Why your feasibility study process is broken

We all know feasibility studies are crucial to properly evaluate a site before purchase. 

But why are they so darn slow?

feasibility studies real estate broken

The traditional method of conducting a feasibility study in multifamily real estate is broken. It’s painful for the real estate developer. The architect. The GC. The investors. The land seller. No one’s making money on it. Yet. 

And guess what? As more firms turn to rapid design iteration tools like TestFit, the final wheel of the traditional feasibility study wagon is going to come off – securing that site before the competition does

In this article, we’re going to pinpoint the major problems (without pulling any punches) of why the traditional feasibility study process sucks for all stakeholders. Then we’ll show how much speedier and – downright fun! –  the process can be with instant design iteration. 

Problem #1 - It’s a big ecosystem

As you can see from the illustration of the average multifamily deal above, every feasibility study involves a lot of consultation. Not just on the first design iteration, but on all the iterations that come back when the developer doesn’t like the yield-on-cost. Or the Land Owner wants way more for your chosen site. Or the engineer says your design just can’t be built like that. Or the city has a new vision for your favorite site.

Each one of these little “back and forth arrows” above represents anywhere from 1-4 weeks, depending on how many stakeholders are involved in the redo. You can see how this can quickly compound.

X design changes at Y phase requiring Z stakeholders = months or YEARS

Problem #2 - The architectural bottleneck of feasibility

We’re going to call a spade a spade. The single area that slows down this process the most is the poor architect who is trying, with AutoCAD, or Revit, or Rhino, to piece together a new design iteration that encompasses everyone’s feedback, from the developer’s Excel model to the city’s variance. This process can take 1-2 weeks. Every. Single. Time.

The puzzle that is multifamily takes a long time to solve.

And traditional BIM / CAD software tools do NOT make the splicing of different unit plans together any easier.

Problem #3 - Everyone needs to make money

That architect working his or her tail off is probably not charging for the feasibility stage. If they are, they probably aren’t covering costs. It’s typically viewed as an opportunity cost to win the project. 

Depending on the size of the GC, the closeness of their relationship with the developer, and /or size of development shop, they may or may not be charging for the work. But most of all, everyone in this process is wasting time. Time that could be spent on billable work. Time that could be spent evaluating designs that the developer knows will pencil financially.

What DO we need?

In short, feasibility studies need:

Better design options

Earlier

Faster

With the ability to quickly make changes

Multifamily Feasibility Studies 2.0

Imagine instead, if the feasibility stage on your next multifamily project went like this:

  1. The real estate developer is on the hunt for a new site (always!).
  2. Their broker finds 2-10 sites that seem suitable to the developer’s requirements.
  3. Developer decides to investigate two sites based on their market understanding. 
  4. Architecture firm is briefed, and does their due diligence on zoning, setbacks, easements and other constraints.
  5. The architect comes up with some starting concepts in TestFit in minutes based on the briefing where they can immediately see financial metrics like net rentable, FAR etc.

6.  The architect does a real-time-deal prototyping session with the developer (and maybe even the city and/or other key stakeholders early on to make sure on the right track) where they instantly run through design iterations to come up with 1-2 solutions that pencil financially. Or the deal is killed right away and we’ve mitigated wasted time from the get-go. 

7.  The real estate developer runs market studies while GCs and engineering teams confirm design feasibility and estimate cost. *We are hoping to use 3rd party integrations to improve costing accuracy in TestFit, like this hackathon prototype with Join.build.

8.  The architect makes any changes as appropriate rapidly in Testfit, then works up more detailed designs by exporting the TestFit building(s) to Revit / SketchUp etc. * Alternatively, the developer may be doing these test fits in-house, and at this phase, bring in the architect to work up concepts they know will pencil. Still less time wasted for the architect on deals that won’t pencil.*

9. Create fundamental presentation materials like renderings and excel models.

10. Presentation to key investors, as well as stakeholders such as the city, land owners etc.

11. Proceed with purchase of land OR make design changes rapidly OR kill the deal. 

12. Pass the design and model on to the architect for schematic design.

The results

Each design iteration takes minutes to change instead of hours. The key financial metrics like net rentable, Yield on Cost, FAR, etc. are instantly visible within TestFit so the developer will know if the deal pencils or not and doesn’t waste the time of any consultants with sites that don’t pencil.

