Six Best Practices For Commercial Real Estate Project Management

Project Management Best Practices

Managing large-scale commercial real estate projects can be a challenge for even the most skilled and experienced project manager. Whether it’s lease abstraction, due diligence, underwriting, financial modeling for acquisitions or dispositions or any other type of commercial real estate project or transaction, adhering to a set of established best practices helps ensure the project runs smoothly, is completed on-time and within budget, and accomplishes its stated objectives.

Since 1992, Realogic has abstracted millions of lease pages, underwritten or performed due diligence on over 10,000 assets and modeled billions of dollars in partnership and JV waterfalls. In the process, we’ve learned volumes about commercial real estate, as well as project management. Here are six best practices we unfailingly follow, no matter what the nature or scope of the commercial real estate project, that will be of help to any commercial real estate professional.

Lay a Solid Foundation

As with any commercial real estate building, all successful projects must have a strong, stable foundation to build upon.
Start by identifying and specifying the project objectives and Key Performance Indicators (“KPIs”). These will help guide the real estate project team over the entire course of the project, providing purpose and a sense of direction.
Establish a total budget for the project. Then, allocate it to specific line items so the project team knows exactly how much is available to spend on each aspect of the project. Track and monitor expenditures closely and adjust line-item expenses as needed to ensure the overall budget is not exceeded.
Identify all the resources the team will need to successfully complete the project and meet all of the objectives. These include people, software and technology, leases and other documents, and outside help, including consultants and contractors. It’s better to start with a long list and pare it down than with a short list and have to ask to add to it later.
Create a detailed timeline that not only has start and end dates for the commercial real estate project as a whole, but start and end dates for each individual task within the project. This will allow close tracking of the team’s progress and adjustments to be made to ensure the project is completed on time. It will also enable the entire team to see how individual tasks impact one another and the consequences of delays.

Track closely.

Consistent tracking helps identify potential obstacles early, allowing the team to intervene and resolve issues quickly, before they can delay the project.
Set milestones throughout the project’s lifecycle and measure progress against them.
Track individual expenditures against the line item and total budgets, reallocating funds as needed.
And of course, track against the detailed project plan and established KPIs to keep the project on course.

Communication is key.

While it may seem obvious, communicating effectively and throughout the project’s entirety is essential.
Hold regular meetings with the entire team working on the project, including consultants, to provide updates and allow the group to share feedback. Take detailed notes and distribute them to the team afterwards to avoid miscommunication.
Alert team members immediately to any new developments or changes to the project. Don’t wait until the next team meeting. Send an email update as soon as possible. Or, if necessary, schedule a face-to-face meeting. To make sending emails and scheduling meetings faster and easier, create a group address book at the very start of the project with email addresses for all team members.
Update project plans, budgets, timelines and essential documents, including lease and loan abstracts, in a timely manner. Distribute the new files to everyone involved with the project and alert them to the changes.

Implement quality control measures.

There are easy, proven, common-sense steps to take to ensure the quality and integrity of the work being done, whether it’s due diligence, lease abstracting, financial modeling or any other element of commercial real estate.
Rigorously review all work as it is being done. Double check numbers and lease abstracts. Proof text. Confirm assumptions and conclusions. Have team members review each other’s work. Often, a fresh set of eyes will catch things that the person who did the work will miss, especially when it comes to details in lease abstracts.
Spot check continuously. This will help catch errors early on before they have a significant impact or are duplicated, and it will make full reviews faster and easier.

Review and analyze results.

Any type of commercial real estate project will mainly be judged by whether it met its primary objectives. But, a project that falls short of its objectives can still serve as a valuable learning experience.
Before starting any review or analysis, confirm that all data collected is accurate. Working with inaccurate data will skew the results of the analysis, for better or worse. Neither case is good. Both are misleading and can cause major headaches. The analysis of the project data should reflect the true outcomes and results of the work that was done. Creating and following a project plan, identifying and following best practices and rigorously reviewing all work being done will help ensure the integrity of the data.
The most important measure of any commercial real estate project is whether it met the objectives and KPIs that were established at the outset. For this reason, it’s wise to focus the analysis on these first. Statistical KPIs are objective and easy to measure against. Non-statistical KPIs, such as increasing awareness or customer satisfaction, are more subjective and can be more difficult to measure without conducting before and after surveys.
When summarizing results, and especially when comparing results to KPIs, be sure to include any contextual information that helps explain the outcomes, regardless of whether the project met, exceeded or fell short of targeted KPIs. Oftentimes, the supporting information is as insightful and valuable as the actual results.
Informal measurements also should be included when summarizing and analyzing the results of any component of a commercial real estate project, especially due diligence and lease abstraction projects. These are the types of measurements taken throughout the course of a project and outlined above, such as comparing individual expenses versus line-item budgets and noting the adjustments and changes to the project that were made and when. While these measurements are not as precise and scientific as pure statistical analysis, they still offer a great deal of insight into why a project met or failed to meet its objectives.
Be sure to solicit feedback at the end of the project from everyone on the project team, including consultants or contractors. Hearing different and diverse perspectives often reveals new insights and even opens new avenues of thinking. Plus, it makes everyone on the team feel valued and recognized, fostering goodwill.

Never stop seeking to improve.

Even if a project exceeds all expectations and objectives, there are always opportunities to do better the next time around.
Make identifying opportunities for improvement a formal step in the post-project review process. This will force analysis beyond the topline numbers and KPIs to identify even small opportunities for improvement and for individuals to hone their commercial real estate and project management skills—all of which will help the team with its next project.
Don’t just identify and document the obstacles the team encountered or the flaws they discovered during the project. Come up with practical, realistic solutions for the challenges and obstacles. While knowing where to improve is helpful, knowing how to improve is even more important. After all, the end goal is to not make the same mistakes again. The best time to address process improvement is immediately after a project concludes, while it’s still fresh in everyone’s minds. Share the list of challenges and corresponding solutions with everyone on the project team. Since they were part of the project too, they can provide valuable feedback, such as confirming that all of the obstacles were identified and communicated accurately, and whether they believe the proposed solutions will be effective. Following this same process after every project will create a continuous loop of feedback and process improvement. The end goal is to create and sustain consistency and excellence.

For your convenience, we’ve created a handy cheat sheet that neatly summarizes our six best practices for commercial real estate project management. It’s in the Library section of our web site. To download a copy, click here.

If you have any questions about managing commercial real estate projects, or need help with your next project, be it due diligence, underwriting, lease abstraction, financial modeling or any of the other areas we work in, email us at info@realogicinc.com.

By Terry Banike, Marketing Manager, Realogic