State of High End Residential Architecture in 2018

THE STATE OF HIGH END RESIDENTIAL ARCHITECTURE IN 2018 Sebastian Construction Group

SebastianCG.com

TABLE OF CONTENTS 3. About the Survey 4. The Survey Respondents/Survey Facts 5. Design Style 6. Project Location 7. Project Size 8. Project Team 9. Project Challenges and Impacts 10. Project Schedules 11. Project Quality 12. Contractor Selection 13. Architectural Fees 14-15. Budgets 16. Factors Influencing Client Selection Decisions 17. Staffing Situation 18-19. Project Phasing and Schedules 20. Design Tools 21. Thank you!

 

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ABOUT THE SURVEY As one of the larger contractors of high-end residential estates, architects often ask us at Sebastian Construction Group about trends we are seeing in our market segment such as project costs, size, health of market, and more. While we all observe different trends in the market, those observations are typically anecdotal or based on “gut feelings.” To gain a better understanding of actual trends, we set out to gather data from you and your peers.

In December 2017, we developed and sent out a survey asking our network of architects to respond to those exact questions. The survey was sent to 390 architects and we received 75 responses (about 19%). Only architects who design residential projects were included in the survey results. The percentages shown throughout the report are based on the number of respondents for each question, unless otherwise stated.

We plan to conduct this survey again at the end of 2018 (and perhaps make this an ongoing annual survey), so please submit your feedback and any topics or questions you would like to see us add or change.

Thank you for taking the time to respond to our survey – we are excited to share the results with you! Also, a special thank you to the ICAA Texas Chapter for sharing the survey with your members and on social media. A few architects shared this survey as well, and we appreciate it.

Best regards, Andy O’Nan Sebastian Construction Group aonan@sebastiancg.com

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THE SURVEY RESPONDENTS Company size

1-5 6-10 11-50 50-100 100+

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

SURVEY FACTS: •75% of responses came from Principals/Partners/Owners.

•Residential makes up 73% of the responding firms’ work.

•83% of responses were from Texas-based firms.

Unfortunately, some great designs go unbuilt, but the majority of respondents say that 3/4 or more of their projects do get built. Only a tiny fraction of respondents said less than half of their designs are constructed.

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WHICH DESIGN STYLE DESCRIBES MOST OF YOUR WORK:

Traditional /Classical Modern/ Contemporary All of the above Other (please specify)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Respondents were asked about design styles. The results show a balanced pool of responses.

New Primary Houses New Secondary Homes Additional/ Renovation/Remodel High-rise Finish Out

0 1 2

3

4

5

6

7

8

9

10

Firms design new primary homes by a slight margin over new secondary homes or additions/ renovations, (which both ranked at a similar rate.) High-rise finish outs came in last. Overall, a healthy distribution of work across the four project types.

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PROJECT LOCATIONS

Architects taking the survey were largely designing projects to be built in their city or major metro area. Less than 6% said that their designs would be built outside their region.

No responses indicated international work.

It was no surprise that most survey respondents hailed from Texas, considering our contact list.

A goal for future surveys is to increase distribution overall and broaden the geographic range of our participants.

A smattering of this year’s respondents are located in New York, California, Georgia, Louisiana, and Wyoming.

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PROJECT SIZE

Less than 4,000 SF 4,000 SF to 7,000 SF 7,000 SF to 10,000 SF 10,000 SF to 15,000 SF Over 15,000 SF

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

60% of projects fall into the 4,000 – 7,000 square foot range for our survey respondents (as measured by air-conditioned space.) A third of the projects are in the 7,000 – 15,000 square foot range. Less than 2% were over 15,000 square feet.

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Per AIA’s 2017 Survey, Upper End Homes are getting larger. Our results do not seem to be in alignment with the AIA’s findings. More than half the respondents in our survey said that their projects are staying the same size. 15% said projects are getting larger, while13% said smaller.

Per AIA’s 2017 Survey, Upper End Homes are getting larger % of respondents indicating square footage of homes in category is increasing: 40% 30% 20%

29%

25%

19% 14%

10% 0% Overall

Upper-end Entry-level Additions/Remodels

“Source: American Institute of Architects Home Design Trends Survey 2017 Q1”

THE PROJECT TEAM Civil Engineer Interior Designer Interior Decorator Lighting Designer Landscape Architect Owner’s Representative Mechanical Engineer Building Envelope Consultant Acoustical consultant Arborist Geotechnical consultant

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

We were pleasantly surprised to learn that it’s common to include lighting designers as part of the typical team over 60% of the time. Also, the results indicated mechanical engineers are part of the team nearly 28% of the time; a finding which could be skewed by not specifically asking for third party mechanical engineering vs. design-build contractors (with in-house engineering), which is more commonplace on our projects.

