Conceptual estimates are crutial to successful development.

Real estate development is a risky and difficult enterprise. However, a small group of specialists is laboring at making the process a little more transparent and less perilous. These professionals are conceptual estimators. A conceptual estimate for a real estate development can make a tremendous difference in the efficiency, cost-effectiveness and desirability of the entire project.

An estimator with experience breadth of knowledge, and a thorough technique can steer the developer clear of any potential disasters, and towards the best possible outcome. A first-rate conceptual estimate can make a difference not only in the quality of the finished product, but in the financing of it, since naturally the overall soundness of the project will affect the cost of capital.

Typically, the developer and the architect will come to me and my staff at the very beginning of the process--having already determined the zoning issues, the setback requirements, and so on--and tell us, "We're thinking of buying this property, on which we want to build X number of stories, with a footprint of Y square feet." We then go over the proposed project, item by item, and determine how much the whole concept will cost. As we put the estimate together, naturally, we look for ways to make the project better, smarter, cheaper, whether by using a certain mechanical system, exterior wall construction, carpeting, or plumbing fixtures.

The conceptual estimate is part art and part science. At the start, it requires a lot of research, and a lot of consulting. We need to know not only the size and purpose of the proposed building, but how many cellars are required, what kind of exterior walls are contemplated, and so on. We need to determine what environmental issues must be dealt with, such as ground contamination. We need to know where the water table is, and ensure that the building can remain above it. We have to ride herd on the developer, the architect, and their associates, to ensure they've given us all the necessary information.

There's no template for a conceptual estimate. At HRH Construction, we keep a master list of 88 different trades--everything from demolition to asbestos abatement to dampproofing to kitchen cabinets to lobby fixtures--each of which has to be factored into the overall estimate. Still, one new item or another always must be considered, in every project. Office buildings, apartments, hotels, factories: all have unique requirements, unique challenges.

HRH has been in business for more than 75 years. Our estimators average about 15 years of experience, and have seen all kinds of different conditions. The learning process is ongoing, of course, but the extent of their knowledge is phenomenal. They also communicate very well with our purchasing people, who can sometimes point out items that we need to add to our checklist, or update our information on item costs.

Quite often, our estimates will lead to improvements in the developer's plans. I might ask, for instance, "What kind of mechanical system will you use?" If it's a residential rental building, you might use an incremental system, which would cost about $6,000 per unit. For a mid-priced condo building you might use a heat pump system, which could cost $7,500 per unit. For a more luxurious condo, you might use fan coils, which are the most expensive: $10,000 to $15,000 or even more. Which of those systems you choose will also affect the architectural exterior. Incremental systems require louvering on the exterior, while the other two systems require cooling towers. That leads to another big cost differential.

At Bank Street Commons, an apartment complex we're working on in White Plains, we determined that the HVAC should be changed from an incremental to the more expensive heat pump system. That actually resulted in a savings of about $200,000, because it enabled us to reduce the number of air-conditioning units required. Moreover, it gave a nicer look to the exterior of the building, because we didn't need to put grilles on the facade.

At City Center, another project in White Plains, we also found a considerable savings, this time by determining that prefabricated panel would be just as good as, and much more cost-effective than, the original facade.

Sometimes, of course, a conceptual estimate will prove that for best results, the more expensive option is the better one. A few years ago, two buildings on East 86th Street that contained a Ronald McDonald House were sold to Frank Gifford to be turned into Cassidy's Place, the therapeutic nursery named after his daughter. We discovered that the buildings had two different floor levels, which would make them difficult to connect satisfactorily. I jokingly said to Gifford, "Why don't we just tear it down and rebuild from scratch?" This he did, at a cost of $2 million more than the original projection, but it got him what he wanted: a more modern, more functional building.

The conceptual estimating business is both challenging and interesting. It stretches the mind remarkably, and exposes you to aspects of the real estate business that you might not know existed. I was lucky, when I started work for an estimating service about 40 years ago, to be exposed to all kinds of different jobs: everything from office and institutional buildings to airport control towers. Most of our associates have similarly broad experience. We're good at what we do, and we're constantly improving.