In a real estate environment, it can be easy to overlook the significance of a project manager’s role: to keep the project moving on schedule and under budget. In the past, some project managers had to justify their presence on a project site. But today, project managers’ pay structure — and the incentives for projects wrapping up as planned — indicates that their value has proven itself over time.
In this article, we’ll cover how real estate projects progress from concept to reality using pro planning approaches and software. Plus, you’ll find expert tips and tools to help you land a job in this high-growth field.
Project management is a growing field, and professionals employ it interchangeably across many industries. The Project Management Institute (PMI), which certifies project managers, defines projects as both temporary and unique endeavors that require the hire of a temporary team and completion of a series of tasks within a defined timeframe. A project manager is a person who brings all the disparate pieces of a project together, ensuring that the different phases of work are completed efficiently and within a predefined budget. Sometimes a project manager isn’t designated or given a title, but the work of a project manager is completed under someone’s purview within an organization or given project.
The Commercial Real Estate Industry Runs on Smart Project Management
Property transactions and construction initiatives (whether new builds or remodels) require multiple steps, lots of money, and input from multiple stakeholders. Think of buying a house: You secure a loan, research available properties, choose and bid on a property, inspect it and secure insurance, negotiate the purchase, close on the purchase, and move into the space. Now port those concepts to the commercial real estate world: Buying a large empty lot for a future building requires similar steps, but on a much larger scale. The developer must conduct research, secure financing, negotiate the purchase, hold conversations with city or county zoning and permitting departments to determine whether the property’s planned use is permissible, hold public comment sessions, coordinate with engineering experts about matters such as the property’s site plan or parking lot drainage, submit plans to a city or county planning board, and so forth. The necessity of all this planning evinces the fact that smart project management is a vital aspect of any successful real estate project.
Why Is Project Management Important in Commercial Real Estate?
Large-scale real estate projects are expensive and often high visibility undertakings with many stakeholders. Companies that oversee their own real estate projects or that regularly tackle real estate projects across a network of buildings must cultivate systems for managing projects for the following reasons:
A project is a finite set of tasks done for a temporary time period and has a beginning, middle, and end. Operations, however, involve never-ending or recurring tasks. A company needs a project manager when constructing an office building, but once the building enters service, its owners or tenant can hire a facilities manager to regularly maintain the building’s systems. This maintenance is known as the building’s operations. Tasks such as servicing a building’s elevators and HVAC systems, managing cleaning crews or landscaping professionals, and repairing minor issues all fall under the heading of operations.
Program management, like operations, is ongoing. Portfolio management involves managing multiple real estate assets (buildings such as hotels, office buildings, or franchise locations) and maintaining them to certain standards while also keeping their profit and loss (P&L) numbers or expenses within projected ranges. Portfolio management for an apartment complex management company might involve adjusting rental pricing to keep occupancy levels in a certain range, or evaluating whether to selectively improve some units or buildings in a particular zip code to appeal to an emerging target market. The portfolio manager would make these maneuvers with an eye toward optimizing their employer’s portfolio performance.
There are dozens of consulting firms that handle North American or global real estate projects. Because these firms specialize in real estate project management and have staffs in major cities with local knowledge about local zoning, permitting, and government building requirements, they often pitch business with large corporations. These organizations can assign project managers to corporate real estate projects, assemble teams using external or internal experts, and manage the projects to come in on time and at budget.
Companies considering hiring an external project manager should ask the following questions:
What is a project in real estate? As in other fields, it’s a series of tasks with a finite beginning and end, and accomplishment. Here are some examples of common real estate projects:
Real estate project management as it’s known today was mostly taught on the job, but many credit James Graaskamp, a Professor at the University of Wisconsin-Madison, with debuting a broad and holistic concept of real estate development that informs the real estate project management field today. Graaskamp asserted that each real estate project is a unique business and impacts its immediate physical, environmental, and sociological environment. Therefore, planners and managers need to consider more than just the financial aspects and timeline for any given real estate deal.
In his book The Fundamentals of Real Estate Development, author James Graaskamp writes, “Like a manufactured product, a real estate project is part of a larger physical system programmed to achieve long-term objectives, but each real estate project is also a small business enterprise of its own. Thus, the development process is a continuum of construction technology, financing, marketing skills, administrative controls, and rehabilitation required to operate the real estate enterprise over many years.”
Daniel Kohlhepp, a real estate developer turned professor, developed what he termed the “real estate development matrix” framework to describe real estate projects. “I’ve been trying to teach people about real estate development and as part of that process I’ve had to repeatedly define it for them,” he says. “The concept of a project manager is defined differently all around the United States. Project management teams typically account for 5 percent of an overall real estate project’s costs. One thing’s for sure: If you don’t have project management, you can’t succeed.”
Kohlhepp’s model states that real estate projects run along a seven-stage lifecycle continuum, and that each stage requires consideration and completion of eight tasks. A project manager or planner can situate any project within this framework and keep track of necessary tasks.
