a comprehensive guide to understanding architectural fees
Blog / How Much Does it Cost to Hire an Architect
How much do you charge for architectural services? That is one of the first questions we are asked by clients looking to build their dream home or do an exciting addition or remodel to their existing home. It seems like it should be an easy question to answer, right? Surely an architectural firm knows what they charge for their services, right? Well… it depends. That is our most common answer, and although it’s not a popular answer, it’s the right answer. Setting appropriate fees for architectural services can be tricky given the large number of factors that must be considered.
Building your dream home or undertaking a major renovation project can be an exciting but complex endeavor, and hiring an architect is a crucial first step in turning your vision into reality. In this article, we will delve into the factors that influence architectural fees, shed light on different pricing structures, and provide you with a comprehensive understanding of the cost of hiring an architect.
Before we get to that, though, we want you to know that at Moment Architects we’ve established a pricing system to help guide our clients in their early planning stages. The button below will take you to a form that asks a series of questions to determine the type of project you are undertaking, and based on your answers the form will automatically generate an estimated cost for Moment Architects’ architectural services. Please note that the fees generated by our automated form are not a contractual agreement, and we would want to meet in person and discuss your project in more detail before providing a formal proposal. The idea behind the tool is purely to give homeowners a ballpark figure to work with, so that they can then approach an architectural firm with a healthy understanding of what they might expect to pay for the architects’ services. Also, Moment Architects specializes in residential architecture, so the form and fees generated will not apply to any project types outside of the residential sphere.
How Do Architects Determine Their Fees?
There are many factors that go into determining the right architectural fees for a project.
Architectural fees can vary significantly depending on the size, complexity, and scope of the project. Whether you're planning a small residential addition or a large commercial development, architects generally base their fees on the project's scale and the anticipated amount of work involved. Smaller projects might have a flat fee or an hourly rate, while larger projects often involve a percentage-based fee structure. In our experience, there are four common methods for determining the right fees for a project. These include the Cost Per Square Foot Method, the Percentage of the Cost of Construction Method, the Time and Materials Method, and the Resource Allocation Method. We will explain each of these methods in more detail.
The Cost Per Square Foot Method
Using a certain dollar amount per square foot of total covered area is a standard way for architects to set their fees for a residential project, especially if it’s new construction. When setting fees based on the cost per square foot method, an architect has typically determined in advance what their firm’s standard rates are going to be, so that when meeting with a client they can quickly and easily provide a quote based purely on the size of the project. In general, the dollar per square foot costs to hire an architect for a residential project can range anywhere from $2.50 per square foot up to $15 per square foot, depending on the services being provided.
How is the total Square Footage Determined?
In most cases, when an architect discusses fees based on a dollar per square foot basis, the architect is referring to the total covered square footage. This should be understood to be different than the total air-conditioned square footage. Here’s the difference between the two.
Total Air-Conditioned Square Footage
Total Air-Conditioned square footage, also sometimes referred to as the Total Livable Square Footage, is calculated by adding together all the areas of a home that are within what we call the “thermal envelope”. The thermal envelope is the insulated exterior wall system that keeps cold air in and hot air out during the summer, and vice versa during the winter. The air-conditioned spaces include all the living areas, bedrooms, bathrooms, kitchens, closets, hallways, offices, game rooms, stairways, etc. The total air-conditioned area does not include spaces such as a garage, a covered porch, a breezeway, or a unique feature like a roof deck or atrium.
Total Covered Square Footage
The total covered square footage of a home, however, takes into account all the spaces that will be constructed as part of the project. This includes the air-conditioned square footage, and it also includes all the unconditioned spaces such as the garages, porches, roof decks, and the like. The total covered area will never be less than the total air-conditioned area.
