by Nathan Artt, on February 2022
I don’t think this is news for anyone, even though we really don’t talk about this enough. Churches struggle with real estate and building projects.
Church building projects can take a long time and they can end up costing more than expected. Why? The main challenge is not any one facet of the project, but that there are so many different facets of a successful project, such as bank funding, fundraising, design, pricing, AVL, civil, MEP, engineers, FFE, hiring the right team, and more. The challenge is that all of these individual silos and teams somehow have to come together into one singular, cohesive action plan that ultimately lands the project within the budget and gets funded.
I have seen this since we started Ministry Solutions in 2012. To date, at least two thirds of our clients are churches who find themselves a year or two into a capital campaign with a design that is far out of budget, leading to deteriorated trust from key stakeholders and an overall frustration and disappointment for leaders. On top of that, we are currently in one of the most massive shifts in our model, coupled with the highest increase in labor and material costs in our history (inflation factored).
Needless to say, there are a lot of churches feeling “stuck” right now in building projects. If that’s you, that’s ok. I promise that you are not alone, and we have written this to provide some help if you have a project that is out of budget and/or you are wondering if your future building is designed for the church of the future and not the church of the past.
Take permission to re-evaluate
Buildings are tools, not strategies. It is no secret that our model is in the midst of rapid change at the moment, and we have to be certain that our buildings are facilitating who we are going forward, and not a facilitator of our pre-Covid, monolithic Sunday morning worship models. If you are down the road and stuck, take permission to put everything back on the table and ask the question; “how do we see maximizing the use of our buildings to create high levels of engagement for the people we are trying to reach and do so at a price point that the project pays for itself?”.
As we have written many times in our studies of retailers like Chick-fil-A, Home Depot, and Target, the digital platform has not changed the value of our buildings; it’s changed the role of our buildings. If your current building is designed to play the same role it did 10 years ago, it might be time to ask more questions and revisit the design.
Revisit the financial strategy
Before working with churches, my background was in real estate. There were some surprises for me when I first started working with churches, but none bigger than the idea that churches, unlike any other organization who uses real estate as a primary source of engagement, actually design buildings and later figures out how to pay for them. I will acknowledge that because church buildings don’t technically produce revenue (which we’ll get to), it would seem that there wouldn’t be similar processes in place, but there are. As building costs are rising, fundraising is more challenging than it’s ever been, and the use of our buildings is changing, we have to get back to these basic questions:
- What is a healthy budget and funding plan that puts us in a situation to move forward and be prepared for rising costs? (and no, borrowing more money is not a good answer for this question)
- Can we afford this building even if we never add another person?
- Is the capacity we’re creating going to pay for itself?
Hire to Ability, Not Proximity
There is nothing more important in a project than to have the right people around the table. One of the biggest challenges that leads to cost overruns and delays is project leadership. Churches are fortunate to have people in the church who have a background in construction or finance or civil engineering, and those people can certainly have a role on a project team. However, these church projects are very, very different from other types of projects. They have non-conventional funding sources like capital campaigns. The building is designed specifically for the user, and not a white box that gets filled in later, which is the more typical type of real estate development. As we mentioned earlier, there are a lot of moving parts that have to come together for a successful project, and that challenge is increased significantly by the unique requirements of the local church who is going to ultimately operate in the building.
One of the biggest mistakes we see churches make is that they bring people in based on proximity, not ability. “We have a guy” is something that we hear on nearly every project from every church. And listen, that’s great! I am not challenging the value of a member in the congregation who has a background related to real estate or finance, I’m simply suggesting that relationships should earn people opportunities, but they should never be the single reason someone gets put into the position of stewarding the millions of dollars your congregation will give towards this vision. Too many times, our loyalty to one person serves at the detriment of the many.
Also, remember that the challenge for church projects is getting to construction, not through construction. Hiring someone to lead a project who has construction experience is great, but not always helpful in navigating all of the other non-construction-related facets of design and integration that will be required to get to the point that construction experience has value.
This leadership was required prior to our models changing and the market going nuts. Going forward, strong leadership will be even more important in the success of building projects.
Plan for contingencies
As we recently wrote in 2022: A Huge Change in Building Projects, our contingency plans have to adapt to the level of complexity and uncertainty in the market. While we used to be able to simply plan for unforeseen changes with a 5-10% cost contingency, the market is just simply too volatile for that to be enough protection, and the last thing you want to do is re-design twice because of price increase! Again, the lost time, trust, and relationship collateral that comes from raising money for projects that don’t get built is too risky for you as a leader.
Be sure that as you are in design, you do the following:
- Get constant pricing updates throughout design.
- Have the project team price out alternates as a part of the financial strategy.
- Have whoever is going to be involved in construction be involved in design.
- Don’t allow architects to design in a silo.
- Take contracts very, very seriously.
- Guaranteed Maximum Price (GMP) contracts are more difficult and nuanced than ever before. Lock in all contracts with AVL, FFE, hardware, security, IT consultants, and the like prior to finalizing pricing.
Look for ways to bring the community in
Our mission to reach the lost has not changed. However, our models in doing so have to. One of the biggest changes we see coming in church real estate is in the monolithic use of our buildings. As a church, we spend millions upon millions of dollars on buildings that get used once per week. On top of that, people are wanting more from their church outside of Sunday morning.
One of the best ways to offset cost and make buildings more affordable is to start with the question, “what does our community (not congregation, but the actual community) need from us?”. In asking that question, we often find that our buildings cannot only be an active center of community during the week, but that people will actually pay to use them when we’re not.
We see a day coming where our buildings are not just in the center of community, but are centers of community, whether that is hubs designed for community outreach or buildings designed to facilitate uses by providers in the community. As we figure this out, we will also see more buildings funding ministry and less ministries funding buildings, which will activate more dollars to go to serving the community around us and in the world.
We’d love to help. There are so many churches right now feeling stuck and asking questions about the role of buildings and how to get stuck projects unstuck, and unfortunately, are relying on the same processes that got them stuck in the first place to get them unstuck. While we don’t offer a prescriptive solution, we can offer a guided process to help you and your team gain clarity in understanding how to help you get from where you are to where you want to be.
We also believe in investing in relationships. If this article resonates with you, we would simply love to chat. Please click on the link below, and I will reach out to you personally.