How to estimate residential construction costs

The cost of architecture and its role as a creative boundary for the work. By necessity, this discussion will be an oversimplification-a conceptual approach because architecture is unique, complicated, and specific. Now, we will show you how we use a basic framework to inform the design process for our case-study project. Until this point We’ve only mentioned developing a project budget once, this was right before we began the schematic design phase. We mention how we directly linked the budget for our – in our case a residence – to the overall square footage of the home. We want to spend some time on this because although it’s not discussed in our training as architects in school, it’s part of the reality of making architecture in the real world and it’s one of the most basic and obvious concerns for both architects and clients.

Cost of architecture

When we talk about the cost of architecture we typically break it out into one of two categories: there are soft costs and hard costs. Knowing the difference between the two is essential when accounting for all of your expenses for your residential construction costs. Having adept knowledge of these costs will also make it easy for you to streamline your resources as you’ll know which areas of the construction you should spend more or less on.

Soft costs are indirect costs of construction: Things like design fees, consultant fees for services like structural or civil engineers, lighting designers, energy auditors, and landscape architects, there are also permitting fees, insurance, financing costs, special certification like LEED and oftentimes legal fees.

In short, the soft costs are the professional services you’ll need to pay for as you’re constructing a residential property. The number of professionals you’ll need to hire will depend on the type and size of the residential property you’re planning to construct.

Hard costs, on the other hand, are essentially everything else related to the real cost of construction, the bricks, and mortar that make up the physical building. You can think of the hard costs as the tangible items you’ll have to use when constructing a residential property. The more amenities or features you’d like the residential property to have, the higher your hard costs will be.

The full cost of a project includes both hard and soft costs as well as any land acquisition costs. Soft costs can be defined by soliciting proposals from the agents involved architects will have a standard fee schedule: either a fixed fee calculated as a percentage of the cost of construction, an hourly fee model or some hybrid, some mix between both hourly in the beginning perhaps and then fixed once the scope is determined. Typical full-service design fees will range between five and twenty percent of the construction cost, as a general guideline, smaller projects will fall on the higher end of the percentage range and larger projects on the lower end.

When choosing which professionals to hire, make sure that you scout for at least three options, and compare their services and costs. This step is vital, especially if you don’t have any idea whom to hire or you’re constructing a residential property in a new area. Regardless of how tempting it can be, you should never hire the first contractor you come across.

Hard costs will account for the majority of a building’s cost and the ones the design of the architecture will have a considerable impact on, now, before we even begin a design, we evaluate the client’s hard to cost budget to determine whether it’s reasonable given their desired scope of work.

Usually, the contractors you’ll hire will help out or solely work on the costing of the materials to be used in the construction. Regardless, you should pay careful attention to the costing and work closely with the contractors involved. This will ensure very transparent and accurate budgeting without compromising the quality of the construction. This can also help you build a positive relationship with the contractors, making it easy for you to voice concerns about the construction and make adjustments whenever necessary.

Reduce the construction cost whilst the design process

How to develop an estimated budget

Now, naturally, at the beginning of a project, we know very little about the building so it’s not possible to do a detailed material take-off of the building components; we don’t even know what they are yet. Creating an estimated budget when you don’t have any idea of the costs of the contractor’s services and the materials used can result in stress as you’ll end up redoing the budget. Instead, we start to be developing a detailed accounting of the spaces. This is sort of a wish list, what architects call the program.

From this list, we begin assigning room sizes for each space. Knowing the overall size of the building will help us make sure the size needs correlates with the client’s target budget. But we have to get a little more granular than that if we want a useful budget figure to work with. To do that, we assign a multiple or factor to each space in the program. As you’d expect a living room with tall ceilings will cost more than one without tall ceilings; there are more finishes, more labor, and potentially more engineering, and structural costs. And likewise, a deck or a covered porch area won’t be as costly to construct as a finished interior space with few or no walls, no insulation no heat. By factoring the square footage of program spaces that are different than typical, conditioned interior spaces with an eight-foot-tall flat ceiling, we can more accurately develop an estimated budget for us to use as a decision-making tool.

As an example, let’s take a living room that’s twenty feet by twenty feet or four-hundred square feet. Our baseline space is a flat eight-foot-tall ceiling. Spaces like these receive a factor of exactly one. So, the factored square footage and the actual square footage are equal. No, this is the case for most of the spaces in our case-study residential project. Let’s say one of our proposals included a vaulted ceiling in the living room. For this square footage, we’ll apply a factor of one point five which effectively increases the factored square footage total for this space. For the living room example, rather than four hundred square feet, the vaulted ceiling would total six hundred square feet in our programming worksheet. We get that by taking four hundred and multiplying it by a factor of one point five. The spaces that we factor in the programming worksheet are as follows: first, garages, decks, and terraces are all factored at point live, screened porches or covered porches are factored at point-seven-five, and then there are any spaces with ceilings higher than the standard eight-feet are all factored at one-point-five.

How to estimate construction cost

Now, you’re probably wondering, why don’t we factor every space differently? After all hallway space and kitchen space, they aren’t truly equal in terms of cost to construct but under this model, they’re treated as such. And while its free kitchen space might be five-hundred dollars per square foot and the hallway space perhaps one hundred dollars per square foot there’s a whole lot less kitchen space than there is hallway space. It doesn’t make sense to do this kind of detailed tweaking because it presumes a level of precision that this kind of early estimate inherently lacks. In general, with this method, these inconsistencies will average out assuming you take care to apply the factors we mentioned.

Now, Why does all this matter? Well, this is the key, remember the budget estimate early on we linked directly to square footage. Once we total all the square footage for the project we multiply that total by the cost to construct per square foot. Now, this number is always a range and this is for two reasons: first because before you even have a design; a range is a realistic means of portraying the variability of the potential costs involved. Second, no two contractors will look at the design, the drawings, and the specifications the same way, even when given the exact same information. Equally, building techniques vary from contractor to contractor as do subcontracts and labor rates.

