Target Costing for the Development of Office Buildings

Christian Kron1 & Rosa von der Haar2

1Dipl.-Wirt.-Ing., Research Assistant, Institute of Construction Management, University of Stuttgart, Pfaffenwaldring 7, 70569 Stuttgart, Germany, +49 (0)711 685 66159, christian.kron@ibl.uni-stuttgart.de
2M.Sc., Student, Institute of Construction Management, University of Stuttgart, Pfaffenwaldring 7, 70569 Stuttgart, Germany

Abstract

In the project development of office buildings, the project budget is set at a very early stage based on both the obtainable market rent as well as the profitability evaluation. The current approach in project development is wasteful and not value-oriented, as the calculation and allocation of the target costs does not follow a standardized process. The estimation of costs for realisation and follow-up costs is corporate-oriented and not carried out detailed enough in the early stages of the project development process. Although the approach of target costing has prevailed in product development for a long time, so far no implementation in the German construction and real estate sector can be observed. Target costing is necessary to integrate proper cost-planning, cost-management, and cost-controlling in the project development process to create valuable and user-oriented properties. The objective of this conference paper is to analyse the adoption and potentials for increasing values with target costing pertaining to an optimised cost-benefit-ratio for project development of office buildings. The lessons learned are transferred to an optimised method approach. The focus of this approach for practical application is on the determination and allocation of the component-level target costs in terms of specific requirements of users or project developers. In particular, due to the strict market orientation and focus on customer requirements, target costing provides support for project developers in developing properties of increasing value.

Keywords

Process, product development, target value design, target costing, cost planning

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Reference

Kron, C. & von der Haar, R. 2016, 'Target Costing for the Development of Office Buildings' In:, 24th Annual Conference of the International Group for Lean Construction. Boston, USA, 20-22 Jul 2016.

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