On any construction project, doing the things that you think will save money almost always cost you more later on in the project.
You'll see below the unintended - and costly - consequences of the WRONG WAY of going about trying to reduce the cost of building a multiplex, small-scale multi-unit home (SSMUH), house, or really any kind of building. For each issue, I'll then explain how to avoid the problem, and you'll see that I hammer on a few solutions repeatedly.
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Individual homeowners and seasoned property developers both make the same mistakes on nearly every project I've seen in an attempt to spend less money, but the result is significant extra costs that the owner sometimes doesn't even realize they're paying. Experienced developers usually assume some costs as a given instead of as extra weight that should be shed.
If you're planning to build a multigenerational home, a multiplex, houseplex, SSMUH, or even a single-family house, you want and need to eliminate unnecessary costs. The typical way most projects unfold doesn't do enough to cut those costs out of the design.
The Way Most Buildings Are Designed
Obviously, nobody - no builder, architect, or designer - is trying to maintain these extra costs, and everyone is trying something to reduce expenses. They're just picking away at the wrong pieces or approaching them the wrong way. Opting for diet cola at the fast food place isn't going to make a difference to your waistline.
First, let me lay something on you: a multiplex will cost more than a typical house. You don't have to be pursuing Net Zero or Passive House, and the Energy Step Code isn't to blame. The unit rate cost (how many $ per square foot of floor area) for a fourplex, six-plex, or even 8-plex is higher than the unit rate cost of a 30-unit low-rise low-end / commodity level apartment building. In 2022, a laneway house could cost half a million dollars. Expecting that a fourplex would cost $200/ft2 or less is not reasonable, so a reasonable starting budget for hard construction costs of a fourplex might be $1.5M, depending on your location, lot size, expectations, and a great many other factors. On top of that are "soft costs" -- fees for permits, consultant fees, costs of financing, and others.
Second, no project is immune to the potential for unexpected changes. For example, unknown underground conditions could be discovered during construction which require more excavation or a change to the building's foundations. I know a project which required the future building to shift and the parking lot to be flipped because of a small patch of protected flower species discovered in the corner of the lot. However, most extra costs are within our control and can be avoided.
Third, construction costs increase over time. If you've taken out a loan, every extra month in the project schedule is another month that you're paying interest. Any delay is nearly guaranteed to raise the final price tag. Many owners realize some aspect of this time penalty and consequently try to rush some things, but they lose more time later.
Extra Costs For Multiplexes And How To Eliminate Them
Site Layout Changes During Design
Often, an architect will develop one or more site layouts showing what goes where on the property, and the owner will offer feedback. Although conceptual and schematic design are iterative and require a series of proposals and client feedback, there is often no clear starting point apart from what comes to the architect's mind. It's like playing a game of hot-cold -- very inefficient.
You as the owner of a property chose it for a number of reasons; at least several of its characteristics were worth enough to you that you committed to buying it. This is less obvious with a multiplex, but by developing a clear Statement of Owner's Requirements (SOR), we can shortcut the 'guessing' phase of the design and get to a concept sooner.
Program Changes During Detailed Design
Your design "program" is a list of requirements - spaces, functions, relationships - that must be in the final design. For a single-family house, the owner may require three bedrooms and four bathrooms, as the starting point. A future multiplex owner may state she needs four rental units -- three in the front building and another unit in the back, with parking tucked underneath a deck.
Designing a building based on just this information is common; the architect takes the requirements at face value, but that opens up the project to potential changes later. The owner may decide after further thought that one of the units should be wheelchair accessible. The owner may not realize until later that no parking is required for this location. She may want one of the ground floor units in the front building to occupy the whole floor.
The architect or designer would need to revise a number of drawings, and the owner will need to pay additional consultant fees. The project is also delayed as a result by the time required to change the drawings.
The solution here is to explore, detail, and confirm not only the specifics of the owner's program but also the WHY behind each requirement. The owner's mental and emotional frame of reference is key to ensuring that the design solution best suits the owner's needs.
Incomplete Design Development
An owner usually wants to spend as little money as possible up front and will hold off hiring any but the bare minimum number of consultants as long as possible (i.e. the architect and sometimes the landscape architect). Typical designers and most architects will create an architectural design based on the owner's requirements but not incorporate structural requirements or consider the practicality of how the design will be built.
Almost no designer or architect will design ventilation, plumbing, or electrical systems since it would be an educated guess at best. The designer will locate sinks and showers - and often luminaires (light fixtures) and switches. However, the architect or designer will not determine a structural layout, nor coordinate ventilation ducting around beams and joists, nor determine plumbing pipe routing, or confirm the heating and cooling equipment size and configuration.
When the Development Permit is approved, other consultants are hired to begin the construction drawings to apply for the Building Permit. Unfortunately, the other consultants' input then requires major changes to the project design. Once a structural engineer and the builder begin to review the design, they will determine features which require very expensive structural elements or labor-intensive, time-consuming junction details. Often, the forms or features cannot be eliminated or significantly reduced without fundamentally changing the building's design, and the project moves ahead while carrying the expense of those designs.
