When developing properties, a majority of Kenyans tend to prefer working with different real estate professionals.
Towards the end of 2018, after securing funding for a commercial real estate project, Jacob and Agnes Muli approached an independent architect, who also happened to be a family friend to custom-design their mixed-use development.
As opposed to working with a one-stop shop real estate company, the couple felt that hiring individual specialists for every step of the process could grant them better control of the project and also minimise costs.
After the design was ready, they approached a structural engineer, as well as a slew of other independent contractors, to lay the foundation, plumbing, electricals and interior finishes.
Within the first few months of construction, everything seemed to be running smoothly. By early 2019, money started to evaporate amid chaos of managing disparate professionals.
The foundation crew finished late, pushing back framers. Meanwhile, electricians bickered with plumbers over shared wall space, leading to costly re-work.
Evenings, which they would otherwise have spent unwinding or catching up as a family, would now be used juggling phone calls, mediating disputes and tracking down suppliers.
The biggest blow for the couple came when the National Construction Authority (NCA), found a code violation caused by a communication gap between the architect's plans and the engineer’s execution.
Fixing it required tearing down a newly built wall and rebuilding it to specification, adding two weeks and millions of shillings to their timeline and budget.
By the time the project finished—six months late and significantly over budget—the couple was exhausted.
That is when they realised that while it seemed cheaper to work with independent contractors on paper, lack of centralised management, accountability and seamless communication cost them far more in delays, stress and unexpected expenses than working with an integrated developer would have.
Considerations for working with individual specialists
When building commercial or residential properties, a majority of Kenyans tend to prefer working with different real estate professionals whom they may know personally as opposed to working with integrated real estate firms.
While this approach does offer benefits of greater flexibility, direct accountability and lower overhead costs, working with different real estate professionals simultaneously can be problematic at times, as the Muli’s case demonstrates.
“In projects with no single lead professional or project manager, the client becomes the central hub coordinating all activities and information,” said Omri Cohen, managing director of ISM Engineering Ltd, a modular construction company.
“If the team under management is large, it can be difficult, time-consuming and exhausting for the client to track who is responsible for specific tasks or delays,” he added.
Since specialists often work in silos, it can be difficult to share information consistently across the team, which can result in decisions being made based on piecemeal data.
Each specialist may have their own objectives or key performance indicators that may not align with the project's overall goals.
The streamlined system of working under one-stop shop models makes it possible for integrated firms to deliver complex projects.
For instance, while a contractor may prioritise speed, an architect may pay more attention to design integrity, potentially leading to conflicts over budget or quality control.
Changes to the project scope, which are common in construction, can also be difficult to manage with multiple specialists and can cause tension among parties with varying interests.
“Real estate projects involve complex dependencies, where one specialist's delay can set back the entire project,” said Cohen.
“Coordinating different schedules and ensuring everyone is working with the most current information requires meticulous planning, otherwise it can be a significant logistical hurdle,” he added.
Working with different specialists simultaneously also brings about accountability, particularly when buildings collapse due to factors such as non-compliance with specifications, poor structural design or foundation failure.
“If one contractor lays a foundation, another builds on top and after sometime the walls start sagging or cracking, the one who built on top could be held liable, even though the one who lays the foundation is the one who did a poor job,” said Cohen.
Advantages of working with integrated firms
When a single company takes responsibility for the entire project lifecycle, the finger-pointing that can occur when issues arise during or after the project gets minimised or eliminated.
Conflicts tend to be resolved more quickly, whereas information tends to be shared more openly and consistently across the entire project.
The need to vet various service providers, manage multiple relationships and oversee administrative tasks gets eliminated, making the integrated models particularly helpful for first-time builders who may not understand the intricacies of construction.
“People are being short-changed in construction because of lack of knowledge. They give a deposit, then they become tied to a project that makes their life difficult,” said Cohen.
“Having a central point of accountability minimises the financial and legal risks clients face in real estate dealings,” he added.
While a client working with individual specialists has to wait for professionals handling the initial stages of construction to finish before proceeding to the next phase of the job, integrated models allow for project stages to overlap.
