In our work with business owners from all types of industries, we often hear the desire to
DIY renovation and relocation after a commercial real estate transaction. While finding and negotiating the lease is left to commercial real estate experts, some companies believe the next stage is less difficult or technical and project management can be handled in-house.

Before donning a hard hat and calling contractors, let us offer a cautionary tale of how that assumption can add significant risk and little reward. Commercial real estate transactions are built upon some very complicated contracts – from lease negotiations at the new and previous location, to reimbursement from the tenant improvement allowance to contractor/subcontractor management and documentation requirements.

Our examples are based on real events, but we’ve changed all the specific details to protect the businesses’ identities. We understand that sometimes business owners make the wrong decisions for the right reason, which doesn’t lessen our desire or ability to bring our commercial real estate skills and expertise to the next project.

Project #1: Delayed, over budget, and overwhelmed

A manufacturing company dreamed about expanding from a cramped 30,000 sq. ft. space into a bright, shiny new 50,000 sq. ft. location. The timeline? July through December—just six short months to tour prospective buildings, negotiate a lease, complete the buildout, and move in.

Sounds stressful already, right? To save $20,000 on hiring a construction project manager (3% of the total construction cost), they decided to assign this to an employee.

Fast forward a few months: project delays piled up quickly. Project construction was 45 days late, the move-in date was delayed, costing the business $40,000 in holdover rent. On top of that, the owners faced $50,000 in construction cost overruns due to miscommunications and unexpected issues.

The internal person who was tasked with managing the project was unaware of that their current landlord would require payment of holdover rent, which was one- and one-half times their scheduled rent to stay in the current space beyond the lease termination date. The business was unaware of the hidden costs of taking that internal person away from their daily tasks, a cost that’s hard to quantify.

The moral of the story? Saving pennies can cost you dollars, time, and maybe even sanity. Hiring an expert might seem like an unnecessary expense at first but it’s the kind of investment that prevents budget surprises and schedule disasters.

Hidden costs to evaluate

Project #2: Smooth sailing with a pro on the helm

Our second example illustrates the benefit of using professional project management. In this case, a distribution company decided to lease a 100,000 sq. ft. space that needed complete transformation, including offices, loading docks, and customer will-call areas. With only three months to start delivering products from the new space, time was of the essence.

Unlike the previous DIY approach, this company hired Forte as both the real estate adviser and the project manager. While it is generally understood that commission costs for the adviser are paid by the landlord/owner, it isn’t as widely known that the landlord also pays for the project management fee from the negotiated tenant improvement allowance. For $40,000—2.3% of the total construction and furniture budget— the project was completed within the budget and timeframe.

Ultimately, the professional project manager saved money, minimized lost productivity, and did not result in any holdover rent. The project finished on time and within budget. Customers were pleased, employees were satisfied, and most importantly, the business owner was able to avoid the stress of managing the construction chaos.

Unsung hero creates great music

One of the unsung benefits of using a professional project manager is the deeper knowledge that comes from each completed project – from the timeline for phone and data cabling to the correct way to apply for a building permit with the city. The project manager sets a schedule, prepares budgets, manages contractors, helps procure equipment, and provides a valuable interface with the landlord. It’s like being the conductor of an orchestra!

But we know that all businesses want to save money and understand how scenario #1 happens for the right reasons. Think of the project manager as your business’ advocate in the construction and relocation process, your navigator of all of the complicated contracts associated with real estate. Most importantly, they know how to keep contractors and their subcontractors on time and on budget.

The Verdict: Trust the experts

If these two tales teach us anything, it’s this: running your business is challenging enough without doubling as a construction project manager. While hiring pros like us might seem like an upfront expense, our wealth of experience can save you time, money, and a whole lot of stress in the long run.

Before you start Googling “how to manage construction projects,” ask yourself: do you really want to be chasing down contractors while juggling customer demands? Or would you rather leave it to someone who knows how to turn chaos into order?

Remember, sometimes spending money is the smartest way to save money (and your sanity).

If you have real estate questions or would like to review if hiring a professional project manager could help you save time, budget and stress—contact our experienced Forte advisors.