Property Development

Since the beginning of the Covid-19 crisis, the property development market has been facing the most significant changes since the economic crash of 2008. And while it turned our lives and businesses upside down and put many projects on hold, experts say that in 2022 the industry is ready to bounce back.

Even though the recovery to the pre-pandemic levels is going extremely fast, there are still challenges that need to be considered. Today, we want to discuss these challenges and show you the solutions to some of them, which Archdesk’s interconnected construction management platform can offer. Let's get down to business!

State of the industry

Prior to the outbreak of the covid-19 virus, the real estate development industry was going strong. Over the past years, the investments generated a steady income and significant return on investment.

However, the global pandemic and lockdowns affected the industry profoundly. Although it has already been said that property development had bounced back, it is still facing the outcomes of this crisis. And that's not the only challenge developers are facing.
Let's take a look at the biggest challenges for the industry!

• Covid-19
  With the start of lockdowns almost overnight, people got stuck in their homes, and many have begun working remotely, leaving offices, malls, hotels and other shared spaces deserted for months. Many tenants struggled with payments, which impacted cash flows. Developers couldn't obtain permits and faced construction delays due to contractors not being able to mitigate health risks for their employees. In the UK, the number of investments in property development drastically dropped after March 2020.
  
  Although full lockdowns may (hopefully) be history now, society will never return to how it functioned pre-covid. Many companies opted to continue to work remotely; people turned to buying online rather than doing it physically in the shop, on a much bigger scale than before. As a result, the value of such properties is going down and there is no demand for this kind of project.




• Materials shortage and high cost
  In 2021, some material prices increased even up to 75% compared to 2020! As a result of Covid-19 disruptions, many suppliers cannot fill the demand for the most widely used construction materials. Brexit isn't helping the situation; the Construction Leadership Council stated that the UK imported up to 22% of all materials and components, 60% of which were produced in the European Union.
  
  With the added disruptions to the supply chain and more restrictions connected to custom clearance – it's no wonder the situation is challenging. A weaker pound is not helping, as with materials sourced overseas, the purchasing power of currency is reduced.
  
  If you want to learn more about the construction costs rising, check out our articles on the matter!
  -> Construction Materials Cost Crisis: Why Are the Prices So High?
  -> Rising Cost of Materials in Construction: How to Deal with It?




• Sustainability and technology adoption
  This challenge is real across all sectors of construction and is not slightly less critical in property development. As the world is quite literally standing on the verge of collapsing the natural ecosystem of our planet for good, there is a growing demand for using eco-friendly solutions and becoming carbon neutral. As the UK has passed a law to become carbon neutral by 2050, it's not only the right thing to do but also a necessity.
  
  As property developers are "overseeing" the whole of the construction process from design, building, installations to maintenance, they can make sure that both property and the process are the most sustainable they can get. We have one article on sustainable property development coming up, stay tuned! Until then, check out our article on decarbonisation demand in construction!
  
  The digitalisation of the construction process is a great way to support more sustainable solutions. Unfortunately, although Covid-19 did accelerate the adoption of modern technologies, the company is still lagging. Even though property developers often don't feel the need to invest in digital management solutions as they prefer leaving it to general contractors, we have some grounds on why it's not an ideal option – an article on that is coming very soon!

Right now, you might be thinking that the article is called "problems we solve", but the ones we mentioned seem a bit out of anyone's control? It's true, but there are some ways to make your situation better.

And we want to talk with you about some specific challenges that your development company may be facing. The challenges that are more controllable than the general market trends listed above. And we promise you: we can really help you solve them!

Problems We Solve

• 01

  Reduced Profit Margin The point of any business ever started is to bring profits. In the case of property developers, it is crucial to retain the profit margin on a satisfactory level to keep the company going and to enable business growth. However, sometimes developers have to face the biggest nightmare - busting the budget or schedule, dissatisfied clients or contractors not delivering what was expected of them, which results in losing money.
  
  Root cause: Poor management leading to errors, delays and re-visits to the site.
  
  Our solution: This is a complex problem, and in our software, you can find a handful of solutions that could help you get it sorted out. Let's focus on a few that we believe would bring the most significant difference:

  • Programme of works & Scheduling – the key to eradicating management problems is having a full view and control over all aspects of the project. Programme of works lets you create a well-planned programme of works for the project and manage resources, responsibilities and more to optimise the whole process.
    
    With Scheduling, you can see all scheduled construction activities in a timeline that helps you ensure optimised cost, time and quality while also letting you know if you stay on schedule.

  • Document Management & Forms – to avoid chaos and keep good communication, it's essential that you have all the documentation you need organised and held securely in one place. No matter how much data you have, every document can be assigned to its place so that it's easily accessible to those who need them. It is also vital that you always have all necessary documents and data at your fingertips, without the need to chase contractors to deliver information or documentation you need.
    
    Additionally, our system lets you create customisable forms that enhance communication between stakeholders and lets you keep track of what was signed off and by who – which is excellent for avoiding conflicts over responsibility.

• 02

  Delayed Payments
  If you ever felt like you were constantly chasing your own tail trying to manage your finances – you're probably not alone. Many developers are constantly going after the client even months after the project was handed over. Not only this, but it often happens that they must face disputes over meeting the contract's requirements, ending up taking less money than expected. In such conditions, there is little chance to grow the company! Not to mention that exceeding the budget has become sort of a norm in construction – but there is a way to fight that too!
  
  Root cause: Poor finance tracking and visibility of the process.
  
  Our solutions: There are two parts to this problem: one is managing your finances most efficiently to ensure steady cash flow. The other is providing evidence that your company did everything according to the client's requirements. For the latter, the answer is the solution already mentioned above. Forms not only enhance communication and accountability in a relationship with the contractors, but they can also work in your favour keeping the client updated and giving you proof that you had fulfilled the contract.
  
  As for keeping your finances in good shape, we have a whole financial platform that can help you with that. Let us give you some examples:

  • Budgeting – with this solution, you can plan out and approve your budget, forecast costs and make sure approved contracts don't go over their limit. You can also track and analyse real-time costs, have an eye on the remaining budget and see the anticipated project profit!

  • Project Finance – this solution helps you manage the whole financial side of your projects from one platform with smooth information flow. Detailed and easy-to-read dashboards let you see all the information you need, which makes it so much easier to react quickly if any changes need to be considered when it comes to budget. Integration with external accounting systems, like Xero and Sage allows you to securely exchange data and boost efficiency!

These are some of the common challenges that real estate developers are facing. Still, we know that the profile of projects taken on and the size of the company and operating regions will come with its specific challenges.

Let's have a chat about your company's needs!

If you want to know more about the current situation of property development and the biggest trends in the industry, check out this article!