A commercial building project is a significant capital expense—one of the largest investments an individual or an organization can make. To achieve a high-quality project while protecting your budget, you need a team of experienced professionals in your corner.
At Neumann Monson, we have guided many commercial clients through the pre-design and construction process, giving us a thorough understanding of each team member and their role. We also recently sat down with GLD Commercial, a commercial real estate firm in Cedar Rapids, Iowa, to better understand the development process from a real estate perspective.
During our conversation, GLD Commercial emphasized the role real estate brokers play and their interactions with other team members. This article will delve further into our conversation and outline six key players you should consult at the onset of a commercial project, including:
- Real estate broker
- Architect
- Civil engineer
- General contractor
- Lender
- Lawyer
After reading, you will better understand the role of each team member and the qualities to look for when hiring.
Team Members for a Commercial Building Project
1. Real Estate Broker
For many, hiring a real estate broker is the first step of a building project. While some may consult an architect first, meeting with a broker is a solid decision for anyone needing additional guidance at a project’s start. Typically, the initial discussion will include topics like the use and nature of the business, size and location preferences, and budget considerations.
Brokers are licensed professionals who act as intermediaries between buyers and sellers. Knowledgeable about the local real estate market and its regulations, they help clients through buying or selling a property.
For new construction projects, brokers may work with speculative developers, build-to-suit clients, or owner-operators. While speculative developments refer to properties with no specific end-user, built-to-suit properties are designed to fit a particular tenant’s needs. Owner-operator projects refer to developments where the end-user is also the owner.
On any project type, brokers can advise clients throughout the process of identifying the best available properties. Brokers wear a lot of hats, and their expertise can help you determine your project’s viability.
In addition to helping you find and evaluate properties, they can estimate your project’s budget, what you will pay to acquire a property, and help develop an initial pro forma to share with the rest of your team. With this information, you can get a sense of what you will need to charge for rent to make a return on your investment.
What to Look for in a Real Estate Broker
A broker should guide you in the earliest stages of your project and help you assess its financial feasibility. Finding a trusted partner is the most important component of this relationship.
You should look for someone experienced in your project type who understands the local market. A solid broker will assess market realities, evaluate the competition, and explain what tenants expect from building owners in your area, such as the level of fit out necessary to attract the right client.
Your broker should factor these expectations into your pro forma to help you evaluate the potential for a return on investment.
2. Architect and Civil Engineer
Consulting an architect or civil engineer is crucial when evaluating different properties. Although a broker can help you narrow your options, you will need design expertise to determine which property is most viable.
A design perspective can also help you see a property’s potential. Although a property may present challenges, assessing its design possibilities can lead to a more exciting outcome than initially expected.
An architect can assist with site selection, helping you narrow your options.
Another way an architect can assist in a project’s early stage is by developing a program—a list of spaces and their sizing requirements. This information will give you a sense of the building’s overall size, narrowing your site options.
A civil engineer, on the other hand, will study the site’s topographic features, its drainage patterns, and plan infrastructure. Together, the architect and civil engineer can perform high-level test fits, accounting for parking requirements, easements, and other considerations.
Both perspectives are necessary to plan your building site. While the architect will focus on the building, the civil engineer will ensure the site can accommodate your plans.
What to Look for in an Architect and Civil Engineer
Generally, clients hire an architect and civil engineer simultaneously. When interviewing teams, look for trusted professionals who understand your project type.
We recommend asking for portfolios of their work to learn about the type and size of projects they undertake. While some architects specialize in specific project types, others take a generalist approach and collaborate with consultants. Both approaches can be successful, with collaboration leading to new and unique outcomes through a cross-pollination of ideas.
Communication and project management skills are equally important. When interviewing design teams, ask how they will manage the project, work with contractors, and collaborate with consultants. Additionally, you should ask about their experience managing budgets and their change order rate.
To learn more, read about the questions to ask when hiring an architect.
3. General Contractor
When and how you hire a contractor depends on your organization and funding. Public organizations, like schools, are limited to project delivery methods specified in state law and may be unable to hire a contractor directly. Instead, they will go through a public qualifications process or a traditional bidding process after the architect completes contract documents.
On a private, commercial project, it makes sense to involve a contractor earlier in the design process. After the architect develops a conceptual design, the contractor can begin pricing exercises, giving you a more accurate understanding of what you will pay.
Brokers may participate in pricing exercises to ensure the project aligns with market realities and your pro forma. Depending on the contractor’s estimate, your architect may need to adjust the project’s scope to bring down the cost. A collaborative relationship between the architect, contractor, and broker tends to lead to the best financial outcomes.
What to Look for in a General Contractor
While some owners may have an existing relationship with a contractor, others may need additional assistance when hiring. Your architect and broker can provide recommendations and help with interviews. Ideally, your team will understand local labor availability and the reputations of area professionals.
An architect or broker can provide recommendations for local contractors.
Like your broker and architect, your general contractor should have experience with your project type and size. They should also be able to prioritize and complete your project within your schedule.
To find a trusted professional, we recommend asking contractors for references from past clients. This information will give you a better sense of the contractor’s commitment to client experience and their ability to maintain schedules and complete close-out duties.
Learn more by reading about hiring a contractor on a privately funded project.
4. Lender and Lawyer
After a contractor provides cost estimates, funding comes into play. Although most clients start formal discussions with lenders after they know their project cost, this relationship should start earlier.
Ideally, you will understand your financing before meeting with a broker or architect. Talking with lenders—even if they are not the ones to fund the project—will help you understand if you can get financing.
Lawyers should get involved earlier in your project to help advise on corporate governance and tax considerations. Discussions can involve different ways to structure the building’s ownership or tenancy and how to best utilize current tax laws. Your lawyer can also help with reviewing and negotiating contracts.
Later, they can advise on construction-related legal issues and help you navigate construction insurance. Building projects present risk, making a lawyer’s perspective vital.
Prepare for the Design and Construction Process
Whether you are a developer or owner-operator, it’s important to form the right team at the start of your building project. Most private, commercial projects involve a broker, architect, civil engineer, general contractor, lender, and lawyer. Each professional brings a different skill set to help you determine your project’s viability and its potential for a return on investment.
Finding a site and determining a project’s viability takes time. Depending on the project’s scope, it can take three to six months to get team members on board, study sites, and develop your pro forma.
Design work will likely take several months as well. After establishing a program and finding a site, your architect will develop a high-level concept for the contractor to price. The design will gradually become more detailed, leading to a complete set of contract documents.
Most projects involve seven steps: pre-design, schematic design, design development, contract documents, bidding, construction, and post-occupancy. To prepare for your project, read our overview of the architectural process.