Real estate development comes with some big risks (and, of course, big rewards as well). All told, millions of dollars may change hands between planning and execution during the average commercial or multi-family residential construction project.
Building a large-scale property development is incredibly intricate, and requires careful work from numerous stakeholders to be profitable. A lot can go wrong, so the more prepared developers and their investors are for adverse outcomes, the better.
Thankfully, there are a number of ways to minimize the real estate development risk you take on during a major construction project. What can you do to protect your investment? Here are four risk factors to keep an eye on:
Construction is physically dangerous work. Unsafe conditions on a job site regularly lead to serious injury, even death. According to OSHA, fatalities on construction sites accounted for a full 20.7% of total workplace deaths in 2017.
Beyond the cost of human life, any serious injury on the job site can be costly for developers. Work on a project will likely halt for a day at minimum, putting the project behind schedule and leading to costly rescheduling and delays. Then, lawsuits seeking compensation for injury or death could result in costly settlements and the need for crisis management.
What if there was a way to drastically reduce the number of deaths and injuries that occur on the job site? Despite the safety precautions and regulations already in place, 42% of all construction worker fatalities are the result of falling. In many cases, that risk can be cut drastically by technology. For example, construction drones can document and inspect structural elements in dangerous or precarious places, limiting the amount of time workers spend in unsafe situations.
Small changes to standard operating procedure can make a big difference, too. Take Multivista’s 3D image technology, which comprehensively captures construction progress with measurable images that are accessible from the cloud. Something as simple as having precise in-image measurements on hand of in-slab or in-wall systems before they were covered, for instance, prevents the need for destructive verification (thereby limiting risk and project delays).
Few things can derail a construction project like the power of Mother Nature can. No developer can plan for everything when it comes to earthquakes, hurricanes, floods, or tornados. However, technology can support your construction site disaster plan to mitigate some of the financial impact a disaster has on your job site.
In the immediate aftermath of a disaster, webcams and UAV aerial photography offer developers a first-hand look at on-site conditions, surveying the damage from a safe distance. From this vantage point, developers can work with contractors to assess timetables, work out what setbacks can be expected, and plan for next steps. When it comes time to deal with insurance adjusters, developers who maintain a detailed record that includes progress photography can accurately account for losses.
A latent defect describes a problem in the construction of the building that can’t be uncovered by immediate inspection (the misplacement of steel reinforcements in a foundation, for example). This phenomena creates a prickly situation for developers who are selling the completed property to a management company or other third-party — something might be wrong, but there’s no way to prove it. The buyer wants insurance against this possibility, whether there’s a problem or not.
Visual documentation creates a record of as-built conditions that can be used as a sales tool with a future buyer. By providing a detailed record of covered features like electrical, plumbing, HVAC, post-tension cables, and other key systems, the developer is providing verification of the quality work performed as part of the sale. This added assurance can make a big difference during negotiations.
When building work isn’t done right, a lot of bad things can happen. To prevent costly contractor disputes and work slowdowns, developers should have as many protections in place as possible.
Building projects miss deadlines and run over budget when a general contractor won’t fulfill the agreed-upon project plans. When a contractor tries to increase costs to cover their mistakes, the difference can wipe out your profit margin. Progress photo documentation protects you by tracking on-site conditions, and creating a dynamic timelog of work completed. Construction work is comprehensively recorded by the visual documentation team at regular intervals with time and location-indexed information in the event that legal recourse is necessary.
The same documentation that protects your investment from contractor disputes can also prove useful during resident disputes — a nice bonus for developers once the certificate of occupancy is secured.