Local Expertise in Today’s Fluctuating Construction Market
Balázs Korintus (left) and Gergely Laczkovich
The construction market, including engineering services, today is more competitive than ever before, with a multitude of challenges making it difficult to plan ahead. However, with the right approach, knowledge of the local markets, and smart cost management it is possible to stay ahead of the curve and put projects on the road to success, 3E International’s co-founding managing directors Balázs Korintus and Gergely Laczkovich tell the Budapest Business Journal.
BBJ: How would you describe the current state of the construction market, and what are some of the key trends and challenges you have observed?
Gergely Laczkovich: The construction industry is in a very chaotic state right now, with both very drastic retrenchment and significant investment dumping between different sectors. Probably the most difficult challenge is to find your calculations, your long-term plans and your opportunities amidst of these conflicting influences. The significant part halt of public sector investment on one hand, and the halt of speculative real estate developments due to the financial environment on the other, has resulted in a significant downturn. However, we see the industrial segment continuing to boom and grow.
Balázs Korintus: There are several projects now where pre-development is underway, so the necessary conditions for the start of construction are being put together, but when it comes to the time to start, the decision is not made at that moment. It is very difficult to see clearly when you are working on a project, you put a lot of energy into it, but whether it actually gets off the ground is unforeseeable. In the past, almost all projects that got to a certain point did so. It is a difficult situation now, but it also gives the opportunity for quality preparation to take place. And if the big green button is not being pressed, then this interim time should at least be used to improve the quality of the project.
The focus and the segments are constantly changing, but we find that there are always areas at the forefront doing very well, and others that are not doing so well. That is why you need to understand the economy and monitor what is happening. It is always a question of what is needed and what is resourced in a given economic, political, and financial environment.
BBJ: Could you tell us about 3E International's role in the construction market and how your services contribute to the success of investors and developers?
GL: The group provides engineering services for investors and property developers with the professional support they need to make investments in the most efficient way. Our aim is to partner with investors to find the professional and business solutions they need to make their investments profitable and commercially sustainable. This is why we introduced construction management services, which is obviously not new within 3E Group, but given the significant increase in prices and the uncertainties in the market and supply chains, it could be a solution to help investors.
We have a number of thoughts and ideas on how we can support investors in a given situation. We understand the needs of international clients and big multinational corporations when it comes to planning and executing real estate project in Hungary. We also possess the local knowledge, engineering experts and legal know-how to make these projects happen according to budget and timeline.
BK: There are a number of serious enquiries and partnerships that are in the process of being formed, whereby we will provide a service to a particular client who has a significant property portfolio, but has limited capacity in terms of professional knowledge. In such cases, we are already involved in the design of the strategy, followed by the development of the concept plan and the licensing procedures. The preparation of the construction plans and operation, as well as the selection of the general contractor are also part of the work process. Our team of professionals has a broad insight into the current market trends at national level and beyond our borders.
BBJ: In addition to cost management, how does 3E International provide value to investors and developers through its technical due diligence services? What benefits do these services offer?
GL: It is important for developers and investors when they want to examine the real value of a property, to understand the technical, legal, financial situation and condition of that property. It is essential that this is properly examined before any decision is made. Whether it is a purchase, an investment, a decision to renovate or to demolish plus rebuild. An integral part of this is to technically screen the property in a way that all uncertainties can be filtered out. This is also intrinsically linked to costs, which is why technical due diligence and cost assessment, depending on the decision made in the course of the overall investment, is a very important task.
BBJ: Could you discuss the importance of local expertise in the construction industry? How does 3E International leverage its knowledge of local markets to assist investors and developers?
GL: Local expertise is very important in terms of legal and regulatory background, but also in terms of professional approaches necessary to address challenges that a foreign investor faces. A local player is better equipped to understand the solutions and deal with them, rather than someone who is just reading the regulations or various proposals to find the right solution. It is also very important that we know the market, both horizontally and vertically. We are in daily contact not only with general contractors, but also with suppliers and specialist companies who work for them. This gives us the security needed to ensure, that we can find specialist contractors in the entire depth and breadth of the market, so that a particular investment can be implemented in the most economical way.
BK: When a company invests in its own operations, and has a framework it is operating under; we also see how other investors think and how to think together with them. We observe how other external actors approach issues in different situations, and what kind of results they get. When we are involved in projects as local experts, we bring in not only local expertise, but also see how other similar investors or developers are thinking. The number and scale of projects is very significant for us, so we can add value compared to a company that implements projects according to its own ideas, or an expert who may only have a segmental view.
There are many segments within the construction industry and we work in all of them in parallel. There are many technical solutions that may be very well known and applied within one type of industry sector but not in another. There is local knowledge within the different segments which we can use to create value.
BBJ: Are there any specific success stories or notable projects that you could share, where 3E International made a significant impact on the outcome of the construction project?
GL: We hope all our projects are like that, and we believe that the work that we do contributes to its success. I can't think of a project that has had a negative connotation from the investor after completion. There are three main aspects of an investment that have to be met; it must be delivered within budget, on time and to the required quality. We think that at least two of these must be met, but obviously we are trying to find the best possible solution in all three.
BK: With the complex approach that we have in-house, we have been able to achieve a level of preparation and quality assurance in the implementation of numerous investment that has resulted in significant time savings compared to the planned schedule. This has resulted in such tremendous success with industrial facilities that they have been able to start production earlier, which is a crucial financial aspect. It is also critical in the financial model of the project, because revenues can only be generated when the project reaches that stage. Hence, if revenues appear earlier, it leads to financial success.
BBJ: Looking to the future, what are the goals and aspirations of 3E International? How do you plan to adapt and stay competitive in the ever-evolving construction industry?
GL: At the group level, it was definitely an important decision to structure our different services to make them more transparent. There is a lot of potential in terms of digitalization, BIM, and building information modeling services. We definitely want to develop in this area, as this is an essential part of competitiveness. We are currently observing that more and more investors are thinking about different structural solutions besides the classic investment structure. We can support this joint thinking with investors, and find solutions that go beyond the classical trinity of investor, contractor and designer. This can help us to remain competitive, both for ourselves and for the clients.
BK: Beyond that, we consider it important to continue building and developing our own company culture. To keep it a community and a workplace where everyone is motivated and creates value, does what they love, professionally, in a good atmosphere. This is an important part of competitiveness and development.
Find out more about 3E International here.
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