August 26 2020
Understanding the Distribution of Costs: Maximizing the Rate of Return on Residential Projects
Uncovering how to distribute and optimize costs to realize an asset’s full potential.
At Entuitive, our holistic approach to the building lifecycle pushes us to continually ask how we can deliver the best project for our clients. Asking how we can be better tomorrow than we were today is what drives our internal research in all areas of engineering.
In a previous series of articles, Associate Ryan Voros, residential sector specialist, analyzed how various market forces impact structural options and costs for residential towers. In his latest research, Ryan has been analyzing the structural costs of concrete residential projects and how best to distribute and optimize those costs to realize an asset’s full potential and maximize rate of return.
Structural Optimization in Residential Projects
How can we provide value to our clients and ensure a concrete residential structure maximizes the asset’s rate of return? These two questions have been guiding Ryan’s research. In his experience, structural optimization doesn’t simply mean finding the least-cost solution for materials and construction.
A holistic approach is required, together with a strong understanding of the distribution of costs, potential risks, and the client’s goals to help ensure a successful project.
Overall Structural Efficiency
There are two main components in ensuring a residential structure is cost-effective. It’s most important to ensure the structural systems are efficient. For example, are there multiple levels of transfers? Do we have the right foundation system? Is the structure constructible and optimized for a reduced construction schedule?
It does not matter how efficiently we design each individual element in the building. If we don’t have an efficient system in place, budgeting challenges are more likely to surface. That is why, at Entuitive, we work through multiple options in the early design stages to find the right balance between efficiency, site constraints, occupancy programming, and other architectural implications.
The second component is efficiently designed individual structural members. In our opinion, it takes significant experience in residential high-rises to know how to optimize structural element design. This is further examined below.
With the right structural systems in place, we can better optimize on costs. “Maximizing our client’s rate of return means being judicious in our material optimization,” says Ryan. “We must be careful that we’re not optimizing one material while simultaneously increasing overall costs. Material optimization must result in a net overall savings.”
When we break down the overall structural costs in a concrete residential building, we generally see the following distribution of costs by material type.It is common for engineers to focus on the optimization of concrete volume and rebar tonnage. However, you cannot neglect the formwork costs. When the concrete and rebar materials are optimized it is possible for the overall costs to increase. This is because the material savings are at the expense of formwork area or complexity.
We also need to understand the distribution of structural costs by element type. In a typical residential high-rise we often see the distribution of structural costs below:
- Foundations – 5-10%
- Columns – 10-15%
- Walls – 20-25%
- Slabs & Beams – 55-60%
The majority of structural costs and opportunities for savings are typically in the horizontal structural members. So, a specific focus on these members is important to ensure the structure is efficient. However, it is still possible that in attempting to reduce horizontal member costs you might still increase overall costs. We saw this in past investigations when, in an attempt to reduce slab thickness, a large number of columns were added to reduce spans.
The goal should be overall net savings and we have conducted significant research on how to achieve this on residential towers.
Distribution of Risk
Risk is the combination of the probability of a negative consequence occurring combined with the severity of the hazard should the event occur. In structural engineering, codes are finely calibrated based on risk and set the absolute minimum requirements for our designs. Since the codes are based on probabilities, it is still possible but unlikely that an unwanted hazard could occur.
There are also circumstances where a design may meet all code clauses but still present issues. For example, a specific glazing system may be highly sensitive to slab deflections. In these cases, minimum code requirements may not be sufficient to meet the needs of a project.
Engineers typically cover risks by increasing conservatism. Conservatism is when a structural element is designed stronger than code minimum. However, conservatism can often increase costs because to design an element stronger, we typically add reinforcing (increase rebar tonnage) or make the element larger (add concrete volume and formwork area).
Since conservatism directly impacts costs, it is our opinion that it should be finely calibrated and serve specific purposes. To minimize costs, we need to understand the implications of designing each element right to the code limits.
Greater benefits can be achieved when we combine our understanding of risk along with how the costs are distributed throughout the project. The image below highlights a few examples.Typical tower slabs generally have lower risk as they are ductile and only fail under extreme loading and after very significant deflection. However, in a residential tower, they are often repeated dozens of times and thus represent a large portion of the structural costs. Since they are lower risk and have higher cost implications, we look to be efficient with the design of these slabs.
Conversely, transfer beams are important, highly stressed elements that can support whole portions of a building. They are generally less preferred since they’re very expensive. So, it would be preferred if we could find opportunities to eliminate or minimize the amount of transferring as it is not recommended to be aggressive with the inclusion of transfer beams in a design.
Then there are columns overlaps. A column overlap occurs when a column changes size or orientation from one floor to the next. All of the load from the column above needs to transfer to the column below through the area that the two columns overlap.
In the two examples above, the light grey is a column below and the dark grey is a column above. The load needs to transfer between the area that the columns overlap. Example two represents a riskier condition since the overlap area is reduced if the columns are not exactly in line, reducing the capacity to transfer the load.
However, with example one, if the column is slightly misaligned, the overlap area would not be reduced. Therefore, we will overdesign the overlap area in example two and not example one to cover the risk that we may not have the full overlap area. This overdesign will require a minimal number of bars of reinforcing with very minor cost implications.
As we can see, optimizing the costs of a structure takes significant experience along with a strong understanding of the distribution of structural costs and risks throughout a building. With this knowledge and experience, we can provide valued insights to our clients and help them achieve the full potential of their assets.