Helping real estate developers achieve sustainable and profitable growth while minimizing risk.
What we do
In the last four years, our Capital Projects & Infrastructure Practice has supported more than 1,000 large real estate projects around the world. Our team of 250 consultants, experts, and analysts, has extensive experience working in residential, commercial, and industrial real estate. We serve a variety of clients, including master developers, sub-developers, engineering and construction companies, property and facility management companies, real estate owners, funds and asset managers. Through our client work, we have developed a deep understanding of how to create value throughout the lifecycle of a real estate project. McKinsey’s global perspective and commitment to impact uniquely positions us to serve clients on the following topics:
- Strategy. Real estate opportunities often emerge individually. In this context, it can be difficult to focus on the whole portfolio and easy to lose sight of broader strategic goals. At the same time, today’s ever-changing market conditions can quickly render existing strategies ineffective and expose a company to risk. In our experience, comprehensive strategies that balance long-term value-creation and the appropriate risk considerations are crucial to success. We assist clients in developing a strategy that addresses three core dimensions—geographic focus, asset class focus, and role along the value chain. At the same time, by identifying key risk categories and drivers, we ensure clients understand and properly manage risk. In recent years, we have worked closely with clients to assess various strategic questions, including scale-up opportunities across cities, portfolio mix across asset classes, product offerings (e.g., luxury, mass market), financing and appropriate debt levels, and ownership and development structures. To ensure a strategy’s long-term success, we help clients develop the capabilities and partnerships needed to sustain it.
- Operational excellence. Value creation has become increasingly important to our clients, who face escalating costs and time pressures. At the same time, efforts to improve operations in real estate are often ad hoc and reactive. We help clients design and implement measures to improve operations and create value across their entire portfolio. We support our clients on the following topics: design optimization and value engineering, procurement, and contracting. Over the course of a project, we work closely with experts who specialize in topics such as architectural design and mechanical, electrical, and plumbing engineering. We also draw upon our proprietary tools, including a bank of several hundred improvement ideas and a global database of commodities vendors and sourcing centers.
- Processes. Our global real estate team works closely with related practices—including Corporate Finance, Organization, and Operations—to constantly test, improve, and expand our tools and knowledge. Through extensive client service, we have developed best practices for core real-estate processes, such as project budgeting, design and engineering, project management, project approvals, and risk management. Over the course of an engagement, we build our clients’ capabilities in these processes, so that long after we leave, our clients continue to achieve results.
- Organization. It can be difficult for organizations to keep pace with changing business and market conditions. We apply our strong understanding of core business functions to help clients build lean and effective organization structures. To support these structures, we assist clients in defining decision rights and performance management processes. Through leadership development training, we help future leaders build the necessary skills to succeed.
- Sales and marketing. Some real estate players, particularly those with development, asset management, or operations as their core focus, may feel less confident in their abilities to predict real estate demand and drive marketing and sales for a project. We take a holistic approach to address the pricing potential and sales and marketing strategy for a project. We work closely with our Marketing & Sales Practice, draw upon benchmarks, and apply best practices in areas such as phasing and show flats to help our clients succeed.
Examples of our work
- We advised a leading real estate developer focused on emerging European markets on how to weather the economic downturn. After reviewing the client’s financials and portfolio, we helped identify and prioritize strategic options, including M&A. We helped the client screen and assess potential partners and once the client selected one, we supported the transaction and integration of the new partner. The client averted the financial troubles experienced by other developers and remains a strong player in emerging Europe, with assets of more than €1 billion. In addition, investors and shareholders captured significant value from the transaction.
- We helped a major landowner create a real estate development office to oversee the master planning and development of 10,000 acres. We supported the client in outlining its strategy, organizational structure, and business processes. We also assisted the client in hiring for the new office, which is firmly established, and in managing this important development project.
- We assisted a top-tier realty firm that owns and leases several malls across the U.S. The client faced tenant dissatisfaction over the facility costs associated with common areas. We helped the client conduct external and internal benchmarking to determine the impact of building design and operational performance on costs. After identifying three cost-saving levers that would not compromise quality, the client has achieved annual savings of 25%.
- We supported a $15 billion North American pension plan with a $2 billion real estate portfolio in a holistic strategy review. We helped the client design and implement a new in-house asset management strategy, which resulted in significant savings in fees and enhanced risk-adjusted returns.
We have developed and tested a broad set of tools and solutions to better serve our clients, including:
- Planning and financial analysis tool, a detailed financial model that calculates a real estate project’s profitability and value creation potential, plus cash flow requirements.
- Real estate organizational diagnostic tool, a qualitative self-assessment diagnostic tool used for evaluating core real estate capabilities relative to industry best practices.
- Real estate 360 tool, a tool to help corporate real estate clients restructure their real estate portfolios to optimize occupancy and manage costs.