Ten Steps to Master in the Land Development Process
This multi-part Blog series will highlight how to mitigate risk and avoid issues that commonly plague land development design projects. We will help you understand how to properly navigate the main phases of the land development design process to help prevent cost overruns and delays (and a whole lot of stress and anxiety). This is a collection of observations, recommendations, and advice from the perspective of a civil engineer who has worked side-by-side with a diverse set of developers on hundreds of land development projects over the past 25 years.
If you are a real estate developer, broker, or land use attorney you will find the series to be of particular interest.
Topic 5: Diving Into Design
In my last blog we talked about the importance of assembling the right team for your development project. Having done this (as well as the steps outlined in prior blog posts), you are now at a point in your project where you have done your due diligence, a proper amount of preliminary design, assembled your team and set forth your permitting strategy. Now it’s time to dive into the design phase. This blog discusses those steps.
1. The big soft cost spend – plan for it accordingly.
- Are you REALLY ready to dive in? If you have worked through the issues raised in my prior blog posts, then you likely are, but I often see developers eager to get permitting started and give their design consultants the green light before things are at a point where design is appropriate. This inevitably causes excessive revisions, costs, and delays. Make sure you have done your homework, have the development scheme tightly locked down, blessed by tenants, etc. Doing so will give you a much better chance of sticking to your budget and timeline.
- Do you have a good handle on the anticipated fees for this phase of the project? I touched on this in my last post. You must make sure that you not only have contracts/proposals in hand from your team of consultants, attorneys, etc. but that you also have discussions with them. These preliminary discussions will allow you to correctly estimate their services’ total costs, including revisions, meetings, expenses, and more. This is more of an art than a science since there is a healthy dose of uncertainty involved, but your team members have been doing this long enough that they should be able to get you relatively close.
- Do you have the cash to pay the invoices that are about to start flowing? Now that you have contracts in place with your design team (which include payment terms) be sure that you understand the cash flow needed. Generally, you will be getting monthly invoices. Delays in payment outside of terms generally mean your team will stop working on your project (and shift their focus on their other clients who DO pay on time). Don’t let poor cash flow planning wreck your timeline.
2. Make sure the initial extent of design makes sense.
- Does it match your deal/project type? The level of site/building design you undertake initially is also a strategy question to discuss with your team ahead of time. For instance, if you are making an initial submission for a 120-unit single-family housing development that you intend to flip to a builder once preliminary approvals are in hand, then you may want to keep design to the minimum possible to get the project to the point where you can sell it. However, if you are doing a restaurant pad development where the tenant is already on board, there is no zoning relief required, and the design is straightforward, then you may want to take your design efforts to a construction-ready level right from the start to save time.
- Does it align with your permitting strategy? Make sure your level of land development design aligns with your permitting strategy. For instance, in Pennsylvania, it sometimes makes sense to make initial township submissions with more basic design plans and get initial feedback, and THEN do the full stormwater/BMP design work needed for NPDES permit submission. This can keep revision costs down. Of course, this strategy needs weighing against any potential timing implications.
- Have reasonable waivers been explored? All jurisdictions and agencies have minimum plan requirements for submission, but most allow for reasonable waivers when situations warrant. Make sure your design professionals are requesting the appropriate waivers (and saving you money and time accordingly).
3. Be sure that any/all design standards are communicated to the team.
- Client standards – Your experienced design consultants are responsible for knowing the various regulatory requirements that they need to design for. However, they can only know any requirements or preferences that you may have as the developer if you tell them. This information needs to be communicated upfront.
- Tenant standards/prototypes – Tenant standards/prototypes are essential. Any/all such requirements need to be disseminated to your team before beginning the land development design. It is better to overcommunicate in this regard by default. For instance, you may think that the tenant’s Work Letter isn’t important for your civil engineer to have, but it can contain critical utility information that they need to know for their design. Providing this to them at the start reduces revisions down the road.
- Unusual Jurisdictional Requirements – This one flows the other way; a good design consultant will alert the developer to anything they find in a code, etc., that is unusual and could have a significant cost impact. Such items need to be discussed early so that the appropriate waiver/variance discussions can be had with the jurisdiction. For instance, a town’s code may limit the height of site lighting poles to 12′ tall. On the surface, this doesn’t sound like a big deal. However, your retail tenants in your large shopping center development all require minimum illumination levels in their parking lot, which, when met using 12′ tall lights instead of standard 20′ lights, requires double the number of lights (this creates a large cost differential for such a project). You don’t want to find this out during construction when it is too late to do anything about it.
4. Coordination between team members
- Have a method of communication – It’s obvious that the various members of your land development design project and permitting team must communicate and coordinate as needed, but you shouldn’t leave this to magically happen by itself. Depending on the scale and complexity of the project, there should be status meetings/calls at regular intervals with a set agenda, issues/action list, etc. This may seem like Project Management 101, but you would be amazed at how often it does not occur.
- Watch out for “grey areas” – By this, I mean those areas of the design/permitting that cross over into multiple consultants’ scopes. Utility connections to the building and roof drainage are classic examples of when you can have your architect and site engineer pointing fingers at one another. Stormwater design of offsite improvements is another such item. Be sure such scopes are clarified and understood.
