Multifamily Development Budget - Architecture & Engineerings Costs

What is typical architectural cost and engineering cost for a ground-up multifamily development of 25-50 units? For architecture fees I have heard and read figures ranging from 3% of hard construction cost to 8% of total project cost...if the total project cost was $10-15 million with square footage of 24-36K square feet, what range of of architecture and engineering cost would you think reasonable? 

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Comments (12)

Jan 26, 2021 - 5:22pm

Correct. I am just referring to the wide range of costs that I read about [ranging all the way from 3% of hard cost (min) up to 8% of total cost(max)]. 

P.S. Can you tell by my bracketing that I am more of a financial modeler than a developer :)

Jan 26, 2021 - 7:40pm

The range is wide because MFR design is repetitive. Going from 50 units to 150 does not mean tripling the number of unit types. You'll find the lowest design % of construction cost on projects with hundreds of units.

Jan 26, 2021 - 11:58pm

So I have done little MF work personally. I had a project in ATL for about 20 units or so and I quoted them about $3.50 sf for Architecture and MEP. Structural, Civil, and any other designer fee such as Landscape were priced separately. I could have possibly priced the Structural fees, but the Civil was very dependant on the site - and that particular site had a bunch of challenges. 

I mostly work on government commercial projects where there is not a bunch of repetitive work like a MF, and our prices are stiffer. Depending on the size/complexity, the A/E fees we charge are roughly 6%-9% of the Construction Cost. 

In your scenario what is your estimated construction cost? I see you estimated a total project cost of 10-15 mil.

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Jan 27, 2021 - 8:17am

$3.50 psf is a lot less for Architecture and MEP than what I had expected. This MF would be a lot simpler than government commercial projects, although it would involve building on top of a parking podium (probably three floors of Type V residential over concrete podium). Here is my full budget for 25 units across 24,000 sf gross / 19,800 sf net residential on a 9,000 sf site. Currently budgeting $6.25 psf for engineering (2.4% of hard cost) and $15.83 psf for architecture (6% of hard cost).

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Jan 27, 2021 - 9:10am

Ok so building on top of a parking podium would add to the complexity variable we would use to calculate fee.

$3.50 is looking at a site relatively flat with ground up new construction.

If we calculated it at even $5 psf using 30,000 sf we would get an AE fee of $150,000.00... I then add 20% (10% overhead, and 10% profit) now we are $180,000. Architect gets 60-65% of the fee the MEP gets 35-40%. We then contract out other fees.

If we thought the job was a bit more speculative we could find a medium between calculating per the Per SF method above and calculating a fee based on Construction hard cost. Just roughly without knowing the project too much @30,000 SF we estimate residential Type V construction @$200 SF so our in house projected construction cost would be $6,000,000. Then like I said above, we would look somewhere between 6%-9%, let's use 7.5%. Our estimated A/E fee would be $450,000. A/E with 292,500 MEP with $157,500. This is closer to the scenario you present. 

This is a $270,000 difference that we are aware of while we would like to get as close to the $450,000 fee as possible it largely depends on the available funds for the project. A developer is more inclined to negotiate for a per SF project or a per unit in an effort to control cost. A city or state may have the budget for the project for years with an expected 6%-9% A/E fee along with other common fees gathered through historical data. Our decision will largely depend on the competitive nature of the market and the office work on hand; that $180,000 still has a 10% profit and will help pay salaries until another opportunity presents itself.

Oh and for anyone questioning what's the difference between receiving the $180,000 or $450,000 if the same building is going to be built, well in short, a responsible Architect will give you a better project. More time in the office can be dedicated to the project and more senior personnel can work directly on it. They will hire "better" engineers; or even you can hire a "better", more familiar architect. Additional specialty consultants can be hired to help with the review process and any potential problems during entitlement/or permitting. Construction Administration can now afford to have 1 or 2 folks more involved on-site through the construction process. Overall design time and revisions should be reduced; saving the Developer money. 

Jan 26, 2021 - 5:25pm

Thanks AM Guru, that is certainly helpful. That is lighter on the architecture and heavier on the engineering that I would have otherwise budgeted. 

You say "there is a lot that goes into this." I am planning on doing three floors of residential above a parking podium (24K to 40K sf of residential total).  Does $75psf for the parking podium and $210psf gross for the residential sound reasonable? And would the 3% for arch and 3.2% for engineering hold up given this type of design?

Jan 26, 2021 - 9:02pm

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