PROJECT CHALLENGES AND IMPACTS Staying on schedule Keeping our design from being compromised Keeping the project on budget Maintaining quality Keeping the client happy

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

For respondents, keeping the project on budget was the most challenging aspect, followed by keeping the design from being compromised. Maintaining quality ranked the lowest among the challenges listed.

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PROJECT SCHEDULES

Which of the following has the biggest impact on your design schedule?

Client decisions and changes Workload and staffing Consultants’ performance Contractor involvement

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

It is no surprise that clients have the biggest impact on design schedules, but it would have been interesting to see these factors ranked against each other along with some comments.

Our observation is that, from the contractor’s perspective, if your design schedule is not impacted by the contractor, it seems that the contractor is providing little impactful feedback.

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PROJECT QUALITY

Which of the following has the biggest impact on the project quality?

Clear drawings and specifications Contractors/ Construction Managers selected Subcontractors being used Client’s expectations Other (please specify)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

From the contractor’s perspective, the responses to this question make us wonder how often detailed, project specific specifications are included in the contract documents.

MOST CLIENTS ENJOY BEING PART OF THE PROCESS. While more than 70% say that their clients typically enjoy the process of designing and building their home, 30% report that clients have limited time to participate.

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CONTRACTOR SELECTION

60% of respondents say that they typically interview one to two contractors for each project. 40% interview three to four. No one reported interviewing five or more.

When it comes to selecting a contractor, 34% of respondents ranked the contractor’s experience as most important, followed by ‘personal and professional rapport’ which came in at 25%.

Contractor Selection Phase Competitively bidding the final construction documents

14.81%

Comparative budgeting of the schematic/preliminary drawings

25.93%

Interview, then by comparing fees, general conditions, and project qualifications

46.30%

Owner typically brings the contractor to the team

5.56%

Other (please specify) 7.41%

25% of the respondents said they select contractors based on “comparative budgeting at preliminary design”. From a contractor’s perspective, this is an ineffective method to select the best contractor.

When bidding a complete set of construction documents with specifications, most contractors will be within 5% of the same hard construction costs. However, at the preliminary stage it is not uncommon to receive budgets that vary by more than 30% because different assumptions are being made on the structural needs, finishes, inclusions, on-site conditions, etc.

When selecting a contractor early, it is much more effective to interview and make a selection based on qualifications and costs that the contractor controls namely fee and general conditions costs. This is what 46% of respondents are doing.

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ARCHITECTURAL FEES

Percent of construction costs Hourly costs with a cap (upset number) Hourly costs without a cap Value per SF A fixed sum specifically negotiated for each project Other (please specify)

0% 10%

20%

30%

40%

50%

60%

48% of respondents charge fees based on a percent of construction cost, more than twice that of the next most popular method, hourly costs with a cap.

56% report some competitive pressure on fees, while 26% have little to no pressure on fees.  

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BUDGETS

Less than $400/SF $400-600/SF $600-800/SF $600-800/SF Over $1,000/SF 0% 10% 20% 30% 40% 50%

In the future, we will ask more about budget range, as well as budget variance from contract budget to final construction costs, early-budget-vs.-construction budget, and construction budget-vs.-final costs comparisons.

Who most often establishes the first project budget on your projects?

Owner Architect Contractor It is a collective effort of all the above 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Our experience is that often the owner does not disclose a target budget until the architect or contractor offers a number. Perhaps they think the project team will spend the entire budget unnecessarily if they volunteer a number. This is one of the reasons it is important to talk about cost early and lay out the assumptions in detail.

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It’s often the case that the client is not as focused on a target number as much as quality and value. (They don’t mind paying for a Ferrari, they just don’t want to overpay for the Ferrari).

We have also found that when a truly special project and client comes along, many architects tend to move the client toward lower cost solutions simply because it is familiar territory. Bottom line? Ask questions to understand and do not fear uncharted waters.

Design phase the budget is first established.

Before we start conceptual design After the conceptual design After the schematic design After design development 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Over one third of the respondents answered that they establish the budget after the schematic design.

Furthermore, 13% acknowledge a budget is established after design development, which is a shocking figure from our point of view.

Perhaps the wording of the question skewed the results. Did some equate ‘establishing a budget’ to bidding? The budget is always a factor on some level and the further into the design process one gets without an established budget risks rework and wasted time.

LEAD SOURCES Repeat clients and referrals dominated the lead sources for architects by a wide margin. More than 80% credited repeats and referrals, while the next largest source, industry referrals lagged at less than 10%.

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FACTORS INFLUENCING ARCHITECT SELECTION

References (clients and/ or contractors) Project portfolio

Awards Approach or process Price/value

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

According to survey responses, the single most important factor that influences a client’s architect selection decision was 52% References, 35% Project Portfolio and 14% based on Approach or Process. No one said that Awards or Price/Value was the single most important factor.

