As construction costs continue to inch upward, cost remains at the top of mind for developers. Materials costs are projected to rise throughout 2020, and labor has steadily become more expensive. Add the uncertainty surrounding the Coronavirus pandemic, and it’s easy to see why the developer’s budget is top of mind.
Nowadays, it’s extremely important to work with designers who understand how to address the issue of cost. It should no longer be acceptable for designers to begin a project without a clear understanding of budgets.
As you assemble your design and construction team, you’ll find great advantages in sitting down early in the process to discuss cost. Designer informed budgeting means your budgeting meetings involve the contractor and the designer from the very beginning.
Designer Informed Budgeting for Outdoor Amenity Space
Designer informed budgeting occurs when cost estimating is provided early on in the design process by the design team.
During the early stages of design (when many major design decisions are made) too many developers rely solely on numbers provided by the general contractor. These numbers are often outdated and inaccurate. At this point, the design team has likely not seen these numbers and the design has not been shown to the general contractor. The estimate is a complete shot in the dark. And it is always too low.
Serious problems can arise when the developer is using estimates without design team input. The longer you delay the reconciliation of the design to the budget, the more costly it will become.
At Loft Six Four, we employ the following two strategies for designer-informed budgeting of rooftop and outdoor spaces. We implement preliminary budget ranges and rough order of magnitude cost opinions as early in the process as possible in order to help developers and general contractors establish realistic budgets and save money and time.
Preliminary Budget Ranges
Immediately after the contract for the design is in place, our team puts together a preliminary budget range for the scope of work. We take into account your vision for the project, its asset class, and your metrics for success. We’ll calculate area totals of street level, podium level, and rooftop amenity space. Using data collected from past projects in similar markets, we put forward a target investment range.
The target investment range sets the expectation for costs from the onset of your project. Typically it is a broad range, leaving room for adjustment as the design progresses and things become more specific. It serves as an early reality check and gives you the opportunity to pivot to a more conservative design approach if necessary.
Rough Order of Magnitude Cost Opinions
With an agreed upon budget range in place, we can confidently move on to conceptual design. During the concept phase we focus on satisfying program requirements and generating creative big ideas for the project.
Once you sign off on a final concept, our team will get to work on a rough order of magnitude (ROM) cost opinion. This breaks down each element of the concept design into separate line items with an associated price per unit. The price per unit is based on the average bid price we are seeing on other projects within your market from a range of specialty and general contractors.
You’ll receive the ROM cost opinion in conjunction with the final design concept. This allows you to easily begin making decisions on what to remove, add, or keep as the design develops. It’s a great resource to send to your general contractor for them to compare notes and provide their take on the cost. This will give you the clearest picture of what your outdoor amenities will cost.
The Advantages of Designer Informed Budgeting
Designer informed budgeting provides many advantages to a developer. It helps you proceed with confidence by allowing you to make informed decisions on the design. You are enabled to stay in control as the threat of budget overruns on outdoor space is neutralized. This means no more surprises coming late in the game when timing is important and changes are more costly. This approach shields you from the potentially awkward discussions with designers when you deliver them a long list of value engineering revisions. Finally, it keeps your investors happy because you are able to deliver a quality project that still gets them those high returns they are after.
Concerned about the cost implications of your next project? Give us a call. Let’s relieve some tension by talking about costs early.