Most CRE Owners Managing Construction Projects Are Behind and Over Budget

Growing labor shortages are pushing real estate owners managing construction projects over budget

New research from IDC and commissioned by Procore shows that 75% of owners in the US and Canada are over planned budgets on projects, and 77% were late. On average, projects are about 70 days late when compared to original estimates.

The average project budget changed six times, while the schedule changed five times—causing an average of 15% increase in cost. Budgetary and cost changes also resulted in projects being delivered 69 days late on average. 

Nearly 70% of respondents said trade and labor shortages were the greatest impediment to getting projects done on time—especially since about 39% of construction projects are still managed with manual processes. 

The biggest labor shortages were in the planning, design and scoping functions, and the survey found that the lowest performing companies tend to rely on both manual processes and “technically obsolete solutions such as siloed personal productivity software”  like Excel, SharePoint, and Dropbox.

“These solutions tend to increase staffing challenges since the most skilled employees are less likely to be attracted to environments using outdated work processes,” the report notes.

Construction completions fell further in the second quarter after record lows in the beginning part of this year, compounded by material and labor shortages and continuing COVID-19 woes. All major property types showed decreases of at least 30% in Q2, according to Moody’s Analytics REIS.

“Trade and labor is part and parcel of estimating project timelines and viability, so when there’s a labor shortage, it impacts costs,” said Warren Shiau, Research Vice President and IDC. “And the longer it takes to finish a project, the more your costs escalate. For companies without proper processes in place, those problems are only going to be exacerbated.”