Everyone spends less time on deals that won’t lead to $$$$$$$$$$ down the line. And less time on those that will, as well. What will you do with YOUR time saved?

Seeing is believing

New to the concept of feasibility studies? Here are some good resources for Real Estate Developers, Architects, and  General Contractors starting out. If you’re new to test fitting, both in concept & practice, check out our Crash Course in Test Fitting.

Want to know more about our thoughts on the concept of broken feasibility studies? Check out this excerpt (until about 20 minutes) of our CEO Clifton Harness being interviewed on BIM After Dark by The Revit Kid.

5 TestFit & Revit workflows to maximize your design process via Dynamo

TestFit to Revit using Dynamo

You want to be able to create powerful geometry and data in TestFit, but also be able to pass that information into Revit and AutoCAD for more detailed design and documentation. We’ve already created a process to export to AutoCAD and we’re happy to share we’ve created some new, more robust workflows to get your data and buildings from TestFit to Revit and vice versa.

 

At the moment, we believe that Dynamo is the best way for TestFit users to pass data back and forth. Although there are easier ways to do this (we’re looking at creating a Revit Add-in in the future), Dynamo allows you to customize the geometry and data you want to manipulate in Revit. We’re breaking down the 5 scripts below or you can skip ahead to download the scripts.

1. TestFit Building to Revit

Let’s say you’ve created a fantastic building in TestFit and TestFit has created all the data you need to know to turn this deal into a building. No one wants to rebuild or redraw a building they have in one software into another. With this script you can choose the Revit families you want to describe your walls, floors, roofs, etc. and create the building from the TestFit .RSD file. 

Figure 1.0 : Easily assign family types to TestFit geometry to create your building in Revit.

2. Revit to TestFit Kit of Parts (KOP)

 

Your firm has a library of typical apartment units you pull from for every project. To make it easy, we’ve created this workflow to allow you to bring those units and their descriptions into TestFit as a Kit of Parts (KOP). Select the walls and input the unit type and it will save it as a .KOP file so it can always be accessed in the TestFit unit editor. 

Fig 2.0 - Convert typical Revit units into a Kit of Parts in TestFit.

3. Revit Interior Fitout with TestFit Building and Revit Typical Units

After bringing your building into Revit you can fit out the interior of the apartment units with this script. By creating model groups of the typical apartments, this script will take those units, associate them to the unit types in TestFit and place them accordingly into the Revit building. From there, if you’d like to make an edit to any of the unit types, all you have to do is edit the main model group and your changes will occur in the rest of the units.

Figure 3.0 The Dynamo script places and rotates all typical unit model groups within your building in Revit.
Fig 4.0 - Enlarged view showing apartment units fit out with model groups in Revit.

4. TestFit Property Line to Revit Model Lines

Just select the .RSD file that contains a property line in TestFit and this script will bring the geometry into Revit as model lines.

Property lines from TestFit to Revit
Figure 5.0: Transfer property lines from TestFit to Revit.

5. Revit Model Lines to TestFit Property Line

This script allows you to do the opposite; bring Revit model lines into TestFit as property lines. Simply select the model lines in Revit and location of the .RSD file to save it.

Figure 6.0: Transfer Revit model lines to TestFit Property Lines.

Dynamo Setup

Step 1: Download the TestFit Dynamo scripts package by filling out this form:

Step 2: Download the amazing packages that our scripts are powered by. To do this open Dynamo, go to Packages>Search Packages, and download them there:

a. Clockwork

b. Archilab

c. Spring nodes

d. JsonData

e. Data-Shapes

f. TestFit Dynamo

Please note: These scripts are based on Dynamo 2.6 however should work with any Dynamo version above 2.0. They have not been tested against versions lower than Dynamo 2.0.

