Last week, I wrote about the general timeline for architecture projects. This week, I want to go into more detail on the entitlement process: what it is, how long it takes, and what are the major project risks involved.
The entitlement process is one of the most critical aspects of your architecture or development project. It’s the process of addressing the applicable zoning regulations, municipal codes, and neighborhood council/community groups requirements — resulting in project approval from a Planning Commission or City Council. If you need a variance, conditional use permit, or similar municipal permission, you’ll be required to go through the entitlement process over and above basic permitting.
Each municipality tends to be a little bit different, which is why it can be important to work with a commercial architecture firm that has experience in your city or county. Minneapolis architecture projects, for example, have to go through the Development Review Committee (DRC) in addition to the city council. A number of cities have similar review boards, and many have other kinds of architectural commissions a project needs to go through to make sure it is meeting all of the city’s planning and visual/aesthetic requirements.
Some business owners — those who haven’t previously owned commercial real estate — don’t know much about the entitlement process, so it completely blind-sides them. Others know that they have to go through the process, but think it’s pretty quick. The entitlement process can actually be quite lengthy, depending on the municipality and the request. If it’s a small ask, then it will often more-or-less get rubber-stamped, but you still have to go through the process. If you are making a big request, it can take multiple rounds of review, and each round typically takes at least a month. So if you get caught having to go through multiple rounds of revisions, it can easily eat up two, four, or more months of time.
So what is a small ask versus a big one? Here’s a good example: Right now we’re working with a glass-blowing art studio that we believe has a pretty small request — a specific use within a zoning district. Our question for the city is whether an artist’s studio is an approved use for this particular building? Artist galleries are approved in this zoning district, but can the studio be in there as well? That is, can the client do glass blowing on site? The city staff has said that everything seems to be blowing in the right direction for us — no pun intended — but, technically, we still need to go through the process to get it all properly approved.
A bigger request would be a situation where we want to use the property in a way that definitely doesn’t correlate with the city’s plans for the area. For example, we could be trying to create a Planned Unit Development (PUD) on a large property. In a PUD, you essentially make a small, independent zoning district within a larger zoning district. Cities tend to be pretty stringent in these cases and require a much more detailed entitlement process. If you don’t want to follow the city’s rules, they need to make sure the rules you’re laying out are good enough for their agenda and what they want to accomplish. So that is a much bigger request.
Entitlement Process Timeline
The entitlement process can easily add two months to your project timeline — and often quite more. You have to prepare the submission, which is going to take at least a month, as it usually requires quite a lot of civil engineering work. The civil engineers need to gather all of their information — put a survey together, get the grading done, and do all of their calculations. Meanwhile, the architect needs to do the preliminary floor plan and elevations, which are typically required for entitlement submissions. In addition to the time that takes, there are hard-and-fast deadlines you have to meet in preparation for the city council.
It typically takes the city about a month to process the application and send it to the planning commission for their review. It then takes anywhere between one and four weeks before the planning commission rolls over to the city council meeting. Once the city council meets, then you either get approval, you get approval with comments, or they say no. Depending on the answer you receive, you either hit the ground running, or you go back and re-tool your submission (which means even more time), or, occasionally, a project will die because of that decision. Regardless of outcome, the entitlement process takes a significant amount of time to get resolved.
Should I Stay or Should I Go Now?
While you’re waiting for the decision from the city, you have to decide if you want to proceed with work on the project. If the timetable is tight for the project, do you want to give away the time that you’re waiting for the city, or do you want to proceed, knowing the risks? The safe route is to just wait until the city council comes back with a decision on what you can do. If you wait for the city, and they deny the request, then you’ve saved all of the expenses associated with the architect’s time — their billable hours working on the project. So that’s a very natural choice.
Alternatively, you can continue having the architect work on the project, if you feel there’s a good chance the city will approve your entitlements request. If you elect to continue working without waiting for the city council’s comments, you can often have your construction documents 85%-95% complete by the time they finalize their decision. The risk here is that, if the city requires changes to the project, that will necessitate more work on your documentation. These can be small changes or large ones, depending on what the city says, but either way it will require extra billable hours. So proceeding at this point puts you, the owner, at risk of having to spend more money.
On the other hand, there are benefits to continuing to work on the project while waiting for the city’s decision. If everything goes through without major changes, you save yourself a month-and-a-half or more on your project timeline. That could mean the difference between doing construction in summer conditions versus winter conditions, which, as we discussed last week, cost significantly more.
The other potential pitfall of waiting is having to deal with an expiring lease. If you need to be out of your current space by a certain time, then you also need your new space ready by that time. Likewise, for retail and restaurant projects, waiting means lost revenue. Every week they’re not open, that’s a week they’re not generating income. So that can be a very big motivator, making some clients willing to take on a little bit of risk or outlay a bit more money to be open sooner and generating more income.