Today, a majority of architects work solely on the design end of the development process. It is common knowledge that the net value of architectural services in a projects’ total value amounts to a very small percentage (it’s usually in single digits), which puts architects near the bottom of the financial structure in the AEC industry.

Stuck between developers, clients, contractors, and subcontractors, architects are usually in a role that implies great responsibility but proportionally low compensation for it. When we add to that the grievance of not having full control of a project, it becomes clear as to why an increasing number of architects either transition to real estate development or transform their design offices into design-builds.

Though still in its infancy, this transition seems indicative of an emancipatory trend that’s taking place, where architects take matters into their own hands and thus claim their rightful position within the industry.

However, with this newfound ambition comes a new set of challenges. Developing a project from drawing board to building site requires business skills that are not taught in architecture schools. Can architects bridge this gap and compete with seasoned developers? Are there advantages to being a designer when it comes to the nitty-gritty of actually building a project?

Let’s take a look the major pros and cons of architects working as developers.

Pros

#1 – Architects Understand the Process of Building

As architects come to learn about the different aspects of project development in the course of their education and throughout their career in the industry, most know what it takes to design and construct a building. They often have project management experience and understand the process of site and project analysis, construction techniques, acquiring building permits and controlling budgets.

This is particularly the case in smaller offices where project managers are often required to perform various roles, from leading the project team and administering construction contracts, through negotiating with clients and contractors, to scheduling and monitoring processes. Due to this versatility in their experience, architects can make sure that construction is completed on schedule and under budget.

In addition to these general skills and competencies, architects often become experts in various niches. Over the course of their careers, many practicing architects specialize in specific typologies, which can be a huge advantage when going into development in these specific areas.

#2 – Great Design Increases Market Value

The expertise that architects bring to the table can have a significant impact on the financial bottom line of a project. For example, sustainable design features can significantly increase the value of a property. Or, as Tyler Stonebreaker puts it in his interview on Archipreneur Insights: “At the end of the day, the market is placing the highest premium on things that are unique and special.”

People are becoming increasingly interested in energy efficient or high performance properties, which is why green design certification programs like LEED and NGBS can raise the selling price of a house. In addition to sustainability, experienced architects also know how to use designs to create quality spaces on limited budgets.

They can also reconcile profitmaking with a broader strategy for social change and an increased quality of life over a longer period of time. Architects that are working as property developers are more likely to consider innovative and creative solutions; solutions that ordinary developers might either overlook or reject.

#3 – Architects Know How Cities Work

Architects are trained to think in terms of place making instead of creating objects that are detached from their surroundings. An architect-developer is trained to consider how a project might sit within and relate to its context, ensuring long-term benefits for themselves, their clients and the relevant neighborhoods. Architects are taught to understand urbanism and recognize areas with development potential. They may, for example, see real opportunity in a vacant lot that doesn’t seem to offer any value to the untrained eye.

For example, San Diego-based architect-developer Jonathan Segal built many of his residential projects as suburban infill developments located on undesirable and oddly shaped lots. Over the years, Jonathan has created a profitable business and accumulated a wealth of architectural accolades in this area of his business.

Cons

#1 – Lack of Business Experience

Many architects know how to design, draw, write, interpret specifications and monitor construction processes, but know little about real estate finances, viable cash flow models, and how to understand a project from a business perspective. Those working in large architectural firms are restricted to the drawing board, receiving little on-the-job training when it comes to the particulars of business.

In addition to a general lack of business skills, most architects don’t know about the financial and business structures that developing properties entail. Understanding real estate finance and the metrics used to calculate and rate a development, along with the importance of overhead factors, are just as important as understanding building codes, zoning regulations and program. The majority of architects have yet to learn that cost is a principal parameter for their designs.

#2 – Getting Caught up in Design

With all their knowledge about the different aspects of getting a project built, architects are often stuck in a closed mindset, focused solely on design. They get overexcited about the design possibilities, and fail to acknowledge the importance of the business side of project development. There is still a general disregard for the financial part of building in architecture schools.

This attitude often continues into architects’ careers, as most continue to work solely as designers. Once they get into developing their own projects, they are forced to become more flexible and let various technical, logistical and financial factors inform their design decisions. This is often a hard pill to swallow for an architect.

#3 – Not Being Familiar with Market Trends

Shifts in market demand determine the properties that will be the most profitable to build. In order to know whether to focus on apartments, condos, mid-rise, mixed-use buildings, or other typologies, seasoned developers read the market and set about targeting the right demographic. There is a significant difference in returns between Build to Rent and Build for Sale.

The key to deciding on the type of structure to build – and where – is in accurately predicting if the asset will either increase or decrease in value over time. Developers also need to know how to read real estate trends and cycles to predict the best time for development, buying and selling. This can be a huge challenge for architects with no experience in property development.

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Combining skills ranging from design to finance and marketing is definitely a daunting task. Still, an increasing number of architecture firms are broadening their reach to include designing, developing and even constructing their own projects. Architecture firms like SHoP, Alloy, BRH Architects, and EM2N Architects are proving that it is possible to strike a balance between good designs and making a profit.

The post Reasons Why Architects Can Make Great Developers (or not?) appeared first on Archipreneur.

This week’s interview is with Ryan King, the founder and CEO of Coincraft, a practice and project management service for architectural businesses.

Coincraft is a service that helps architectural practices to analyze and manage their projects and business. You can forecast your cash flows, project budgets and track time to overview your project cost. A product which definitely fills a gap in the business of architecture environment.