Dynamo Player

Most of the TestFit Dynamo scripts can be run directly out of Dynamo Player. Just point your Dynamo Player Directory to the location you placed the scripts and press the play button for the script you want to run. If you want to see what is happening in the background, you can click on the pencil icon next to the play button.

Pro tip: placing the script folder on a network drive is a great way for more employees to be able to easily access them and make sure all of you are working off the same version of them.

Figure 7.0 Dynamo Player

Our user interfaces are powered by the Data-Shapes package, which allows us to make simple user interfaces for you to work with. This prevents what we call “Spaghetti Shock”, the feeling when you open a large and complicated Dynamo or Grasshopper script and feel utterly worthless. When you press play in Dynamo Player, one of these UIs should pop up. Input the necessary parameters and run the script!

Dynamo Spaghetti Shock
Figure 8.0 Sample Data-Shapes package user interface.

Example TestFit Dynamo script

We’ll use the TestFit Building to Revit script as an example. If you’ve followed the above steps correctly, your Dynamo Player should look like the images above. Click the play button for the TestFit Building to Revit Script and a UI will appear. The dropdown box titles will vary depending on the families in your Revit project. 

Select the filepath of the TestFit .RSD file you want to bring into Revit and select the family types you would like for each TestFit geometry. Click import and you are done! Depending on the complexity of the building, it could take somewhere between 10 seconds and 5 minutes. You should be able to see progress bars in the bottom left of the Revit window.

Make Revit go brr

With these scripts we hope that we empower you to better utilize the geometry and data you create in TestFit in other stages of the design process. If you have any feedback on the scripts, suggestions on other ways to improve TestFit, or just want to send us a funny gif, don’t hesitate to send it to Nat.

Special thanks again to the great Dynamo packages we used to power these workflows:

Crash Course in Test Fitting

Table of Contents

Its About Solving the Deals

 

In this blog post I will attempt to give readers a crash-course in test fitting. We will use our software, TestFit (fitting name, no?) to show many of the concepts, along with some meaningful graphics to explain deal concepts. If you already know why we test fit, you can skip ahead to the TestFit crash course.

One side note: The audience for this post is students interested in using TestFit for coursework or real estate development competitions. Experienced architects and developers might not learn too much, other than the basics of our software.

Why do we do test fits? The answer lies in how complicated it is to create viable real estate deals. Real estate deals, in the mind of this author, boil down to five sub-problems:

  1. Design – How is the product designed?
  2. Capital – How is the deal structured? 
  3. Land – Where is the building, and shape of the land it is on?
  4. Construction – How will it be built, and what will it cost?
  5. Zoning – Does the design conform, or will it need additional entitlements?

Capital, Construction, and Zoning

 
Capital, construction, and zoning generally start out on a pretty solid set of facts: LPs and GPs want to achieve a solid YoC (normally 6.5%), GCs simply execute on construction documentation while meticulously keeping track of cost. Zoning is generally known, and operates under various land use controls like DU/AC, FAR, Height, and Lot (or building) coverage.

Some Definitions:

  • LPs: Limited Partners, often the equity component of a real estate deal
  • GPs: General Partners, who are normally referred to as “Developers” in the USA. 
  • GCs: General Contractors, the companies that get buildings constructed
  • YoC: The ratio of money made in the first 12 months to total cap ex
  • Cap Ex: Capital Expenditure, the money spent by companies on physical assets
  • FAR or Floor Area Ratio: the ratio of built floor area to the land it sits on (see image below)
  • Lot Coverage: the percentage of the lot covered by building
  • DU/AC: Dwelling units per acre
  • Acre: 43,560 square feet, or 1 Chain*1 Furlong (the area an ox team can plow in one go)
FAR: Floor Area Ratio - what is the total building area compared

Land

Land is a pretty simple concept. It and its fixtures are static, unmoving, and permanent. The only asset class that is said to be “real” hence the term “real estate”. Land gets a bit complicated with assemblages, but in general its analysis is limited to who owns it now, what kind of soils are on it, what kind of zoning is attached to it, what kind of private covenants are associated with it (hello Houston), and how bad is its topography.

