We all agree that 2020 has significantly changed thought processes around the world. There are “professional” debates about whether this change is permanent or temporary, and if temporary, how much so. However, the best businesspeople do not concentrate on the time factor because they know that now is the time to make decisions about their own fates and those of their companies. Decision-making and motivational rankings have drastically been rearranged, which is understandable. One of the most visible changes is the need for “computability”. Or should we call it “desire”? In the field of real estate investment, desire is not the appropriate word at all. There are concrete expectations that promissory notes are satisfied, and investments are foreseeable regardless of the pandemic or the crisis caused by the virus.
Budget mania
Those who have ever worked for a decent company know that the budget is sacrosanct. We learn it early as managers that the most important thing is not necessarily the fact that we bring great results ¬– we can pass judgement on it – but that we can deliver the numbers we promised. In this case, we are calculable and reliable. In some economic sectors, its importance has decreased, while in others, it has significantly increased. The real estate investment sector has always belonged to the latter group because besides the fact that a huge amount of money is involved in this field, return on investment takes longer than average. In addition, there is a significant mental factor, as well. While we accept it easily in the case of IT development that things change because it is a dynamic and technology-centred sector, stability takes all when it comes to property. Who would like to live in a “wagging house”? Does this example seem too silly? It might be, or actually, it is. However, human decision-making works the same way. We incorporate elements from our private lives into projects when we have to make decisions. But only in the case of very important decisions. However, it is not comforting when it comes to real estate investment because then we get back to the question that large sums of money are involved in this sector. No wonder that investors are characterised by a kind of “mania” to “avoid surprises”. It is a fundamental requirement. This means that the “recipient side’s” situation is easy because everybody knows what expectations have to be met. Although it is true, keeping the budget seems to have become harder over the past decades for market actors. The calm managing of sentences like “more money is needed” has almost become regular for real-estate investors. Of course, the development of the real estate market in certain regions contributed to the destruction of trustfulness. When it is almost impossible to find workers to implement projects because there are so many orders in the market, which investor would dare to raise their voice just because the budget plan has been miscalculated by 10-20%? So what? The project will be ready.
Trustfulness
Many people believe that the profession itself is unreliable and that we need to accept that it is how professionals are coded in this sector. There is some truth in it that just because one wants to bring the best out of a plan and does their best to make perfect financial calculations, it does not mean that they can actually do it. Besides will, professional knowledge is needed for the appropriate result.
“80% of the costs are decided on the drawing board; the earlier we make the appropriate decision, the greater the positive effect it has on the project. It is extremely difficult because we are still at the beginning, but we have to see the complete image. It requires significant planning experience, the application of efficient models, and deep knowledge of technologies and manufacturers,”
explained Ákos Pohl, a construction expert and the founder of HEARTURE.
However, in theory, having the right knowledge means that we cannot be wrong. Suppose a real estate investor entrusts an architecture firm with an appropriate level of expertise. In that case, they have the right to expect quality work, realistic plans, and that the investment sum does not change significantly.
“In the case of budget planning, we need to calculate with new circumstances and elements of construction, so there is an acceptable error rate, which is around 6-8%. However, an architecture firm is not necessarily expected to have a specialist who can increase the calculability of the budget, even if the firm has outstanding professional expertise. In our case, two professionals are responsible for our “budget guidance” strategic consultancy. We have several professionals who can compose very good plans, can calculate well; however, the assessment of their calculations’ trustfulness is another level. That is the reason why there is a growing number of orders in our industry, in the case of which investors completely separate planning from its supervision and a higher level of professional control if formed with this practice,”
said the CEO.
Of course, professionals responsible for the concrete planning and professionals responsible for the supervision of planning mustn’t be in a dependent relationship, but they report to the number-one leader responsible for the investment. It means extra consultancy costs, but compared to the investment scope, it is “chump change”, as they say. The safety of the projects was important before the crisis; however, from 2021, construction projects need to be more carefully considered, and they have to be made more calculable. Architecture firms have a great deal of responsibility for it.