For instance, construction on early phases such as the foundation can begin while the detailed design of later stages is still being finalised.
This overlapping of stages, in addition to the streamlined project management and enhanced coordination, helps to accelerate the overall project schedule.
“When you do a hotel, a resort, or an Airbnb, you automatically get a better return on investment, because you can start occupying the place within a shorter timeline,” said Cohen.
“The only thing that can affect the time of project delivery is changes in the design, or financial setbacks for the client,” he added.
The streamlined system of working under one-stop shop models makes it possible for integrated firms to deliver complex projects that require the use of different building designs and materials, with ease.
“We have done a hostel project for Lion and Kenyatta Hospital, that is part light gauge steel and part containerised. The only reason we have been able to do that is because we provide holistic solutions for modular requirements,” said Cohen.
“If you go to a company that does flat packs, they may not be able to do the foundations, the landscaping and the interiors around such a project, nor will they be able to provide after construction services such as property management,” he added.
Geoffrey Ongaya, general manager at Buxton Point GulfCap Real Estate, agrees, adding that the benefits of working with integrated real estate companies extends far beyond the construction.
Particularly for complex commercial projects, Ongaya observes that integrated firms, which also provide after-construction property management services, can ensure smooth running of projects for clients, after construction is complete.
“The interface between the construction itself and the after construction services such as property management is very important,” said Ongaya.
“If the project in question is a short-term rental apartment, hotel or a supermarket for instance, a property manager who was not involved in the initial stages of design could find it very difficult to handle the many aspects of access and luggage control,” he added.
Disadvantages of working with integrated firms
While the one-stop-shop real estate model offers undeniable speed, convenience and security, Jacob Muli, an architect, says that potential drawbacks warrant careful consideration for clients.
“Working with an integrated firm means placing all your eggs in one basket, sacrificing independent choice and potentially the most competitive pricing on the market, ” says Muli.
“Integrated firms may not always offer the most competitive rates,” he added.
While integrated firms aim to provide a comprehensive, all-in-one service, prioritising coordination across different functions over depth in a single domain, independent specialists typically focus intensely on a narrow field.
This allows them to develop profound knowledge of the latest industry trends and complex challenges, provide tailored solutions that a broader firm might overlook and offer an outside, objective perspective without internal biases.
In most cases, integrated firms will ask clients to sign legally binding exclusive agreements that may prevent them from engaging other professionals, for the project in question.
“This might deny clients access to the deep expertise found in independent, specialised professionals,” said Muli.
“It might also make it difficult for clients to switch to another service provider, if they are dissatisfied with the service of the integrated firm,” he added.
The bottom line
Ultimately, Cohen, says that clients must weigh the convenience and coordination benefits against the potential for higher costs, limited choices and reduced control, while deciding on whether or not they should work with integrated firms.
“The issue always comes down to the same question. What are you really looking for? Are you looking for something cheap or are you looking for your plan to come true,” posed Cohen.
He cites a client who wanted his company to deliver functional containers to a site they had opened in Northern Kenya.
As opposed to doing a fully containerised site, ISM advised the client to consider flat packs (prefabricated building components), or light gate steel, which would be cheaper to transport and install on site.
The client insisted on containers, so ISM went ahead and prepared a quote for this. After comparing ISM’s quote with that of another supplier, the company opted to work with the supplier, who happened to be considerably cheaper than ISM.
What the client did not know is that in their quote, the cheaper supplier only factored in the cost of an empty container. They did not factor in the cost of laying the foundations and connecting the containers, as these were services which the company ordinarily did not provide.
The company struggled to get the containers to site, let alone install them, forcing the client to pay more than was agreed and eventually engage ISM Engineering, to fix the situation.
“If we sell a container for an average of let's say, two and a half million shillings, that covers the foundations, transportation and installation. Somebody else might sell the same container for Sh500, 000-700, 000,” posed Cohen.
“If the client does not understand the scope of work, he will go for the cheaper option, but he will get a terrible product. Somewhere along the way, he will have to add money to get what he really wants,” he added.