Kohlhepp’s seven stages of real estate development include:
Kohlhepp’s matrix states that there are eight tasks to consider at each development stage. These include the following:
Another approach to project management is a Design Structure Matrix, as described by Dr. Tyson Browning, Associate Professor of Operations Management at Neeley School of Business at Texas Christian University in his co-authored book Design Structure Matrix Methods and Applications. This graphic representation of tasks uses a square chart to cluster project stages and represent intersections where multiple stakeholders or processes need to weigh in or influence the movement of a project toward its final stage.
Real estate project managers must have a firm grasp of a project’s stages, and what tasks occur during those stages. Since a project by definition has a beginning, middle, and end, then each of phase also has a beginning, middle, and end — known also as milestones, exits, or gates — which a project manager checks off their list as work progresses.
Project managers must pay careful attention to how they define the project before them. A project’s planning stage is critical and a manager must consider the following questions: How long will the entire project take (or how long is an employer or client allotting)? If the project is an acquisition project, is there a timeframe for steps in the due diligence process? And within that timeframe, how much time will team members have to complete tasks? Depending on the answers to these questions, a project manager may adjust the size or scope of team hiring, scheduling, budget, and the design and engineering needed to fulfill the overall container of the project.
Once the project is defined and mapped for time, the planner must also anticipate time required for the project to receive input, feedback, or signoff from multiple stakeholders. Additionally, project managers must serve as on-site management for the project, handle payroll for workers, encourage smooth collaboration among disparate contractors, handle change orders (requests for additional or more expensive materials), and factor schedule changes (weather impediments, workers out sick, holdups for permits) into the project. Project managers must show strong overall governance over the project schedule and team members’ timely task execution.
Once the project is complete, the project manager will need to compile post-mortem tasks such as final reports or audits so their employer or client can measure project success. Many project managers receive salary bonuses directly tied to their success keeping projects on-time and on-budget.
Real estate project management jobs are in demand — and they pay well. In America, the field is expected to grow by 17 percent between 2010 and 2020, according to the U.S. Bureau of Labor Statistics. Globally, 15.7 million new project management jobs are anticipated across seven industries including construction, according to Project Management Institute data.
A day in the life of a real estate project manager can vary widely, since they often handle multiple projects concurrently. You might lead a small renovation effort, coordinate with a landlord at a new construction site, staff up an incoming project, hire vendors, or work on a tenant improvement initiative featuring new or changed electrical systems, acoustics, lighting, or interiors. Multi-tasking, communication skills, time management, collaborating with multiple stakeholders, grace under pressure, and analysis are musts.
“The Great Recession of 2008 blew a hole in the market, in terms of creating a pipeline of professionals who would now have five to seven years of experience in construction, development and design, or capital improvement work,” says Kipp Gillian, a Former Real Estate Developer who recruits nationally for real estate project management roles at Gillian Executive Search in Los Angeles.
Entry-level jobs in the field pay starting at $50,000 (with a 10 to 15 percent bonus) and rise in larger urban markets to the $150,000 to $180,000 range (with a 20 to 25 percent bonus), Gillian says. Pay can vary widely based on experience and urban market, however. Job portal Payscale reports that senior real estate project managers earn an average of $94,770.
Developers and property owners hire for these roles, as do real estate project management consulting firms and architecture firms. Those breaking into the field will need a bachelor’s degree, but the major may vary depending on which type of project management role they’re seeking. Future real estate development project managers are advised to study math, accounting, business management, and courses in analysis or where they’ll develop pro forma budgets resembling those used in projects, says Gillian. Otherwise, civil engineering or architecture majors work well, as do construction management degrees.
“Internships are key,” Gillian says. “Nothing can replace a good project list when you’re looking for a job in this field.”
There’s demand for project managers who can work on new construction sites, hotels, and industrial properties, he says. Also needed: Project managers at “mixed-use” real estate sites, where two types of real estate are co-located. Examples of this include condo or apartment buildings with ground floor retail, or retail sites that add office or residential to a site.
“Mixed-use requires an enhanced skill set,” Gillian says. “Sometimes one REIT will hire a project manager with skills for the partner’s component of the project — so a residential builder will hire someone who knows how to talk to the retail space developer, or vice versa.”
If you’re planning to manage a real estate project, or pursue work in the field, you’ll need to know some basic technology, Gillian advises. Generally, if you can work with spreadsheets and scheduling technology and use mobile apps, then you can adapt to workplace software programs designed for real estate environments. Even contractors and construction workers are now required to use virtual “notes” systems instead of more analog methods to alert team members about work site happenings.
There are dozens of basic software programs and cloud-based technologies on the market designed specifically for real estate work (such as Procorem), while other offerings are customizable for projects that could include real estate (like Projectmates).
If you’re reviewing software, consider these questions:
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