Very high-end residential - structural design fees are challenging/confusing me 8

[DETstru]

For the last 3-4 years I've been taking on very high-end residential structural design and I like the projects for the most part. Decent sized jobs so there's less admin work to do, relatively low-stress structures, and the fees can be good. It probably makes up 15% of my revenue (I'm a 1-person shop and do my own drafting).

But I feel like it's a crapshoot when it comes to fees. Especially recently. Some clients expect you to charge the same per SF as a relatively simple home, and others understand that high complexity increases the cost per SF.

I'm defining very high-end residential as having roughly these qualities:
[ul]
[li]Construction cost >$1M[/li]
[li]Market value when complete >$3M[/li]
[li]Size >5,000 SF[/li]
[li]High-end features like tall ceilings (12 ft+), canopies, roof steps, mix of flat/pitched roofs, large architectural feature walls, high-end finishes, etc.[/li]
[/ul]

I found this thread from last year and most of the comments are in line with what I like to charge. Something like $1.4-$1.5/SF for a moderate level of complexity.

https://www.eng-tips.com/viewthread.cfm?qid=495787

I've gone down to close to $1/SF if the complexity is relatively low, and a few times I've been closer to $2/SF for 2-story or a basement or lots of canopies and/or odd features.

Most recently I did a design for a single-story 7000 SF home with a lot of complex architectural features (mix of clay tile and low-slope membrane roofs, 8 different roof heights, ceiling height up to 16 feet, parapet height up to 23 feet, 6 different attached canopies, 3 sliding panel exterior doors that were up to 45 feet long each, 2 exterior semi-freestanding "feature walls", and some site retaining walls). My fee of $13k was accepted and honestly I think it was low after the effort I spent on those canopies. I had 2 full 30x42 sheets dedicated to the plans and details just for the canopies. There was so much steel to design for them and in the feature walls. Not to mention all the hoops I went through to justify the diaphragm steps to the AHJ.

I'm bidding on another job that is of similar design features but 9000 SF and has a walk-out basement due to it being on a very steep hillside. The client wants to work with me but they have a proposal for just under $1/SF! I can't imagine it's profitable at that fee. Maybe someone is trying to buy the job, who knows. I went in at about $1.5/SF and that was only because I learned of the low bid.

Anyway my real question in all this is: what do you currently charge for this kind of work? I'd like a reality check on what I'm charging with the goal of expanding my business in this market.
I've only gotten maybe a quarter of these that I've bid on. Maybe my fees are too high, maybe I work too slow. I don't know.

 

[milkshakelake]

I'll share my fees with the caveat that I'm in a different market (4+ story residential, which tend to be rectangular boxes). Your fees are outrageous, in a good way. It's good that you can collect it. I'm around $1/SF for complicated stuff and $0.80/SF for easy stuff, but have a minimum of $8000 for any project, regardless of how small or simple it is. It's because there's a significant amount of backend work that goes into every project, like layouts and filing. When it gets to VERY complicated stuff, like things with crazy roofs full of moment frames, I'll add another 40% or so.

I'm thinking that if you can't be profitable at the amounts you're quoting, you might be paying yourself too much. You might want to hire a drafter and offload a bunch of backend stuff. You afford yourself two advantages: you can be more profitable, and you can afford to go lower with your prices if you need to (it might be a good idea if you're only securing 25% of your bids). Or find ways to do the work faster. I'm a huge proponent of finding a time saver in every single project. After a bunch of projects, it adds up. Right now, I'm tired of sizing joists on each project, so I'm going to make a table with every possible situation we run across. It'll take a day or two, but it'll save time in the long run. Regular joist span tables simply don't work for me (dead loads are off, or the calculations don't pan out with the way I do them) so it's the only way for me.

 

[DETstru]

Thanks for the info milkshakelake.

I come in pretty similar to you on multifamily residential. I usually get $0.6-$0.9/SF for 3-5 story wood apartment buildings. I also have that type of work pretty dialed (both in calcs and drafting) so my effective hourly rate ends up really good. I do win those jobs at a much higher rate and have more solid relationships with clients.

Maybe it's just that very high-end homes have so many unique features and/or I still haven't done enough of them to be efficient. The design work isn't that hard, but they are very drafting intensive. I can see if someone had a good drafter on staff or via contract, they could cut the fee quite a bit.

I've thought about finding a drafter but never thought I had enough revenue to justify it. Not sure I will unless I start winning these projects at a much higher rate. Luckily I make enough from other sectors that I don't necessarily need to. Lots to ponder.

 

[dik]

Then you politely explain that you do not think that you can do it properly for that price, and pass on the project.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[XR250]

I do them by the hour but they are running $2-$4 per square foot.