The mechanical engineer or HVAC subtrade will design what is required to heat and cool the building and to provide adequate fresh air, but the impact of how the building is designed usually results in large, expensive equipment that takes up more space than was previously allocated in the design. Sometimes, the architectural design results in a construction cost that is too high, and the project can't proceed without making drastic changes. These changes may diminish the character or sacrifice useful space inside the building. For a multiplex, the cost of expensive structure could mean a smaller building and less rent.
Consider a large project on which the owner tried to hold off spending $200,000 in consultant design fees, but then incurred $1M in various other costs and a 6 month delay in the start of construction (which could have been $100,000 in holding costs and construction cost escalation).
The solution is simple - hire all the consultants and engage the builder and subtrades at the beginning of the project so that everyone's input is taken into account as the building's design evolves.
Rushing Design To Apply For Development Permit
Everybody is eager to move the project along quickly. The time required for the city to review a permit application is beyond the team's control, so the owner will typically push for the applications to be made as soon as possible. This means reducing the amount of time spent on developing the general shape and styling ("form and character") to prepare the Development Permit application. Instead of various technical aspects being sorted out at this stage, they're left for later on. The concern is that the time spent on details would be wasted if the city demands more significant changes.
However, consider a $16M project that held off hiring $50,000 of technical consultants until preparation for the building permit began. The result was a delay of 8 months (possibly $1M additional holding costs), an additional $200,000 in consultant fees, and an unexpected additional $4M of construction costs.
If you don't have an extra $500,000 laying around for that $2M multiplex, don't skip the technical analysis during the design phase. My Deep Blue Design includes various technical discussions even as the overall concept begins to take shape.
Cost-Savings Measures During Construction
If the multiplex will be rented out or sold, the owner may be less particular about some things than she would be if it was a single-family home. A builder who has not been involved in the design process will usually make cost-savings suggestions along the way, and the owner is generally more receptive to them.
However, a change made to the design during construction requires the consultant first to assess how the change impacts other aspects of the project. Then, changes must be made to the drawings and possibly an application made for an amendment to the Development Permit and/or the Building Permit. Usually, the construction deadline doesn't allow adequate time to review and coordinate these changes properly; they're rushed through yet still cause a minor delay on site.
What was envisioned as $10,000 in construction cost savings resulted in $5,000 in additional consultant fees. If the builder is involved from the beginning of design, his cost-cutting ideas are already implemented in the project as much as feasible and are coordinated with everything else.
I've seen a proposal that a builder pushed to be implemented to save time and tens of thousands of dollars. After weeks of discussion with the consultants and with the city and at the cost of thousands of dollars in additional consultant fees to achieve a design revision that was acceptable to everyone, the builder discovered that the subtrades would not be able to execute it, and it was abandoned. This was followed by more additional consultant fees to revise the drawings back to the original design.
The main lesson here is to hire your builder early. The second lesson is to have a comprehensive SOR so that everyone understands why design decisions were made during the design phase.
Second Opinions From Outside The Design Team
Often when working with professionals, a second opinion is not helpful. If you seek late advice from someone not already involved in your design team, the advice will be based on incomplete information and not take into account important factors.
Consider a large project that was estimated to cost $50M to build. An external consultant claimed that a particular change could save $2M. However, the impact of the change required nearly $1M in additional fees for other consultants to make changes and incurred a delay of 14 months. Instead of costing less though, the result was an INCREASE in construction cost of $10M and less saleable area.
Instead of shopping around when the construction estimate is higher than you planned, direct the design team to coordinate a strategy to reduce the cost.
Lessons From Real Projects
These strategies are not theoretical. A variety of private and public developers, builders, and architectural firms are already taking advantage of them and reducing how much projects cost. In most cases, the approach is a response to making a Passive House or Net Zero project feasible. Both Passive House and Step 5 projects have been built for no more than code-minimum buildings, and some have been built for LESS.
However, these strategies can be applied also to any project. Do you want better buildings built for a lower cost than the worst building legally permitted, or do you want to struggle to build to the code requirements and grasp at vanishing profit margins?
There is no silver bullet or magic pill, but my SAPPHR Strategy™ is a framework upon which the architectural design process can be structured to ensure that the right people are involved at the right time, the right information is discovered at the right time, and the right decisions are made the right time.
To learn more about the SAPPHR Strategy™, download a copy of my guide below.
If you would like to discuss the next steps to move your project forward, book a free, 30-minute consultation with me by using the link here:
DISCLAIMER:
The information included in this article is to an extent generic and intended for educational and informational purposes only; it does not constitute legal or professional advice. Thorough efforts are made to ensure the accuracy of the article, but having read this article, you understand and agree that Daniel Clarke Architect disclaims any legal liability for actions that may arise from reliance on the information provided in this article. I am an architect in BC, but readers are recommended to consult with their own architect on their specific situations before making any decisions or exercising judgement base on information in the article.
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