Drawbacks to the Cost Per Square Foot Method
Although calculating a fee based on a certain cost per square foot of building area is the most common way for residential architects to set their fees, it has its flaws. Just because a house is bigger doesn’t always mean it will require more work. Sometimes the opposite can be true. For instance, there could be two homeowners looking to build a custom home for themselves; Joe wants to build a new 5,000 square foot custom home, while Mark is only wanting to build a 1,500 square foot home. An architect who bases his fees purely off the cost per square foot method might charge each of these clients $5.00 per square foot, meaning the fees for Joe’s home would be $25,000, while the fees for Mark’s home would only be $7,500. However, Joe may be thrilled with the very first design option presented to him, he may make decisions quickly, never change his mind about anything, and be a pleasure to work with. Mark, on the other hand, may require 7 or 8 preliminary design options before finding one he likes, he might drag his feet on getting the architect the necessary information, prefer one thing one day and something completely different the next, and may have a personality that is very difficult to work with. In this case, the architect would invest a far larger amount of time and energy into Mark’s project, but get only a fraction of the return. Similarly, Joe would be paying his architect far more money, and although he’s ultimately getting what he is paying for, Joe is getting it for a far higher price per hour of the architect’s time.
The Percentage of the Cost of Construction Method
Another common way for architects to establish their fees is known as the percentage of the cost of construction. An architect will typically base their fees on a percentage of the overall cost of construction in larger or more complex projects. Typically, the percentage can range from 5% to 20%, depending on factors such as project complexity, location, and architect's experience. This approach aligns the architect's fee with the scale and budget of the project.
Common Objections to the Percentage of the Cost of Construction Method
As with most things, there are pros and cons to this approach. The most common objection given by clients against using the percentage of the cost of construction method is that the fees paid to an architect may increase drastically because of the selections made by the client, even though the selections don’t seem to change the amount of time or effort the architect must put forth. For example, if an architect’s fees are 10% of the overall cost of construction, and Joe buys a refrigerator, oven, and cooktop from Best Buy for a total cost of $10,000, then the architect’s fees on those three appliances would be $1,000. However, if Joe decided to buy his refrigerator, oven, and cooktop from Wolf and Subzero instead, the total cost of the three appliances might be closer to $50,000, resulting in an architect’s fee of $5,000. Arguably, the architect is going to draw and note the oven, cooktop, and refrigerator in the construction documents the same way regardless of the price, so why should there be a difference in the fees?
Why Architects Feel a Fee Based on the Percentage of the Cost of Construction is Justified
This argument has some validity to it, although in general, the time and effort expended by an architect on a project in which appliances are being purchased from Best Buy is going to be less than the time and effort expended on a project in which the appliances are being purchased from Wolf and Subzero. Not because of the appliances themselves, but because projects with larger budgets usually, although not always, come with more complexity, higher expectations, and greater levels of involvement from the architect.
Time and Materials Method, or Hourly Rates
Another method commonly used by architects to establish fees for a project is the Hourly Rates method, sometimes referred to as “Time and Materials”. This method is most commonly used on projects where the scope of work is not clearly defined in the beginning, and therefore establishing an appropriate cost per square foot or even a budget to set a percentage-based fee on is unrealistic.
How Do Architects Determine Their Hourly Rates
When an architect proposes an hourly rate for a project, those rates should be established in advance by the architect based on their own in-depth knowledge of their business. At Moment Architects, we have established the hourly rates for each of our employees based on the following factors.
First, we take into account the salary of each employee, add to it the additional compensation offered through benefits, plus the taxes Moment Architects pays for payroll, Social Security, Medicare, and the like. We convert these costs into an hourly rate using the average hours worked in a year, and call this number the “Direct Hourly Cost”.
Second, we calculate the overhead costs incurred by Moment Architects over the course of a year. This number includes things like rent, computer software subscriptions, costs of goods sold, Professional Liability Insurance, office supplies, and so on. Also included in the overhead calculation are the salaries of any employees who are not part of our “production” team, such as our office manager, business development managers, marketing director, etc.. The reason administrative personnel’s salaries are added to the “overhead” cost is because these employees are rarely, if ever, spending what we would consider “billable time” on a specific project. Instead, they are providing behind-the-scenes support to the employees who do log billable time. The number we calculate in this step is called the “Overhead Cost”.
Third, we take the Direct Hourly Cost and add it to the Overhead Costs to calculate what we call the “Total Hourly Cost” for each employee. This number is different for each employee, because although the Overhead Cost is constant for all employees, the Direct Hourly Cost varies. The “Total Hourly Cost” is basically our break-even number, at which rate we don’t lose any money, but we don’t make any either.
