Architectural Project Budgeting For Viability (#2 of 10 Principles)

Does the project work?

The second Jones Pierce principle to a fun client experience says all projects must be viable in order to proceed. Typically, project budgeting will define the viability of a project.  Therefore, early in the project, we look at several possible aspects of viability to make sure the project works as early as possible in the design process.  Knowing viability early allows for changes to the project parameters to proceed or the ability to get out without too many casualties.

Is the project getting ahead of itself?

The excitement of a new project is a powerful thing. First, the client has just made a difficult decision to select a design team and is ready to move forward by starting construction. After that, the design team has made it through the sales process and is ready to start problem solving. Now, the owner / architect team can typically get caught up in the excitement and start sprinting towards a quick solution. However, this solution may not meet an architectural project budgeting, zoning ordinance, building code, or work in the projects financial model.

Six answers you need to know about architectural project budgeting for viability:

The viability answers you need to know could be a single issue or a combination of things for a project.  Questions to consider are:

  • Are there zoning issues?  Order and review a survey to determine if there are zoning setback, stream buffer, or lot coverage issues.
  • Is the property in a historical district and needs to go through the approval process, resulting in increased time and effort? Understand the approval package requirements and number of meetings by the local jurisdiction.  Sometimes you will have to front load more design work than you think to achieve neighborhood and city staff approval.
  • Can owner goals be accomplished for the architectural project budget they are planning for?  Keep the project in a spreadsheet, adjusting the project size and scope until the owner agrees to the working budget.
  • Will the project goals appraise for financing? If projects will need to appraise to close, you can talk to a trusted local or recreational real estate agent to help with comparable properties. Or you can hire a residential or commercial appraiser to establish the value of the project design before starting work.
  • When the project is finished, how much equity will remain?  It is nice to financially model anticipated owner equity at the end of a project. In a good market, solely being in the market creates equity, leaving the clients happy. However, in a bad market, the owner can use the result to make sure they will not be underwater if the project needed to be sold.
  • Does rental space or the unit sales  produce enough income in the proforma to create the desired return on investment? Good commercial investors will model the performance of a project in a proforma. The financial model is based on assumptions of rent amounts, project size, project cost, and sales revenue. Is the project viable in the proforma?

Determine the project’s success on paper before diving in too deep into the design.

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