Industry standard developer fee % and GC fee %

I work for a private residential homebuilder and developer and as we analyze potential deals we consider several avenues for development and construction, as well as financing. I am in the process of creating a multiple scenario proforma for feasibiity analysis and needed the industry average for developer fee, general contractor fee and developer acting as GC fee (the general consensus on the latter seems to be that in lieu of a normal GC fee, 1% is tacked on to the developer fee when the developer is also GC). I also wanted to confirm that the developer fee is typically on all land development AND construction costs and GC is just construction (this would really be more a question when we are receiving HUD financing and lines are a bit blurred between GC and Developer by overlapping supervision).

Comments (6)

Jan 10, 2018

In my personal experience working for both commercial and multi-family developers, the development fee is around 2-3% of total project costs (excluding land cost and actual value of development fee). The GC fee really depends--3-4% on the total project hard costs only is typical, with larger projects (ie $150+ hard costs) pushing the fee down to low 3%s. That is in addition to typical general conditions costs the GC will incur as part of the job.

Jan 10, 2018

Is the project cost for the developer fee calculation inclusive of developer overhead, GC overhead/fee and financing costs?

Jan 10, 2018

financing costs--yes. GC overhead/fee-yes, in the sense that we award jobs to third party contractors and underwrite those items as just part of the base hard costs.

Jan 11, 2018

Thank you!

Jan 10, 2018

We take 4% developer fee on everything less developer fee and sometimes land unless we source the deal. Our GC's typically get 3%. Per your question above, the short answer is yes. We manage/take the risk for coordinating all of these items and prefer to take a fee on them. Reimbursables is somewhat negotiable but the reality is most of the time reimbursables are a required part of any job (almost like a developers general conditions if you will) but are subject to a cap by the owner.

Jan 11, 2018
Comment