Case Study: $100M Multifamily Development
How a Leading Real Estate Developer Reduced Their Project Costs by $4.2M with Makom Management
Overview
With over 30 years of successful multifamily development, one of the southeast’s most established real estate developers set off to build their latest project. Specializing in Class A & B builds, the firm started preconstruction on the $100M multifamily project centered inside one of Alabama’s most desirable and upcoming metros.
The challenge
Rising labor costs and material pricing have pushed project costs significantly higher in recent years. Nine out of ten commercial projects encounter cost overrun, and an equivalent 90% experience project delays. In fact, per McKinsey & Company, “Large projects across asset classes typically take 20 percent longer to finish than scheduled and are up to 80 percent over budget”.
One month into preconstruction, the results quickly showed that their construction costs would be 20% higher than they budgeted. Incoming materials proposals quoted delivery times 8 weeks beyond the scheduled delivery date, and labor proposals arrived over twice the estimated price for several trades. The project was already pushed back two months and was at risk of additional delays, and with costs on the rise, going further over budget.
About the Project
$100M Multifamily Development
300 Units
15 Residential Buildings + Clubhouse
Recreation Centers + Outdoor Amenities
“We’re getting crushed. Our framing labor budget is about $2.8M and our best quote is at $3.5M. Siding suppliers are out of inventory pretty much everywhere, and flooring quotes are coming in $2M higher than they should be. Even the drywall-paint package is over by almost $2M.”
Delivering the solution
To reduce the project’s construction costs and prevent additional delays, a framework was implemented to identify which trades & materials required immediate attention. Because the developer had secured their site development and concrete contractors at a price within budget, construction could begin if their cost of framing decreased in time for the project to go vertical on schedule.
With priorities set and a timeline established, Makom Management created a blueprint to strategically target labor & material components that would minimize delays while reducing the overall project costs.
Makom Management identified and delivered an alternate framing contractor directly to developer’s construction team within 2 weeks. Priced at $2.4M, the new cost of framing labor was $1.1M less than the developer’s best quote and $400K under their budget.
Following framing, the Makom team delivered additional contractors for masonry, flooring, drywall, paint, insulation, siding, and fire systems. Of particular note, Makom Management lowered the developer’s drywall and paint costs by almost $2M.
Altogether, total construction costs were reduced by $4.2M within a two month period.
“There was literally no way we could move forward before this. The Makom team did a fantastic job”
Results at a glance
8
Total Contractors & Suppliers Awarded the Project
$4,200,000
Total Amount of Labor & Material Costs Reduced from Project
27
Amount of Contractors & Suppliers Delivered to Developer