Some Definitions:

  • Assemblage: Putting together several parcels to make a new, more valuable parcel (see below)
  • Private Covenant: Zoning, but without government intervention (Some private covenants can and have been ruled unconstitutional, however)
  • Fixture: Anything attached to the land. If you have to hire someone to move or demolish it, its a fixture.
  • Topography: The slope of a site, and how extreme that slope is

Solving the Subjective Design Component

Now into the meat and potatoes of what we are best at here at TestFit Inc: Solving the spatial layout. The main problem with building design is that there are no “right” answers. The solution space is as large as the universe itself. At TestFit we simplify buildings down to component parts to constrain the solution space from infinity to only a few trillion possible solutions.
 
 

The Major Components of the Design of a Housing Deal

Depending upon the land, zoning, capital and construction, the makeup of the following list will change drastically on a percentage basis.
 
  • Dwelling units – housing for people and family
  • Parking facility – housing for cars (we build a lot of this in the US)
  • Human circulation – corridors, stairs, and lifts for getting to units
  • Car circulation – roads for moving cars around
  • Leasing and amenities – space to convince people to rent

The table below gives some comps between building types and their respective component percentages. In a world where a YoC of 6.5% is desired, increasing the area of units versus all other spaces becomes quite important. This is actually an industry metric: Building Efficiency. Building efficiency is most often used without the parking facility.

320 Units @ 875 SF Avg
Space TypeWrap DealPodium DealGarden Deal
Units56.1%59.3%60.9%
Parking Facility30.7%29.6%29.2%
Corridors10.2%7.9%7.5%
Stairs + Lifts1.6%1.8%0.9%
Leasing + Amenity1.0%1.0%1.1%
Other0.4%0.4%0.4%

Some Definitions:

  • Wrap Deal: Parking facility is wrapped with housing units.
  • Podium Deal: The housing units sit atop the parking facility.
  • Garden Deal: The housing is individual buildings, surface parked.
  • Building Efficiency: The percentage of the building that is rentable.
Building Efficiency what is the total area compared to the usable or rentable area?

Using TestFit to Solve Deal Design

Now we transition to the more practical part of this blog post: how to use our software to solve deal design. TestFit supports some construction, capital, and zoning problems, but only at the highest level. It’s main focus is using algorithms to allocate net rentable area on a plan, and to create a vision for what a project could  be.
 
The following series of videos give an overview of how TestFit works. 
 

Working With Presets

The building types mentioned above are easily wielded within TestFit’s configurator by using our default presets. This ~9 minute video will give a good overview of those presets and building types. 

Working With Sites

Within TestFit we use sites to define the land area. Sites also have some other interesting properties, like setbacks. The following video will give an overview of sites.

Understand Density with Sites, Schemes, and Presets

The cross product of the last two videos is how sites (land) and (building design) presets work together to show what density is possible with different combinations of the two.

Using the Zoning and Building Inputs

Now that you have a handle on sites and presets, let’s take a look at zoning parameters and how to get into the weeds via building inputs.

These few tutorials are just the beginning on how to solve or even optimize real estate deals using TestFit. If you would like to learn more via tutorials, please check out our Knowledge Base. Not yet using TestFit? Sign up to try it now.

Concluding Remarks

I hope this post was informative on why we design different shapes and styles of buildings. With tools like TestFit, anyone can now site plan buildings. It is a democratization tool. That being said, it takes several years to fully understand the true nature of buildings, and for users to get an intuitive sense of how they should solve a deal–but it takes decades without technology to have that same sense.