One of the overlooked pieces of any property firm is how much time and money they spend on construction and maintenance. The biggest property firm in the world, Brookfield Property Partners had $137 million dollars in construction costs in the second quarter of this year alone. This likely doesn’t cover the immense amount of money that goes into maintaining their 200 million square feet that they manage globally.
So, it is no shock that many big firms are interested in finding better ways to manage the work and the risk of completing physical improvement projects. One of the standout software providers to the commercial real estate industry has been Honest Buildings. In fact, Brookfield Property Partners and Rudin Ventures invested in Honest Buildings’ Series B round in October of last year. This, along with investments from other top real estate firms like Oxford Properties, The Durst Organization and DivecoWest have helped Honest Buildings become one of the leaders in the project management software space.
Now they have another big firm investing in them and likely bringing them on to help assist in the management of their portfolio, JLL. The technology investment arm of JLL called JLL Spark has announced an investment in Honest Buildings as well, siting the need for transparency into capital and construction projects.
“Given the $10-trillion per year flowing through projects globally, owners need to have a platform built specifically for their needs, not those of the general contractor.”
To better understand why Honest Buildings has been able to capture the hearts and minds of so many big landlords I spoke to the founder and CEO Riggs Kubiak. He told me that one of the big differentiators for his software has been that it wasn’t built for contractors, like most project management software, but for the real estate industry specifically. “Given the $10-trillion per year flowing through projects globally, owners need to have a platform built specifically for their needs, not those of the general contractor,” he said. “For owners, completing projects on time and on budget will make or break the underwriting for any asset they purchase. For developers, staying in line with the capital forecasts is truly their primary job on behalf of their investors. And, for large corporate occupiers, tracking spend across projects is paramount to your bottom line performance each year.”
Obviously, tracking a project at every point is the only way that property firms can ensure that they are hitting the targets that they promised their investors but that is only the beginning of how construction can become more efficient. The bidding process for large jobs is arduous and rife with overpriced budgets. A consistent look at prices for each type of job and material across a portfolio can reveal where numbers might be inflated. Riggs talked about how his software can help each project inform the one after it, “Over time, the technology amasses a repository of historical cost and vendor data invaluable for strategic planning, project benchmarking, and trend analysis to positively impact costs, timelines, and asset value.”
This round of investment is said to be to help the company fuel international expansion and develop new tools. I asked Riggs what were some of the pain points that he thought he could further address and he told me that forecasting was a place that could be improved even further, “The most immediate update will be an addition of Cash Flow Forecasting to the Portfolio Capital Planning Product in the coming months.”
While the amount of investment is Honest Buildings seems amazing given the niche that they are in it is important to remember that companies that are in the property industry are by default in the construction industry as well.