 

[phamENG]

I'm in XR's range. XR and I are in slightly overlapping regions (there's at least on regional firm with offices in both our cities), so that makes sense. My going rate is about $2.50/sf. Though I just wrapped one up that hit $6.80/sf...but that was a pretty special house.

Current high end residential is building at $350-$400/sf in my area. Using 'standard' engineering pricing based on estimated construction costs is 12%-17% of total design fee, design fee of about 6% of total construction.

$350*.12*.06= $2.52/sf
$400*.17*.06= $4.08/sf

So that range is $2.52-$4.08. I'm at the low end because I'm also fighting those who will do them for less than a buck a foot, but I'm also not willing to stoop to their price point. When people say I'm nuts and people will do it cheaper, I tell them that I don't want to be the cheapest guy in town. I want to be paid a fair rate and bring the best value for that money to my clients than anyone else. If they don't want that, they can go with the cheap guy. I have a backlog several months long, so I'm not planning to change that method anytime soon.

 

[DETstru]

XR and pham,

If I could get $2+/SF, I'd be in fantastic shape. Very encouraging to hear that you are getting that consistently. When I get even close to $2/SF is when I feel like my time was worth it and I'm able to produce the quality that is deserved on this type of work.

I do enjoy doing these projects and they're a nice change of place from more traditional residential and apartment buildings. But it has to be worth it financially.

For some extra context, the architect's fee was $60k on that most recent job I described (where my fee was $13k). I don't want to share any renderings that I don't own but it was similar to this house if you added a few cable-supported canopies and a bunch of eyebrows.

 

[dik]

Unless you really need the work, charge what you think is a fair price to do a good job...

I don't do residential very often, only for close people I know.

I design steel generally... mostly connections (and wierd ones too sometimes)... mostly only a few hours each... just finished my 936th project over 3 years... I'm happy with the work... there's a lot of variety; I get bored easily. My employer pays me well... I haven't had a raise in 3 years... I haven't asked for one... I'm comfortable and enjoying my old age work... 76 years old and playing engineer for nearly 55 years...

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[AaronMcD]

I don't know what $/sq ft has to do with anything at all. Residential can vary a ton per square foot but I've never seen anything priced by floor area.

Picking 5 major projects from the past few years including new, renovations, and additions, the fees vary from $14 - $70 per square foot, plus hourly CA which often ends up being more than the design phase. $2 per square foot would not be anywhere near very high end.

I should add that there is no way in hell a drafter would help at all. The drafting gets revised and revised so many times, and often is part of the design process itself. There are very few typical details.

There was one project that took several engineers a few years to design. Single family residence, paid by the hour.

 

[Aesur]

I tend to price at a min $1.50/sq-ft and honestly struggle to make much profit on those with the amount of hours engineering and drafting put in to get the detailing "perfect" (demand of the clients), but that is the going rate of the one man shops around whom we compete with. I have tried pricing at $2.0/sq-ft and was told it was too high compared to our competitors. I know some competitors are pricing between $1.00 and $1.25 and just cover costs but use as training due to complexity. Another major factor is some of the high end architects require significantly more detailing, on average I would have 40 foundation details and 70 framing, but have been as high as 150 framing details on some of these high end houses. I like working on them because it's something different than the more profitable, repetitive, commercial buildings and they are great for keeping me on my toes for how to frame complex structures.

As a comparison, the price per sq-ft of many of these custom residences I have seen over the past 2 years are $450 to $800/sq-ft including finishes. In our area, $250 to $300/sq-ft would get you a tract home recently. I know the architect are getting MUCH larger fees for these houses and they can get that due to lack of architects who specialize in those high end homes, whereas structural tends to have significantly more competition.

Sounds like I need to move into @phamENG's region!

 

[IceNine]

Meanwhile, the buyers and sellers agents are getting $15/sf each on these $500/sf homes....Awesome.

 

[Aesur]

Meanwhile, the buyers and sellers agents are getting $15/sf each on these $500/sf homes....Awesome.

Yep - just goes to show that when it comes to finances, most engineers are stupid.

 

[bones206]

Well didn’t the national real estate agent association just get fined for collusion or something? I think this thread shows we engineers are terrible at collusion ;-)

 

[lexpatrie]

It's a misconception that winning 100% of the work you bid is a good thing.

If these projects just wander in, or it's more of a referral item where you aren't explicitly bidding against a competitive market, it's not that you should charge whatever you can get, you want your fees to be reasonable, but when you fixed price something and it goes wildly haywire, you're still on the hook. If you are bidding these or sending proposals 25% is probably good, and as a fellow sole proprietor, just how many of these style of projects can you accommodate a year? Further, I'm guessing your work is in a high seismic region with those property values. There's also risk that isn't being discussed, somebody with the means to afford a $3,000,000 house has the means to "finance" a dispute almost indefinitely, regardless of how frivolous. Its not my thing.