Finally, we multiply each employee's Total Hourly Cost by a profit margin of 25% to get the final actual billable rates.
What are the Pros and Cons of Hourly Rates?
Clients may hesitate to agree to an hourly rate agreement due to the inherent uncertainty around what the final cost will end up being, and understandably so. For many clients, they may not have ever worked with an architect before, and therefore have no idea how much time typically goes into a project, so an hourly rate is useless in helping them properly budget for their project. To counteract this, most architects will agree on an estimated number of hours up front, and even set milestones throughout the project in which they inform their clients of how they are progressing in relation to what was originally estimated.
Hourly Rate to fixed fee hybrid
Another common way of reducing the uncertainty of an hourly rate agreement is by establishing that the hourly rates will only apply until the scope of work has reached a degree of clarity that makes it possible to set a fixed fee based either on the cost per square foot or the percentage of the cost of construction method. This typically means that the Schematic Design Phase will be at an hourly rate, and the Design Development Phase, Construction Documents Phase, and any other included phases will be at a fixed rate. Typically, this involves two separate contractual agreements; a initial agreement that outlines the hourly rates and the services provided under those terms, and a second agreement that establishes the fixed fee and the defined scope of work associated with that fee.
The Resource Allocation Method
The final method of calculating fees that we’ll discuss here is a method we’ve termed the “resource allocation method”. This method is the most advanced of the four methods we’ve discussed, and although it takes the most time to establish project-specific fees using this method, the fees established are going to be far more well-suited to each project’s unique scope of work.
How Does the Resource Allocation Method Work?
The Resource Allocation Method for determining fees has become more and more prevalent as architects begin to use advanced project management tools such as Monograph and BQE Core. These systems streamline the process of tracking the time and expenses that go towards each project, prepare a multitude of reports and data for the architects to review, and in general assist architects in better planning their future based on solid information about their past. These platforms also make it easy for architects to set up the total hourly costs for each of their employees, and then assign time for specific employees to work on various aspects of a potential project, using historical data as a guide. The system then calculates the total architectural fee based on the time (resources) allocated to the project.
Why Doesn’t Everyone Use the Resource Allocation Method?
While the resource allocation method will usually produce the most suitable fee relative to the anticipated time and effort put towards a project, it is not always used for several reasons. The first is that not all architects have access to a software or online platform that makes this type of tracking and calculating possible, and sometimes the costs of these platforms is a deterrent, especially when an architect has been “doing okay without it” for many years.
Another reason this method is not always used is that it prevents an architect from giving a client a fee on the spot. This article is written precisely because the most common question we get asked at Moment Architects is “How much do you charge?”, and nobody ever likes the answer, “Well, it depends, let’s talk about what you’re looking for and then I’ll send you a proposal in a week or two.” It can be argued that giving a client a fee quicker will help land more jobs, especially if a potential client is talking to several architects at the same time, and one architect gives them a proposal on day one, while the other architect takes two weeks to turn around a proposal. Not everyone is willing to wait that long for a proposal.
There Is No Fool-Proof Method
Moment Architects leans more on the Resource Allocation Method than any other method, but we recognize the benefits of each, and use them all from time to time.
Every residential construction project is unique, and therefore there is no single best way to establish architectural fees for every project. Some factors that can affect the fees include the project’s timeline, location, budget, size, scope, and the parties involved in the decision-making process. Additionally, there are several additional services an architect can offer that may be desirable to one client and not to the next. These additional services may include 3D renderings or virtual walkthroughs, obtaining building permits, managing the bidding process, overseeing construction, and coordinating with contractors. For these reasons, most architects will want to meet with their potential clients in person, gather as much information as possible, and then determine the most appropriate method of calculating fees based on the project specifics.
A construction project of any size is a big undertaking, and it’s important to plan ahead. Knowing what things cost is a crucial part of this process. If you are planning a custom home, addition, or remodel, we would love to meet with you and discuss the services we provide in more detail.
(Note: The information provided in this blog post is general and may vary based on specific architectural practices and regions.)
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