GC, architect, engineers (civil, structural, MEP), interior design, etc., as early as possible in the pro- cess are having the most success- ful outcomes regarding total proj- ect cost. In consulting with current and prospective clients, it has become apparent that this process will result in benefit for all parties, but breaking the mold we’ve cre- ated for ourselves as a commodity industry proves challenging. Our industry, as a whole, under- stands and appreciates that dur- ing the course of any development project, multiple challenges will arise that will require the collec- tive input of the project team. The best solutions always come from collaborating, communicating and working together to find appro- priate, cost-effective solutions. However, when and how these are identified matters a great deal more than they did in the past. Uti- lizing the traditional design-price- build model, identifying and trying to solve these challenges while engaged in the construction of the project unnecessarily creates sig- nificant cost, delay and market-risk exposure for our clients. Here are four things to consider: • The preconstruction process is important. Engaging a build team for initial preconstruction esti- mates (with open-book process) can identify potential challenges while there is still time to make design changes and productive specification modifications. Pre- construction cannot simply consist of sending a set of plans to five contractors and relying on the low- est number, but instead must be a collective and collaborative effort by all disciplines in the process. • Value engineering does not always mean cheaper. VE has become synonymous with “cheap- ening” the design. This does not need to be the case. True value engineering, earlier in the process, identifies opportunities in the project design (think layout, struc- tural components, parking require- ments) for which efficient, alterna- tive options actually could create savings in the structure of the project and allow for more project budget to be spent on the finishes that drive return with less pressure on the overall budget. • We all know each other. This is not a big secret, but our teams work together with civil, MEP, structural and all the various con- sultants. The development commu- nity would benefit from bringing the various skills and experience to the table at earlier stages in the process. One party missing from the initial design development can permanently prevent obvious effi- ciencies from making it into the project. • Buy-out savings are limited. Dur- ing the last five years, the Front Range has experienced such a dramatic increase in develop- ment activity that the subcontrac- tor market has struggled to keep pace with hiring, developing and keeping skilled labor. Their mar- gins have been squeezed by a lack of resources, rising labor costs, and more reliance on second-tier subcontractors. Overall, this is reflected in a 10% to 15% (or more) increase in pricing throughout the market. With annual economic growth anticipated to be 5% to 10% annu- ally for the next two to three years, the Front Range continues to rep- resent a significant opportunity for additional multifamily devel- opment. That said, based on our experience and conversations with other general contractor partners in this market, we believe the true savings opportunity is not in the acquisition process, but now exists in defining and engaging your proj- ect team to infuse their collective experience as early as possible in the development process. ▲ Collaborative construction: Rethinking the process Tony Lajimodiere Chief financial officer/member, Martines Palmeiro Construction LLC