#21 - Construction Close-Out
An Underrated Risk in Rental Development
In This Issue
Construction Close-Out
An Underrated Risk in Rental Development
Earlier this month, I toured a large mixed-use project that was in early lease-up. From a block away, it looked complete. Up close, it told a different story.
Phased occupancy is common in large projects. It makes sense financially — early residents reduce carrying costs — but it adds operational risk. Especially when construction is still visibly underway.
Here are a few observations I made on this particular site:
Dirty and unfinished exterior: There were stained façade panels, trash and construction debris left around the building, and incomplete punch list (AKA deficiency list) items at ground level.
Unfinished work and lack of cleanliness in units: There was dust and debris in the units we toured, along with painter's tape stuck to various surfaces, suggesting that trades may still have access to units that the leasing team was showing to the public.
Low manpower on site: Few people seemed to be working, which suggested that open items were not going to be resolved as quickly as possible.
Leasing agents were not knowledgeable and seemed rushed: This suggested that the leasing team had limited visibility into construction progress and timelines, and were trying to sell a product that they didn't fully understand.
Amenities incomplete and timing unclear: My leasing agent didn't have good answers for when the amenities would be complete, and the information they did provide didn't seem feasible.
None of this is unusual. But that's exactly the point.
Old construction pros will tell you that the last 2% of a project is often the most difficult. Trades start to visit the site less often, so it takes longer for them to resolve open items. New deficiencies arise during occupancy, which can cause tension when a contractor is trying to wrap up their work. Who caused the damage? A trade, a property manager, or a resident? Any noise, dust, or other disorder can negatively impact residents and create a lot of complaints that need to be handled deftly. Oftentimes, building systems aren't fully commissioned, and there will be issues with hot water or HVAC systems. Basically, lots of different things can and do go wrong during partial occupancy.
But when you are spending $500,000 per month or more in interest and payroll prior to opening, it can be very tempting to start booking revenue by welcoming residents into the building.
But too many owners treat close-out as a slow coast to the finish line. In reality, it's a sprint. A lot of value is created — or lost — at close-out, because this is when you establish your asking rents, your initial market positioning, your early online reviews, and the culture of your leasing and operations team.
Here are a few lessons owners can take from the field:
1. Cleanliness signals readiness.
Debris and unfinished details create an immediate sense of neglect. Prospective and current residents notice. Brokers notice. Lenders notice. First impressions shape absorption velocity, reputation, and future rent premiums. Your development team should require strict site cleanliness standards, daily inspections, and a "ready for showing" checklist. I like having the trades contribute labor for a composite cleanup crew every Thursday or Friday, to get ready for weekend leasing.
2. Construction in occupied units creates conflict and risk.
Allowing trades access to occupied floors, and especially within occupied units, often ends badly. Even minor fixes cause friction when a resident is living through them. Work gets deferred, service requests pile up, reputations erode. We could go very deep on this topic — coordinating access, communication, and responsibilities requires a detailed playbook. We don't have space to lay it all out here, but suffice it to say: it must be carefully managed. Owners should aim to complete unit deficiencies before occupancy whenever possible — or, if not possible, use a structured, well-communicated schedule with resident consent and updates.
3. Low manpower = ballooning time and cost.
It's common for contractors to pull manpower toward the end of a project, chasing new work. But without a strong push at the end, the last 1–5% of work really drags out, often costing 10–20% more than it should. Owners should front-load a final surge of qualified labor and tie contract close-out payments tightly to full delivery, not partial progress. One thing I often see is developers acting penny wise and pound foolish — delaying the approval of minor change orders while they burn hundreds of thousands on delays. This is extremely common when there have already been cost and schedule overruns.
4. Leasing teams need confidence and coordination.
Your leasing agents are your front line. If they don't know what units are ready, what amenities are open, or what timelines to promise, it erodes trust with residents and prospects alike. Worse, it can lock in concessions or reputational damage that outlasts the construction dust. Owners should treat lease-up as a coordinated launch: real-time status updates, daily communication with construction, and resident-facing messaging that matches reality. Never make promises you can't keep. And I strongly recommend using an in-house leasing team over residential agents. The difference in alignment and training is night and day.
5. Amenities must be timed carefully.
If key amenities aren't ready when lease-up begins, owners face two bad choices: discount rents or stretch resident patience. Both erode value. Owners should either (1) delay public marketing until critical amenities are ready, or (2) proactively manage expectations with realistic timelines and interim solutions.
6. Commissioning is not optional.
Residents won’t care about high-end finishes if the HVAC doesn’t work. Incomplete commissioning is one of the most common causes of early complaints. Owners should try to require that major systems be fully tested and documented prior to occupancy, and that site staff are trained to operate them. In high-rise construction, full commissioning before turnover isn’t always possible, but staged commissioning or partial handovers can help. These require tight coordination and early planning, but they can significantly reduce risk during lease-up.
7. Resident experience is brand management.
Your first hundred residents will determine your online ratings, your leasing velocity, and your reputation with brokers. A clean unit and warm welcome matter more than a move-in gift basket. If the resident experience feels like an afterthought, it will show — and it will cost you.
Close-Out Is Value Creation, Not Box Checking
Construction isn't complete when the last slab is poured or the last drywall is taped. It's complete when the project is clean, functional, and trusted by residents. The final phase isn't just clearing deficiencies — it's protecting value at the moment it matters most.
Have you lived through a lease-up from the front lines as a developer, property manager, or resident? What went wrong or right? I'd love to hear your war stories.
Urban Progress Returns
This is a very delayed announcement, but I am happy to report that on January 23rd, we hosted a launch party for Urban Progress, Issue #02.
It was a special moment. This project had been on pause for almost a year. We started the magazine back in December 2022 to bring new voices and fresh thinking to the conversation around housing, prosperity, and growth. Our first issue was entirely self-funded. We printed a run of magazines, threw a launch party with more than 100 attendees, and built a mailing list of people hungry for a smarter, more optimistic urban discourse.
We thought we were onto something. But just as we started raising support for Issue #02, the market began to fall apart. A lot of the people who wanted to help simply couldn’t. We put things on hold.
Then, a stroke of great luck: the Neptis Foundation offered to support the magazine as our new sponsor. Their mission is deeply aligned with ours: to reimagine how Canadian cities can be designed and built, and to produce content that’s rigorous enough for policymakers, but accessible enough to reach the wider public.
With their support, Urban Progress is back.
We're excited for what comes next. Content from Issue #02 is now available on our website, and we’re planning a slate of events this year. We kicked off with a packed talk by Coby Lefkowitz, author of Building Optimism, and we have more in the works.
You can follow along at urban-progress.com, or sign up for our mailing list to hear about upcoming events and articles.
In The News
With the Liberals winning Monday’s federal election and Mark Carney becoming Prime Minister, there’s been plenty of commentary on what this means for housing and urban policy. I don’t have much to add on that front — but as an American living in Canada, I want to pause and appreciate the process itself.
Whatever your politics, Canada deserves credit for how well it runs elections. The process is calm, competent, and quietly impressive. My friend Ben Parry said it best:
That’s A Wrap.
I write this newsletter because I like to connect with smart people who are doing interesting things. Reach out by replying to this email or commenting below.
Thank you for reading, and have a great May.