5. Making sure it is the “best” design, not just the correct design.
- Operational needs – There are many correct ways to design a site, but the key is to ensure that your design team does it in the “best” way. That goes beyond meeting the letter of the law and looking at the design from the eyes of the end-user(s). For a retail site, this is from the perspective of the tenant and customers. Parking massing, delivery truck routes, pedestrian routes, etc., must all be thought through and considered. For example, you don’t want an inlet grate in the parking lot directly in the path where most customers are going to walk. You don’t want delivery trucks crossing in front of the main building entrance to get to the loading docks. In a residential community, you want the grading to accommodate usable yard space. Such things aren’t specified in any regulations or standards but can have a negative impact on leasing and sales of the property if not properly accounted for.
- Value engineering – This can mean a lot of things to different people, but to me, it means designing the site to meet the regulatory requirements and operational needs of the project while also keeping construction costs to a minimum. Earthwork balancing is the classic case of this. While a seasoned design team can provide good value in the way they design the site, there is no substitute for involving a sitework contractor at this stage. They are better suited to assess current market conditions and how they impact costs for things like pipe material, asphalt, lumber, etc., and how to tweak designs and specs to minimize construction costs. This review and assessment by a contractor should be done as soon as preliminary plans are completed, but BEFORE they are submitted to the various permitting agencies. Doing this will ensure that any resulting changes won’t require amended permitting, and in some cases, strategic waivers can be requested from an agency that could save the developer significant money.
- Maintenance considerations – While value-engineering can keep the initial construction costs in check, the ongoing costs of development also need to be considered. Things like energy-efficient site lighting fixtures, low-maintenance landscaping, providing areas for snow storage, etc., are among a myriad of things that can be considered in the design that can reduce the life-cycle costs of a project.
6. Quality Control
- Internal QC processes – Mistakes in the design phase can seriously hamstring your permitting efforts, blow your budgets, and delay your project. While no one is perfect, you need to make sure your design consultants take this seriously. Ask them what internal processes they employ to ensure a high-quality design product. They shouldn’t rely on agency reviewers to catch mistakes (and shouldn’t expect the developer to pay to fix them).
- Client review – Every developer I have worked with has a different level of involvement in the land development design phase. This ranges from nearly no involvement at all to a set milestone review process and peer-review of progress plans. At a minimum, developers need to understand the basics of what is on a set of plans, whether they are architectural, site/civil, landscaping, etc. Ask your engineer or architect to take some time and walk you through them before they submit. You don’t want to be surprised by a design element at construction time when it’s been on the plans for 6-months during the permitting process (“I didn’t realize the retaining wall would be THAT tall!”; “Why are we planting so many trees?”).
- Cross-team review – This goes back to the team communication issue that I previously mentioned. Even if your consultants are communicating well, they need to be sure that the appropriate coordination reviews are taking place at the right milestones in the project. The architect, landscape architect, site engineer, traffic engineer, et al. should all have access to each other’s plans and perform detailed coordination reviews to ensure consistency. This is a common time when the ball gets dropped and fire drills, change orders, and sometimes legal action inevitably ensue.
7. Contractor Involvement
- Value engineering – I already touched on this topic above, but it can’t be emphasized enough. Get your contractor(s) involved in the design phase. They understand pricing and what impacts it the most. You need their input.
- Constructability issues – A good contractor will be able to spot issues on the plans that are going to create challenging construction situations — which equal expensive construction situations. A common example of this is when a site designer is pinched for space designing a parking lot and needs to utilize retaining walls to make grades work. This is fine, but then they show site lighting, curbing, guide rail, safety fences, and drainage pipes all in an 18” strip between the parking and the top of the wall (which hopefully accounts for the wall batter). This may look fine on a plan, but a contractor knows this will be a nightmare to build. A good site engineer will avoid such situations in the first place, but again, there is no substitute for getting the perspective of the person that will have to build it.
- Construction cost estimates – The point I want to make here is WHEN to get construction estimates for the various portions of your project. Ideally, your contractor will provide you with estimates as the land development design project hits various milestones. There can be the initial rough estimate at concept time, a modestly detailed estimate once some preliminary design and due diligence are completed, as well as a tight estimate once permitting plans are prepared. When major revisions are required during permitting, consult your contractor accordingly to understand cost implications. Obtaining pricing throughout these various stages ensures that your pro forma evolves as more information becomes available. If this is done, then things will be a lot less stressful and time-consuming for both the developer and contractor when it comes time to ink the final contract and get building.
There are many more important items for a developer to consider during the design phase of a project but getting the above steps right will go a long way to making permitting, and ultimately construction, go much more smoothly. Stay tuned for our next blog, where we’ll dive into best practices for project permitting.
The above article is the fifth in our series of “10 Steps to Master in the Land Development Process”. Previous articles are linked below. Subscribe to the Blog to be notified of future articles in the series.
LANDCORE’s staff have been through thousands of projects – reach out to us to leverage our knowledge on your next deal.
To take advantage of LANDCORE’s free consultation click here or reach out to me at email@example.com or call me at 215-836-2510 x1. I look forward to the conversation.