Ryan is an entrepreneur who had worked in different professional fields; from architecture to graphic and web design. Here is Ryan’s perspective on the architectural profession and how he expects to make improvements how architectural practices are run.

I hope you enjoy the interview!

What made you decide to start Coincraft.co? Was there a particular moment that sealed the decision for you?

I was working for a small architecture practice and was given the job of finding a cashflow and project management solution; in particular, something that would forecast rather than just track data.

We couldn’t really find anything affordable and simple to use that suited the needs of architects and as I spoke to more architecture practices they were all facing similar problems. So I started working on a solution and it all escalated from there.

How does Coincraft help architectural practices to run and improve their business planning more successfully?

Coincraft provides you with a way to see your business and project metrics. For example, is your business making enough money, both right now and in the future? Are your projects profitable? Do your staff have enough time available to hit project deadlines?

Coincraft answers all these questions with an interface that is built for visual thinkers like architects. Instead of getting bogged down with tables of numbers you can plan your business in exploratory and intuitive way.

You just released a new project management feature within Coincraft. Could you tell us about that?

It’s our project and staff scheduling tool. The exiting thing is our interface; you can pull sliders around and adjust your fees, budgets, and staff schedules to see what affect they have on your business in real time.

This takes a lot of the guess work out of running practice, and instantly you can know how many staff hours are available, what milestones you need to hit and when you need to hit them, and what budgets a required to run a profitable project.

What do you find the most fulfilling about your current job as an Internet entrepreneur within the architectural community?

I’ve met a lot of architects who don’t necessarily have the time, resources, or training to best manage their business; it’s great to be able to remove that struggle and give them the insights they need to focus on creating great architecture.

How has your architectural training helped you in the actual running of your business? What specific/transferable skills have proved the most useful?

I think design is a skill that can be transferred to any discipline. Everything I do is design, whether it be business models, marketing strategies, or interface design, you’re always designing something to create a desired outcome as it interacts with people and other elements in the system – if you can’t reach your desired outcomes then it’s poor design.

In particular, I think the way architects twist the rules to work with planning restrictions is a great asset to an entrepreneur. Where as new constraints can be inhibiting for some, the architect knows how to work with constraints to reach their desired goals.

Architects are also comfortable not knowing what they’re doing, and that can happen a lot as an entrepreneur exploring new ways of doing things. Architects are great at questioning conventions and creating novel approaches to solving problems; whereas fields that have a direct A-to-B approach to solving problems struggle without a path laid before them.

Do you have any tips for “Archipreneurs” who want to start and build their own business?

You should just dive in and get started working on your business full time. At first we tried working Coincraft during nights and weekends but it was getting nowhere. It wasn’t until we started working full-time things gained momentum.

If you’re starting a business you should give it your full attention. It’s a risk, but the reward is much greater than never trying in the first place.

How do you see the future of architecture? In which areas (outside of traditional practice) can you see major opportunities for up and coming architects?

The two biggest problems I see facing architects in the future are firstly becoming more of a necessary industry and secondly making architecture more accessible to the general public.

In most circumstances you don’t need an architect to get a building built. The second there’s a cash deficit architects are generally out of a job as we all saw in the recent recession. On top of that the general public see architecture is an unnecessary stylistic overlay to a building. In a lot of ways architecture is considered an unnecessary industry but I would like to see the day where an architect is involved in every built structure.

There’s a few different approaches to making this happen. There’s policy, education, marketing, but I think a great strategy involves getting as many people as possible to experience good design and architecture. To further distribute architecture amongst the population I think architects need to become more business savvy – that’s partly designing more affordable housing, but also experimenting with new business models in order to create greater architectural distribution whilst earning a decent salary.

We’re already seeing great approaches with this in Melbourne with the Nightingale Apartments. I’d love to see more projects like that and hope Coincraft can help architects be more comfortable with developing new business strategies in the future – and ultimately become more business savvy.

About Ryan

Ryan has been worked for a few architecture practices over the last couple years. Previously working in graphic design, and a hobbyist programmer, Ryan handles a bit of everything in Coincraft, overseeing business strategy, product management and branding. He sees Coincraft as an opportunity to combine his many interests and significantly improve how architectural practices are run.

The post Coincraft: Helping Architects Manage Their Time and Money with Ryan King appeared first on Archipreneur.

Phases of Real Estate Development

Project Initiation

• Location seeks capital and idea
  A company, for example, seeks a project idea and an investor for an existing property they own. This is often the case if the companies’ core business is not real estate related. If you are an architect you probably have experienced the situation when an investor asks you to develop an idea for a special site.
• Idea seeks location and capital
  In this case a precise idea or demand is existing and the goal is to find a suitable location and provider of capital.
• Capital seeks location and idea
  In this case an investor wants to invest in real estate due to different reasons, i.e. pension funds or other institutional investors.

Project Conception

• Market analysis
• Location analysis
• Usage concept
• Competition analysis
• Risk analysis
• Cost analysis

Graaskamp defines the term feasibility as follows: “A real estate project is feasible when the real estate analyst determines that there is a reasonable likelihood of satisfying explicit objectives when a selected course of an action is tested for fit to a context of specific constraints and limited resources.” (Grasskamp, James A. “A Rational Approach to Feasibility Analysis,” The Appraisal Journal, October 1972.)

The extensive investigation and research of the Feasibility Study should guide you to a positive or negative decision for the project.

Project Management

Project Marketing

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