I don't do a lot of design work, and what I do take on is generally something nobody else can find another structural engineer to work on. Nothing all that remarkable, but stuff nobody else wants due to size or history.

 

[Aesur]

I think this thread shows we engineers are terrible at collusion

Damn our ethics!

I did read about that though, I forget how much a few of the larger lenders got fined, but it was probably pennies based on what they made. I also read a few of the smarter ones settled early thereby setting groundwork for case but costing them significantly less.

 

[kissymoose]

$10,000 / $1,000,000 = 1%.
Anyone pushing back on a fee to save less than 1/2% of the project cost isn't someone I am interested in doing business with.

 

[milkshakelake]

The real estate market is dirty and corrupt. For example, MLS (multiple listing system) in the US is made to lock out the best deals to anyone who isn't a realtor, discourages people selling their own property without an agent, and has heavy penalties for giving anyone else access to it. A realtor told me that he hates using such an anti-consumerist thing, but has no choice. Making MLS exclusive is how they squeeze like 2.5% on every deal and inflate property values. It's also hard to find a trustworthy realtor; they'll lie or omit things to make a sale. I tried to get into real estate (my thinking was that it's a great advantage being a licensed structural engineer) and ran into all this. I figured that I couldn't be honest/ethical and still make a killing being a real estate agent. Structural engineering isn't without faults and corruption, but it's at least slightly more honorable.

Anyway, back to the discussion at hand. I think if you're winning 25% of bids, you're leaving a lot of money on the table. Especially if it's a repeating client. There's a balance to be struck between sticking to your guns and finding the right client versus compromising a bit and taking it on the chin once in a while. My particular balance of those things results in about 50% of my bids working out. I found that most engineers in my area don't take the time to talk to the client about specifics of their structure when bidding, and discussing those things beforehand increases trust over the competition and lets me bid higher.

I agree with kissymoose to an extent; if someone is looking for a race to the bottom, I'm out. They can go hire that guy that I know has a record of screwing things up. But if the negotiation is $1,000 or so (which might be like 0.1% of the project), I'll negotiate sometimes, based on how comfortable I am with them. For a lot of people, I know they're just taking a shot in the dark to save a few bucks, so I won't negotiate and I'll still win the bid.

 

[jerseyshore]

Earlier this summer I did my first brand new house (with drafting) as a 1 person shop for a new architect. It was almost 9000 sq/ft and I charged $9100. Basement walls were superior walls and floors were trusses. Big house, but not really anything complicated and no foundation, just shops. I saw an opportunity to get an actual real client so didn't want to miss out on the chance even if it was lower than I normally charge. Plus I wanted to set up a process and system to expedite things moving forward. I don't think you could get more than $11k or $12k for that house anyway. Unless it's very complicated, $1-$1.50 is common around here for single family houses with drafting.

Architects are so busy in my area that everyone is trying to outsource the full structural for houses these days. Because it sucks. And I don't want to do it either. I want to design a pile plan for $2k-$3k that takes me one night and leave the rest of the framing to the arch. Unless I really need the work or am trying to gain a new good client, I usually charge extra for a full house because of the time-sink. Or tell them I'm too busy to do drafting but I can mark it up for them to draft and save a third of the price.

 

[SE2607]

I, too, enjoy high end custom homes, but it's difficult to make money on them. They are usually the farthest thing from a "box". Framing is complicated, lateral loads are complicated and detailing, the essence of wood design, is incredible. I've been designing wood structures for a long time and I can't believe I haven't created every wood detail known to mankind. I have a fairly efficient retrieval system and, yet, I still spend an inordinate amount of time detailing. For me, even $2/SF is not enough. I believe most of my competitors don't keep a time card. They are fun to do. These days, I have to treat it as a hobby.

 

[8thStreet]

Great Thread!

We do about 50% high end residential and the build price is about $500/sf to $1000/sf.

We will price our fee on $/sf basis and also typical around 0.5% to 1% of construction cost. We then round up or down based on complexity and work history with the architect. Do they want a million details? Do they throw us last minute curve balls?

This last year we averaged about $3.50 / sf across all our residential projects, and we have 40% acceptance rate on our proposals.

Its hard to make money on high end residential because everything is highly custom and you have to draw tons of details. We have to be diligent about asking for add services if there is significant scope creep or design changes. We have been working on building relationship with architects and and raising our fees.