Developers may lose US $15m in profits by not delivering projects timeously
Developers may end up losing a whopping US $15m of their profits if they fail to submit their projects in a given period of time for any reason states research by the Construction Industry Institute, a consortium of leading owners, engineering-contractor and supplier firms from both the public and private sectors based in the US.
According to the report, for every day late, it equates to thousands of dollars lost, and a 10% overrun can lead to a five-million-dollar blow to project profitability.
“With the average of 20% to 30% delay that most projects report, you are looking at a significant profit loss – one that is just shy of US $15m,” reported the Construction Industry Institute.
A good example is Two Rivers Mall which is currently the largest shopping complex in Kenya, which postponed its opening dates three times before finally opening in February 2017.
The mall was first scheduled for opening in October 2015 but it was later pushed to March 2016 then to September 2016 and later to Valentine’s Day last year in 2017 when it finally opened. The developer attributed the delays to its increased letting space capacity and underestimation in the scale of work involved.
Moreover, whatever the reason, such delays also reduce returns for investors. At the same time, ready tenants miss out on revenues from shopping sprees within a particular lucrative season.
“Delays in project delivery can cost an organisation a significant percentage of its return on investment. Also, it triggers a surge of negative issues such as drop in share prices on the stock market, profit reduction which can be hard to recover in the long term and a loss of interest from consumers. They are thus forced to spend more in advertising and marketing in order to recover the initial momentum,” said Stella Kimani, a brand strategist.