Having the right occupier-focused project manager is critical to a successful industrial pre-lease, writes Andrea Brown, Knight Frank National Head of Client Solutions, Occupier Strategy and Solutions.
A great project manager is worth their weight in gold. They will save a client time and money, and reduce risk. I always recommend to my clients that before you sign your Heads of Agreement (HOA), engage a project manager as part of your real estate team, to ensure you understand the following:
1. Programme
Your project manager should map out the whole of project – that is, all the things that need to happen before and after the build and absolutely should include what your exit/make good strategy looks like from your existing premise(s). You need to map out the whole end-to-end project to inform everything from sunset dates to early access periods (no point having early access if you cannot use it) to those supply chain decisions (for example, re-routing product) that are critical to the relocation.
2. The Brief
A good project manager engaged before a client launches their Expressions of Interest (EOI)/Request for Proposal (RFP) to the market is essential to ensure the building technical requirements are correctly articulated and documented as part of the EOI/RFP. It is also important that the base build/technical briefs that are submitted in response to the EOI/RFP from developers are appropriately reviewed to understand technically where they may fall short against the original brief. A project manager will contribute to the overall RFP/EOI evaluation process in partnership with the client’s broader commercial real estate advisory team.
3. The Scope
If an aspect of scope (the minimum size of an awning for slide loading requirements, for example) is not agreed as part of the HOA, it could result in a variation at the Agreement for Lease (AFL) negotiation stage (and subsequently put risk on the commercial deal as it is a cost that now has to be rentalised). Post AFL execution, variations can attract contractor and developer margins but also risk an extension of time claim which could have a negative impact on your master programme (and see double rent being paid for an unforeseen period).
A project manager is there to derisk these scenarios but also to push the development base build scope to include more bespoke requirements to meet what the occupier needs (whilst working with the clients commercial real estate team to ensure commercial terms are still acceptable).
Key areas of focus include:
4. Amenities
A developer will look to build the minimum required amenities to meet the National Construction Code (NCC) and the proposed occupancy numbers. Occupiers always want more than the NCC is going to stipulate and generally prefer warehouse and office staff amenities to be separated. If you do not understand and include additional amenity requirements as part of the HOA terms, they will either become variation owing to the need to integrate at build stage or a post practical completion tenant fit item. Both of these outcomes result in additional costs to the client and also in potential make good removal costs at lease expiry.
5. Truck size and Movements
Understand type and number – now and in the future. This influences awning design, roller shutter sizing and hardstand aprons.
6. Sustainability
Many developers look to meet minimal 4 star Green Star targets but many corporates have goals above and beyond this and are looking to their partners/vendors/supply chain to contribute to their carbon reduction targets. In prelease, this needs to be articulated into the design, construction and ongoing operational requirements. Occupiers are looking beyond solar/LED lighting/electrical charging infrastructure (both cars and trucks)/rainwater harvesting/grey water closed systems etc.
What can a project manager do?
The role of the project manager is to understand the occupier’s business and its ambitions. The project manager will derisk the process and provide the occupier greater certainty on cost and programme.
The project manager can assist by translating the goals of the occupier into the HOA phase to drive a best in class outcome. We are seeing an increasing number of corporates prioritising sustainability when selecting their pre-lease development partners.
Importantly derisking from before the HOA stage should result in a speedier execution of the AFL and delivery of the project. That keeps all parties to the transaction happy.
The Knight Frank team understands that occupiers are not real estate focused companies. Real Estate is the business enabler for occupiers, and it is our role to assist our clients find and foster the best environment for their business. We can help act as an extension of our clients' internal property teams, to help them leverage the power of the Knight Frank platform to deliver end-to-end real estate solutions, including lease administration, complex location strategy, portfolio planning, transaction management and execution, workplace strategy, design and fit out, and ongoing facility/property management. Our approach is to turn insights into action - Data, Plan, Execute and unlock opportunities, together.