One of Los Angeles’ largest real estate brokerages has identified “major inefficiencies” in the luxury multifamily and high-density condo development sectors, and is looking to correct them.
The firm, The Agency, is aiming to assist developers in the design, construction, marketing and eventual sale of their projects via its division The Development Group.
“We think there are efficiencies to be had in using one group to manage that entire development life cycle,” said Jason Glasgow, COO and managing partner of The Development Group, adding part of their focus will be on off-shore developers.
“I haven’t seen a group with new home sales and marketing capabilities that is also effective at asset and construction management. We believe it’s a natural evolution.”
A significant portion of the firm’s construction coordination services will focus on managing all third-party consultants involved on a project. By managing these various parties, The Development Group expects to speed up a project’s construction timeline and allow a developer to focus only on specific aspects of a project, for example finding and entitling sites.
“(Construction) speed aspects are related to confusion and inefficiency in the process, not because the building can’t be built fast,” Glasgow said, explaining miscommunication between parties and information requests are the most common problems that slow construction.
Representing private equity groups
In addition to managing and selling projects for traditional developers, The Development Group is also planning to service private equity firms.
Traditionally these firms provide an equity chunk for a ground-up deal, with the operating partner (developer) contributing a smaller co-invest and shouldering the majority of the responsibility for building the project.
However, within the commercial real estate sector, specifically on the West Coast, Glasgow is seeing more private equity groups developing projects on their own.
“Frequently these (equity) groups that have internal capabilities are frustrated with the (development) process,” he said, explaining they will opt to bring in a fee developer who doesn’t contribute a co-invest rather than contribute equity to a developer’s proposed deal.
This trend is something that has yet to occur within the residential development sector, but one he foresees happening down the road.
