The Domino Effect: Why 70% of Real Estate Project Delays Happen Before Construction Begins

Real estate project delays are a hard reality of commercial and residential development. Whether it’s a ground-up construction, a major renovation, an interior fit-out or something in between, most projects end up surpassing their expected completion date.

But oftentimes the “why” of the delay is misunderstood. Yes, weather can impact the timing of ground break and material delivery can fall behind, but there are a number of pre-construction delays that can take place well before the construction team arrives on site.

Months – and often years – before a construction site becomes active, project teams are making critical decisions that impact zoning, permitting, financing, vendor identification and management, design, materials and, ultimately, timing.

Traditionally, project teams track all of these details in multiple, disconnected spreadsheets (that tend to serve as glorified checklists), email threads, running lists and other one-off tracking and filing systems. Teams are constantly trying to pull the right information from these sources to be able to answer time-sensitive questions, but instead find themselves bogged down in disorganized paperwork, slowing their ability to make informed decisions.

With so much to manage – and no clear, simplified way to do so – it’s easy for a project team to fall way behind, losing a few days a month to inefficiency.

You’re probably thinking: So what? What’s a day or two here or there?

The truth is, slipping by one to three days a month can really add up during the 12+ month pre-construction phase, totaling up to more than an entire month of time (+ money) lost, and putting the Domino Effect into motion.

Think about it: You miss a key target date for getting your demolition RFP out to bidders because you were preoccupied with lender back-and-forth during the monthly draw request and resolving spreadsheet errors. Eventually, you get funded for the month, but now you’re two days late on the demo RFP, meaning you need to push everything on the critical path out by two days – unless, of course, you want to pay demo contractors acceleration and overtime payments to regain schedule. Instead of moving ahead as planned, you’re backtracking, playing catch-up, losing days of your time course-correcting, and negotiating with vendors to accelerate without charging you more. You’re on your back foot, trying to keep the rest of the dominoes from falling, all while you’re paying millions of dollars in interest on acquisition or land loans. Sounds overwhelming, doesn’t it?

Not to mention, there are a number of other one-off situations that could derail your entire schedule, impact adjacent decision-making and hold up project funding – costing you time and money. Some of these may sound familiar:

> Unforeseen + lengthy zoning variance process
> Community opposition to project with a focus on foundation underpinning concerns
> Environmental review identifying toxins in the soil
> Late vendor RFP submissions
> Lack of data + inability to benchmark vendors for informed decision-making
> Early-stage change orders due to challenges with design consultants
> Drawing set errors indicating constructability issues
> Ineffective value engineering based on assumptions, not hard data
> Irregular scope gaps + inability to complete buyouts within current budget
> Loss of JV/financial partner due to lack of trust, missed deadlines, disorganization + unsophistication

It’s important to note that when 30% of a project team’s time is tied up on low-value administrative tasks like reporting, tracking, solving spreadsheet errors and more, they are unable to focus on the bigger picture. This means they’re unable to get ahead of all these potential pitfalls that delay projects even before they’ve started.

And, unfortunately, cost and schedule spirals like the one in this example will impact the entire lifespan of the project, costing you millions of dollars and thousands of hours. With so many project variables dependent upon one another (funding, permits, vendors, etc.), if one detail goes awry, it’s tough to get back on track. See below for how much time and money you may be losing as we speak, just on loan interest rates alone.

Original Project Budget Monthly Loan Payment Project LifespanDays Lost to Avoidable Delays per Month (avg.)Months Lost to Avoidable Delays (avg.)Estimated Cost of Delay (avg.)*
$50 million~$145,0003 years2 days3 months~$466,000
$250 million~$729,0003 years2 days3 months~$2,333,000

*assuming a 5% average interest rate on a commercial real estate loan

As a real estate professional, this probably sounds like your worst nightmare – and, occasionally, your reality.

But it doesn’t have to be.

The first step to regain control of your project is to eliminate bottleneck decision-making that creates delays and cost overruns. Start empowering your project team with the tools, data and visibility they need to make faster, better, more informed decisions. Let Northspyre help you start your project on the right foot and avoid unnecessary time waste and spending. Stop playing dominoes and start completing your projects on-time and on-budget! Constant real estate project delays do not have to be your norm. Upgrade with Northspyre.

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