With the cost to build in California being significantly more expensive than the national average, developers may be hesitant to break ground in the Golden State. However, Galloway’s comprehensive understanding and experience with California’s building codes, policies, and costs make developing a project in California less daunting.
“In general, the costs are higher to build in California,” said Terra Mortensen, site development project manager, and regional manager for Galloway’s Fresno office. “This is where we can make a difference – our understanding of policies and our ability to advocate for our clients through these cases.”
One of the most notable regulations is the California Green Building Standards Code, Part 11, Title 24 – also known as CalGreen. This is the nation’s first state-mandated green building code and is specific to California. While these CalGreen building standards can increase energy efficiency, this is where most additional costs lie. Other impactful costs include development impact fees, construction costs, and the cost of acquisition.
Development Impact Fees
There are multiple ways our team helps navigate and reduce the cost of development impact fees. Galloway understands fees are highly nuanced based on how a project is categorized in the City municipal code. We look for overlaps in conditions of approval, reimbursement/credit/deferral opportunities, and CIP budgets.
Our team also evaluates fees early during the due diligence feasibility period, monitors fee increase deadlines, and educates our clients on how to take advantage of cost-saving opportunities, including provisions in the Mitigation Fee Act. While this act authorizes localities to impose development fees to defray the cost of new public facilities to serve those developments, jurisdictions shall not require developers to pay fees until the issuance of a certificate of occupancy or the date of final inspection. However, most jurisdictions collect this fee at the time of building permit. Paying fees later in the development can lower the interest on loans and decrease the time between fee payment and revenue creation.
Our team is proactive with our approach to mitigating hard construction costs. “We are always trying to stay two steps ahead with being a trusted advisor for our clients,” said Mortensen.
We stay aware of when projects are bidding, understand the bidding process, and work with our clients to time the start of construction to maximize funding. We conduct individual cost comparisons of materials and labor and evaluate supply chain issues to ensure our clients get the best cost and that the materials needed are available on time.
Cost of Acquisition
To navigate the cost of acquisition, our development services team can participate with our clients and brokers in the site selection process before they go under contract to assist in vetting the property. This involves comparing multiple properties, looking for hidden costs like offsite or environmental mitigation measures, and helping clients understand the land they are purchasing.
Galloway’s nationwide experience and extensive knowledge of building codes enable us to educate our clients on the differences between development in other states compared to California.
This ability to translate and learn new codes facilitates innovation. “We are constantly learning new ways to do things and adapting to different environments, which helps us find the most efficient way to approach and complete a project.”
This is also significant because California’s CalGreen standards are updated every three years, with the next update on January 1, 2023.
“We tell our clients about the incoming update, the building code we are designing under, and the specific deadlines we must hit to develop under the current year’s code. If we miss that deadline, we must update our design according to the new building code, which typically has cost implications,” said Mortensen.
Whether you have developed in California before or not, Galloway is well equipped to guide you through the process most efficiently and cost-effectively.
“Galloway’s standard is proactive communication and advocacy, not just delivering plans,” said Mortensen. “That is a big component to success in developing a more complex state.”
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