While references and project portfolio are most influential, architects with a strong process should be touting that advantage to the owner. As builders, we certainly attest to the architect’s process being a key component of a project’s success – particularly on large scale projects.

Architects who are disorganized and haphazard with their documentation and communication create issues that have significant impact on the project schedule, the outcome, and ultimately whether clients, builders, and others will recommend their work.

FIRM WORK AND STAFFING 43.4% of respondents rated their pipeline the same as last year, while nearly 36% said it was better, and almost 21% called it worse.

Interestingly, AIA’s 2017 Residential Architecture Survey has an almost 6% decline in the percentage of respondents reporting that the custom/luxury home sector is improving.

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STAFFING SITUATION

Almost a third of firms say that they are struggling to find talent, but more than half (54.72%) report that talent is not an issue, as they’ve been holding steady at the same size for years. About 11% feel that talent is plentiful in their market.

Sources of new employees are varied: almost 40% are sought out by potential employees and 21% hire college grads and “train them up.”

Several respondents use employee referrals to find talent (“Our own people are the best source.”) A few use the AIA job board or post on social media and in city newspapers. One respondent states his future talent-related plans as “staying as a one-man firm.”

ARCHITECTURAL SCHOOLS Most Popular/Favorite architectural schools to recruit from include: Notre Dame UT Austin Rice University Auburn Texas A & M Texas Tech LSU UT Arlington University of Houston Kansas State University University of Oregon Pratt

We were not surprised to see so many Texas schools named given the preponderance of responses from Texas architects. We were surprised, however, to note how many surveys listed Notre Dame as the favorite – it topped all others.

Some respondents didn’t pick a school, but instead shared their hiring philosophy: “Attitude most important quality” “It is the person, not the school.”

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PROJECT PHASING AND SCHEDULES

When it comes to projects starting construction, more than half commence based on 100% complete construction documents and specifications. 45% start with a “shell” package only with interiors being added in a future set of plans.

100% complete construction documents and specifications A “shell” construction package only, with a future “interiors” set A foundation/ substructure package only “builders set” only; the Contractor provides the rest of the information needed

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Our observation has been that most of our clients do not have the desire (or patience) to wait for the full drawing set. They opt instead to commence construction while the interior design is underway, putting at risk approximately 30% of the project value, which is still to be determined. This can be a successful time-saving strategy only if there is continued pressure to complete the interior design and interiors documents are completed within the first few months of construction (or less).

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DESIGN SCHEDULE - IN A TYPICAL PROJECT, WHAT’S THE PERIOD FROM INITIAL CONCEPT TO CONSTRUCTION DOCUMENTS? Up to 6 months

6 to 9 months

9 to 12 months

12 to15 months More than 15 months

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Design schedules, from concept to construction documents, vary widely among respondents.

When asked what phase of the design the contractor is typically engaged, more than 40% put it in the Schematic Design Phase and 30% put it in the Design Development Phase.

As

illustrated in the chart below, the effort required to change the design increases as the design

develops. It is for this reason, that we advocate for early involvement of the contractor to help identify and solve potential issues while the cost of change is low.

Ability to impact costs

Traditional design workflow

Effort

Preferred design workflow

Cost of design changes

Concept

Development

Documentation

Construction

Time (MacLeamy Curve) 19

Design Tools Traditional hand sketches

88.24%

2D CAD 64.71% 3D models on screen or printed 3D model

80.39%

Scale model or 3D printed model

39.22%

Virtual Reality 11.76% Mixed or Augmented Reality

3.92%

Traditional hand sketches edge out 3D models (printed or on screen) as the most popular way to present concepts. With a low entry price point (about $500), it’s surprising that only 10% of respondents are using virtual reality.

Responses show that the primary tools used for construction drawings are digital with 78% using AutoCAD or similar and 22% using Revit or another BIM application.

When asked about the biggest threats or concerns in the high-end residential architecture market, the answers ranged from fee pressure (particularly among uneducated buyers) to rising construction costs to poor designs and unqualified architects cheapening the value of design itself.

Professional Organizations or Groups Respondents were asked to name the professional organization or group most beneficial to your firm. AIA leads the pack with ICAA following closely in number of mentions. Other organizations like the US Green Building Council garnered a couple of mentions. One-offs like Design Leadership Network, Home Builders Association and Young President’s Organization rounded out the list.

More than 20% of respondents said, “None”, with another one commenting, “Still looking for one that is beneficial to residential.”

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Thank you to the architects who completed our State of High End Residential Architecture in 2018 survey.

We appreciate your time in helping us create this valuable reference tool for our industry.

For media and educational groups, we are happy to provide report excerpts for re-print on request.

Please send all requests to: Andy O’Nan at aonan@sebastiancg.com.

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Sebastian Construction Group

SebastianCG.com