Market Intel

Current Cost Management Trends in Real Estate Project Management

Effective cost management is pivotal in steering the success of real estate projects, influencing everything from meticulous planning to seamless execution. At VVA Project & Cost Managers, our team, helmed by Adam Kavanagh, comprises seasoned RICS-certified quantity surveyors. Their deep-rooted expertise breathes life into this complex facet of construction.

Recent Trends in Cost Management

Since 2020, inflation rates have seen notable fluctuations, especially pronounced between 2020 and 2022. Although these sharp increases have begun to stabilize, inflation levels remain above historical averages. Looking ahead, we anticipate a trend toward stability and gradual growth over the next two years, assuming steady global supply chain conditions, stable energy prices, and effective monetary policies. Here’s a glance at our current price index:

Focus on Drywall & Ceilings

The trade of drywall and ceilings has consistently encountered rising material costs. As of the second quarter of this year, some products are witnessing up to a 20% price increase:

Fiberglass Insulation: 6%
Armstrong Acoustical Ceiling Products: 5-7%
Tools & Accessories: 5-10%
Wallboard: 5-10%
Metal Framing: 10%
Plaster Products: 10%
Interior Finishing Products: 10-20%

Challenges with Lead Times

Material lead times continue to pose significant challenges, affecting both project timelines and budgets. Although some improvements have been noted, lead times still exceed pre-pandemic levels, particularly for critical components like electrical and HVAC systems:

Lighting Fixtures & Controls: 10-20 Weeks
Air Handling Units: 20-45 Weeks
UPS (Uninterruptible Power Supply): 20-40 Weeks
Chillers: 20-60 Weeks
Switchgear: 30-60 Weeks
Generators: 50-120 Weeks

Strategies for Effective Cost Management

A strategic approach to cost management can significantly enhance the success of any construction project. Key to this strategy is the use of advanced technology, such as Building Information Modeling (BIM). BIM software facilitates detailed 3D modeling of projects, allowing early detection and resolution of potential issues, thus avoiding costly on-site errors. By leveraging clash detection and enhanced coordination, BIM minimizes rework and material wastage.

Moreover, considering alternative products during the design phase, especially those focusing on sustainability, can substantially reduce costs. Utilizing eco-friendly materials like recycled steel or locally sourced timber not only cuts costs but also minimizes environmental impact. Integrating renewable energy sources and energy-efficient systems further contributes to long-term savings through decreased energy consumption.

Ongoing cost estimation and tracking throughout the project lifecycle are critical to maintaining budget control. At VVA, our skilled cost managers proactively manage these elements to forestall any budgetary surprises during project buyout.

Additionally, adept schedule management optimizes overall project costs. By thoroughly analyzing the project schedule and pinpointing critical path activities, we can strategically time purchases of materials and rentals of equipment, securing better pricing and reducing holding costs.

By adhering to these strategies, VVA LLC confidently manages project costs, consistently delivering successful projects that meet budget and schedule expectations.