Now, imagine for a moment that the client hires the most meticulous local contractor to build their home. If you assumed and designed the size of the home around the three hundred dollars per square foot benchmark, sizing it to meet their budget during the schematic design phase- if the chosen contractor is used to constructing things at six hundred dollars per square foot the building is now one hundred percent over the client’s budget. It’s important to have this discussion early on to correlate quality expectations. Now, if we assume that the average local custom building cost here is between three and four hundred dollars per square foot and then apply it to the factored building square footage we’ll have an estimated budget range to work with.

Now hopefully you can fully appreciate the value of our factoring exercise. Whit this model, the cost to construct the living space with an eight-foot ceiling would be one hundred and twenty thousand dollars at three hundred dollars per square foot, and to construct the vaulted space the cost would increase by sixty-thousand dollars.

Now, will space actually cost sixty-thousand dollars more to construct? Perhaps not but it’s definitely going to cost more and it’s not unreasonable to assume quite a bit more. Really this is meant to provide a starting point to work from and can be fine-tuned based on your own project experience. As you build more or collaborate with other builders who might have a deeper backlog of cost estimates, you can dial in these spreadsheet factors. No matter how accurate you think an estimated cost projection is, there will always be some things you leave out. Some things you missed. Material or systems not accounted for, price increases, labor shortages, unforeseen subsurface conditions. we recently had a project where the shingle cost was increased by twenty percent due to a new tariff placed on important wood products from Canada. Literally overnight, material acquisition costs for the shell package wood products from Canada. Literally overnight, material acquisition costs for the shell package increased by twenty percent.

To cover these unforeseeable circumstances, always add a contingency to your estimates. A contingency is like a slush fund, a percentage of the contingency to your estimates. A contingency is like a slush fund, a percentage of the overall budget reserved for unknowns. It starts out in the early phases of design as a rather high fifteen percent; there’s more at this point that we don’t know that we do know. Then we reduce it as we define more and more aspects of the structure from ten percent down to five percent. The more we know about the building, the more accurate our estimates can be and the less need we have for contingency. As the building progresses in construction we can begin to release some of the contingency funds back to the owner’s control – hopefully unspent. All this information helps both the architect and the client to guide the scope decision. Before the design concept is established and before you start drawing lines, use the total budget to determine the overall building size the client’s budget will support. Doing this ensures the client isn’t surprised by the reality of construction costs – that sticker shock – and equally that the architect isn’t spending their fee designing something that the client ultimately can’t afford.

In the early stages of design, it’s nothing more than a best guess and it’s good practice to involve a contractor as a partner sooner rather than later to help evaluate costs. For larger projects, this process will likely involve a cost estimating consultant and it’s much more involved. But the concept is very similar. So how does all this relate to design? Well, the cost is an important creative boundary. Without cost limitations, anything is possible. When you begin to constrain the projects in various ways, new design opportunities will present themselves. Look for economies of scale, use humble, inexpensive materials, simplify design moves, do more with less, and design spaces that can serve multiple functions, the question is just how much space you actually need to accomplish a certain task. When you realize that every square foot costs between three and four hundred dollars it holds you accountable for each one in a much less abstract way. It’s why we regard building your own dwelling, at least for an architect, as an essential part of professional education. It forces you to experience the real costs and financial stakes involved in building.

Perhaps most importantly, every added square foot is another one you’ll have to heat, cool, light, maintain, and clean for many years to come. Buildings use an incredible amount of energy and here in the USA, our homes are substantially larger than our European counterparts. Be ruthless about what you really need and what you can live without. Be responsible, by consuming fewer resources your self-less act gives to generations that follow us.
Once we bring in a builder and begin defining more of the building details, the square footage estimate can be jettisoned and replaced by the builder’s estimate which will be refined at the major waypoints to ensure we’re proceeding according to the budget. During the early design, phases to be serious about controlling costs will most often reduce square footage. This will be the easiest and best opportunity you have to do so when the foundation has been poured and hammers are flying the amount of impact you can have on building cost is severely limited. Don’t think you can save money by simply changing materials at this stage, the bulk of your costs are tied up in square footage. This is the power law of economics related to architectural design. As we translate our sketch plans into working floor plans, invariably the size changes.

Returning to our project, our client chose two of the schematic plan schemes to hybridize and We developed a few plan options for each, to make things realistic, We translated the sketches into CAD linework which always has a sobering effect. Sketches are forgiving, they are easy to fake. But laying things out in CAD is different, you’re working with real sizes and alignments and wall thicknesses. Having roughed it out we massaged a few functional, if not rather primitive, floor plan options for the client to review. Now, as part of this process, thinks got longer. We spread it out on the site a little bit, bedrooms increased in size, hallways lengthened, and, when we revisited the square footage take-off, the footprint – and consequently the building cost – had increased significantly. So, again we retooled, and revised, made things smaller, pushing and lulling to align the two. In the end, there was an overall expansion of the programmed square footage. But, I’m happy to say that this was a client-driven decision, spaces were increased to accommodate certain wishes and desires and this too is the benefit of the programming and budget exercise. It allows the client to be in control of where and how they spend their project dollars.

Be noted that there is specific software for each category of residential buildings, like multifamily buildings, gyms,  … and even churches that have powerful accounting software.

It’s fine with us if they want to spend more or less, We are here to provide the information which allows them to make the most informed decision possible. Having a baseline tied to a budget keeps two in check. It’s always a good idea to revisit the square footage and cost estimates at different points in the design process, in the same back and forth manner as we do with the other aspects of our design.