AS APARTMENT DEVELOPERS begin to look at whether new construction pencils out again, here are five ways they can use general contractors (GCs) to save money on new development.
1. Confer Early
John Rooney, business development manager for Birmingham, Ala.–based Doster Construction Co., says the best advice he can give any developer is to bring in the team, including the GC, architect, property management company, lender, and others, early. “You create a team that works together to accomplish the developer's budget. The interaction between these groups provides the developer with the info to decide if he's building the right product with the right amenities for his market,” Rooney says. “It also eliminates the chronic problem of change orders."
2. Find the Right Contractor
Mat Dougherty, director of business development for The McShane Cos., based in Rosemont, Ill., says that even more important than getting your team on the same page early on is doing your research first. “The reality is that most product mixes have guys who are really good and attentive to that product mix," he says. “Finding the right contractor is more important than picking a contractor quickly. You need to do your research and try to understand who does affordable, garden-style, and high-rise."
Dougherty says a contractor's specialty can pull him into new markets, but Rooney thinks picking a GC with market knowledge can help a developer avoid pitfalls and, ultimately, save money. “The value of a general contractor is knowledge in a region,” Rooney says. “We won't price in Oklahoma if that's not our region. If you get a general contractor who doesn't know a region, that could cost you money."
3. Don't Rely on the Past
Dougherty says developers, like many people, often fall victim to what's worked for them in the past. “People rely on what they know and what they've done in the past. There are other options for buildings,” he says, adding that coming out of a construction lull may mean it's time for developers to “really analyze their structural systems."
“You need to analyze the building systems knowing if you can use wood frame, metal, cast-in-place concrete, and precast concrete," Dougherty continues. “You need to make sure you find the one that best suits your product and code and not necessarily the one you're most familiar with."
4. Look at Common Space
Design can also save money, according to Shelby Shafer, president of Franklin, Tenn.– based Construction Enterprises Inc. (CEI). Of course, the design element is an architect's domain, but Shafer says the GC plays a key role. “Jointly through the production and design sides, we're trying to come up with ways to keep lower-cost residential products as our primary resources used in the commercial field in order to keep costs down,” he says.
Common areas are a place that Shafer has seen architects look to trim costs, though the example he uses is trimming breezeways in garden units. It's not necessarily cutting the amenities in urban high-rises. “A lot of architects are really getting serious taking their common space and taking your net rentable space and trying to come up with innovative ways to keep your common space down so you don't have that extra cost that you have to carry,” he says.
5. Know Your Audience
In his work on seniors housing, Dougherty sees a common mistake. “A client or design team will propose a sophisticated heating and cooling system for senior living,” he says. “A lot of times in senior living you can get away with baseboard heat and PTAC [Packaged Terminal Air Conditioner] units. There isn't really huge cooling demand on senior-living– type facilities. The key is understanding where you should be spending your money."
Developers can fall into traps with amenities on conventional projects as well. “Any multifamily developer knows what pays," Dougherty says. “But some other times, they can get pigeonholed into one product and don't realize that their market is demanding something else.”