A snapshot of how Development Management differs from Project Management
On nearly all projects where Development Management (DM) is needed, Project Management (PM) is also needed (although the reverse is not necessarily true); the functions of each trade craft are not mutually exclusive and indeed often complement each other. So then, what value does DM offer the project Owner, and how does it work in an actual project scenario? Simply put, DM increases the investment returns for the Project Owner while minimizing the financial risk on the project. The responsibilities and typical activities of the two disciplines are shown in the below exhibit.
The DM’s target is an investment return metric – ROI, IRR, NPV and Development Margin. A DM measures their performance on a project against these financial metrics utilizing the full range of the ‘’project toolbox’’ – design, engineering, business, and financial tools. In this way the DM serves as the Project Owner’s ‘’trusted advisor’’ and looks out for the Project Owner’s best financial interest throughout the project lifecycle. If the Project Owner is a large-scale development company, then the typical solution is to hire an in-house team to handle DM functions. Large semi-government master developers will have staff with titles such as VP of Development, Chief Development Officer, Director of Development, and etc. However, when the Project Owner is not a large-scale development company with a strong in-house team, oftentimes the best solution is to retain an outsourced DM consultancy team that can provide the necessary services and expertise to the project on an ad-hoc basis or full life-cycle process. This solution is often best for HNW Investors, Family Offices, Investment Houses, and etc.
The option of either foregoing DM, or trying to perform this function in-house without the necessary expertise, means that the project is now competing against other developers at a disadvantage. As the UAE market matures, development margins are shrinking, competition is increasing, sales are more difficult, and investment yields are compressing. While still a far more profitable place to do business than a fully mature market such as the USA or Europe (where DM is an absolute must), the UAE is moving into a new phase in its market dynamics. And in this new phase, a lack of DM services is a competitive disadvantage that no new project can afford.