WHY FEW ARCHITECTS MAKE FOR SUCCESSFUL DEVELOPERS.

By Ben Richards, director of Aura Architecture & Interiors and development director at EXP Property

Let me start this thought-piece with a bit of background and somewhat of a riddle. I’ve worked for architects. I’ve worked for developers. I own an architecture practice. I own a property development company. My degree is in Architectural Engineering. So, what am I?

In truth, it depends who I’m talking to! But above it all, I’m a business owner. This, I believe, is where most architects fail as property developers.

At architecture school, you are very much pushed towards conceptual thinking, where the impetus is on creativity and exploration. Yes, there are modules on contracts, procurement methods and quantity surveying, but generally, if you are studying architecture, your enjoyment comes from the art of design.

Let’s first discuss why an architect may want to become the developer in the first place.

The obvious answer here is 1) the potential profit. One successful development could bring the equivalent income of many years in practice working on client projects. Then there’s the fact that 2) an architect developer is their own client! What architect wouldn’t want to answer to themselves and make all the design decisions? 3) They can guarantee a higher quality finish and chose not to value-engineer out their favourite piece of the scheme like a developer would.

These are all excellent Pros!

Having been on both sides of the coin, I can speak first-hand about the benefits gained by being an architect-turned-developer and why I continue to run AURA Architecture and EXP Property in tandem.

The main benefit an architect-turned-developer gains from learning the property development lifecycle from start to finish is an appreciation of the struggles. This way they are better placed to serve their developer clients.

An architect that has analysed development opportunities from scratch, seen the financial stress, dealt with investor relations, understood the legal complications, and shouldered the uncertainty of the sales market can provide a truly optimised design solution for the developer.

Through my time working for the Berkeley Group, it was clear that the design is only one part of a successful property development puzzle, albeit fundamental to its success.

We break our development business down into the following departments:

• Land and Planning

• Funding

• Investor Relations

• Design

• Construction

• Sales & Marketing

• Estate management.

To be a good developer, you will need to be proficient in all departments, not just in Design and Construction.

As the old saying goes, “You make your money when you buy”. The Design and Construction stages become only the operations to deliver. On the face of it, architects are perfectly placed to become a developer.

I first discussed why an architect would want to be a developer, and this is key. For all the benefits, some people just have no desire for it. Designing and creating beautiful structures and senses of place is their passion and so that’s what they will do. Others just aren’t cut out for it.

To develop property, it takes a certain ability to analyse and take calculated risk; a resilience to changing dynamics; the ability to negotiate/sell; and to fundamentally understand business. These aren’t typically characteristics of a ‘creative’.

The ability to take off a ‘design hat’ and switch to the ‘developer hat’ is generally an alien concept for someone that has spent more than 7-years in the study of art and design. It’s simply a different part of the brain.

With all the above being said, I believe there are real opportunities for architects with a true desire to learn the art of property development.

An architect has the natural ability to visualise very quickly what can be achieved from a site, or see an angle that others miss. They have the technical expertise, understand the planning system, and have a solid network of third-party professionals to deliver schemes with great efficiency.

As an architect-developer, there is much greater speed in decision making due to a greater design ability and technical understanding. In a much quicker timeframe (than a developer employing external consultancy), there is the opportunity to test ideas and narrow in on an optimised scheme. Speed of movement can often be the deciding factor when offering on a site.

If an architect is willing to educate themselves in structuring deals and understanding financial products and surrounds themselves in the right property circles (Qandor, for example), then they could forge a very profitable path as a developer.

If ‘design’ is their one true passion and there is no business acumen, I believe it’s destined for failure, unless there is some form of Joint Venture (JV) agreed. A JV could be a great opportunity for both the architect and the developer.

For developers, there is great value in working with architects during the development appraisal, and maybe more so where the architect has a vested interest in the project at an early stage. This could be on a profit share, or even on a ‘success-fee’ basis.

We have recently undertaken a similar JV structure with my design company AURA, where our concept design, preplanning advice and full planning fees were significantly reduced. In return for de-risking the developer in terms of capital expenditure, we agreed a fee multiplier based on the number of units we obtain at the planning stage. This was only a small project where the developer needed 4-units to achieve his profit margin targets. We have pushed this to 6-units and are confident in a successful approval.

More units, more developer profit, more renumeration for the architect. Everyone wins.

The added bonus of having design resource and an extended network of professionals should greatly increase the speed a developer can move. We certainly find this in my development company.

Architect-developers are excellent at unlocking under-used and quirky brownfield sites where creativity and innovation combine to create spectacular homes. I hope the trend continues where smaller architect-developers take on a small percentage of development projects of their own alongside their main client work.

Ultimately, I have confidence that architects can become great developers if they have the risk appetite (and want to!), but education into property development as a business will be the key to their success.

I’d love to hear from architects that have or are turning their hand to development. It’s a risky path but if you get it right, it can be very rewarding. Get in touch for a chat!