The Need for Project Managers

Real Estate Press Releases Wednesday September 10, 2014 10:27
Bangkok--10 Sep--CBRE Thailand

To fit-out or renovate an office can be one of the most challenging and time consuming tasks for any company. Every renovation project should be aligned with the company’s strategic planning, keeping in mind short-term and long term targets. Unfortunately, many of those responsible for these kinds of projects do not have the experience and technical knowledge to manage the different parties involved such as landlords, designers, consultants, contractors and suppliers.

Therefore, many companies are now deciding to outsource the project management of their fit out or renovation to professional project management teams so that their employees can focus on their core business.

A Project Manager will run a competitive and transparent bidding process with the knowledge of comparable prices achieved for materials from previous projects. Project Managers will also review the design and recommend changes that will provide the same quality at a cheaper price. This is known as a value-engineering process.

“In today’s heavily supervised business environment, the importance of compliance due to corporate transparency requirements is critical. A project manager will ensure that the whole procurement process can be transparently audited and completed on time. We know that every company wants the best quality at the best price, delivered on time, in a transparent manner, and achieving this objective requires a specific set of skills and experience,” said Ms. Pattra Jotikabhukkana, Head of Project Management Services at CBRE Thailand.

Among various key players in a fit-out project, the role of the landlord is sometimes overlooked by the company. The key real estate objective of the fit-out work schedule is to minimize the amount of time that a tenant has to pay rental on two premises. Many tenants forget that they are obligated under the lease agreement to reinstate their existing premises to the original hand-over condition. Depending on how many modifications have been made, the reinstatement work to the original condition can take at least one month.

Most landlords will give tenants a rent free period for new leased space; in an ideal world, the fit-out is completed within the rent-free period and the tenant moves in a month before the lease at the existing premises expires. The project manager saves money by delivering the project on time, satisfying the requirement of both new and old landlords and avoiding or minimizing the period when rent is payable on both the old and the new premises.

The significant risks of not using a project manager include an increase in the possibility of costs going over budget, projects being delayed resulting in extra costs if the lease for existing premises has to be extended, and quality issues.

Among these, the most common problem arising from a delayed fit-out project is a double-rent period. Given that the average grade A CBD office rent in Q1 2014 was about THB 837 per square metre per month, on a thirty-day basis, each day of the delay would cost a minimum of THB 28 per square metre. This can be more than doubled if the tenant cannot move out or complete reinstatement of the existing premises by the lease expiration date since the old landlord may agree to a short tem extension but will charge a rental that is at least double the market rate.

For example, let us take a 1,000 square metre project with an original capital cost of THB 20 million, where the tenant is one month late. Supposing the rent at the old and new premises are at the Grade A average of THB 837 per square metre per month, and the old landlord has doubled the rate for a short term extension, then the combined rent on the old and new premises will add up to a penalty rate of almost THB 2.5 million on top of the original THB 20 million capital cost of the fit out.

Hence, CBRE sees the market in Thailand for managing fit-outs following the same course as the rest of Asia with more companies deciding to outsource project management.

It is CBRE’s recommendation, however, that for the most effective outcome, companies should appoint a project manager when commencing the search for new premises. A project manager is very valuable during this process – he or she will assess the various options and determine the most efficient locations where the tenant can have the most people in the least amount of space, thereby saving money while simultaneously providing a comfortable and productive workplace environment.

“CBRE Thailand provides services that combine the expertise of both, its Offices Services and Project Management Services teams. With our in-depth experience and knowledge of the market together with outstanding technical support, CBRE can deliver a high quality of service to our clients from the moment they begin their search for new premises,“ said Ms. Pattra.

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