Improving profitability
Value engineering makes a difference to profit margin
Planning permission had already been obtained for nine residential apartments in a derelict retail premises in Anerley, London SE20. A property developer saw the potential and decided to make it his next development.
Network Rail
Network Rail owned the land on the border of the site. The developer had not anticipated the extensive negotiation that would be needed to obtain the various licences from Network Rail. So, his plans to start construction works were promptly put on hold. And no one likes delays for any reason.
He soon realised that the costs for undertaking the project were escalating. Once he had received the tenders, he realised that they did not make great reading as it looked like the investment was only likely to break-even.
Value Engineering
The Kisiel Commercial team could see that a bit of Value Engineering was needed. Our team started with a comprehensive review – looking for opportunities to improve the return on investment. We challenged some of the requirements on the overall design with a view to reducing the costs on the building phase.
A chance to be creative at the early design stage meant that we could make recommendations for some cost efficient changes. So, in this instance we noted that some elements of the design were not required and were taking up valuable space. A re-design enabled the addition for four extra bedrooms within the nine apartments adding value to the client.
Outcome
Undertaking the 5 steps in our Value Engineering Process gave the developer an opportunity to understand his choices. He was able to reflect on the various impacts on function and cost of changes in the design. By being open to alternatives, it gave him confidence to continue with his development plans, in the knowledge that it would be a profitable venture.
“We relish the challenge to find savings in cost on a development project whilst retaining the function needed for the design. We are delighted that we can now start the construction phase with the developer – adding more residential housing in this part of London.”
