Site Selection is Critical in Controlling Construction Cost

Aggressive control and containment of construction costs involves much effort, and many aspects start long before the first spade of dirt is turned or first nail hammered. By identifying constructability and program adaptation challenges represented by each possible location being considered, the impact of these adverse elements can become part of the financial and schedule considerations for final selection.

Selecting a suitable site for a new location involves satisfying many objectives. A new location must target the appropriate geographic market, meet defined demographic and sociographic requirements, and of course conform to requisite financial parameters. But adaptability of a new location to your program and identification of constructability challenges should also enter into the equation. These issues can significantly affect development budgets and timelines to opening.

In new ground up locations things such as soil stability conditions and contamination, availability of appropriate utility services of adequate size, necessary grade modifications, local jurisdictional overlay requirements and others can all add significant site specific cost to a project that probably were not anticipated in conceptual or proforma budgets. Surprising to some these physical circumstances can vary greatly from one site to another even in very close proximity. Of two potential sites very nearby one another and roughly equal on market and financial terms, one could suffer several physical adverse conditions while the other does not. Addressing these types of issues can add thousands of dollars to construction cost, and weeks or months to schedule.

When converting an existing building to a new program, adverse constructability issues can also be numerous. When considering an existing structure for retrofit and renovation diligent detailed inspections of the building with specific consideration to adaptability of the program is a must. Some pit-falls affect almost any user - environmental contamination, structural deficiencies or deterioration, etc.  Many times, if identified during lease negotiations, these types of issues can be pushed back to the landlord for correction. However many issues that may relate specifically to the tenants new-to-be improvements must be part of the project construction cost. Base building systems to be used in the new improvements must be prequalified as sufficient and adaptive.

Central plant capacities, available voltage/phase/amperages for power needs, appropriate domestic, fire and sewer water services, and floor load capacities are just a few examples of high cost-risk exposure. If assumptions are made at lease decision that these systems are adequate for the new use, and then prove to be inadequate, the upgrades to these systems can be extremely costly and time consuming.

Certainly there are times that the specific location, financial terms or other criteria make a site "the" choice despite the existence of some of these issues, but it is imperative to identify these at the onset of a sites consideration. In this way, these project elements are known, accepted and can become part of landlord negotiations or incorporated into the forecast development cost and schedule on which the projects viability is based.

Challenges occur in all development projects, the key is to identify them as early as possible so solutions are anticipated and planned proactively, not reactively.

David Cochrane
Principal
DLDT Associates, LLC