‘Design It Before It’s Been Designed’: Why Chicago’s LG Group Embraces Vertical Integration
Almost everything about 601 North Central, a new, 29-story mixed-use development in Phoenix, is big. From its 750 residential units to its 30K SF of retail space and an amenities floor that will boast the largest multifamily building swimming pool in the city, it will be the city's largest residential building constructed to date upon its completion in 2025.
One important aspect of the project that thankfully was not impressively big, however, was the cost escalation it experienced in 2022. In a year when commercial real estate projects were hammered by rising interest rates and inflation, 601 North Central remained closer to budget than most. Brian Goldberg, founder and CEO of LG Group, credited this to the approach LG takes to all projects, whether it is working for a client or developing its own building.
The Chicago-based design-build-development firm brings multiple development-related disciplines under one roof to give clients a seamless experience. It also embraces a proactive and collaborative pre-construction process that saves clients time and money and ensures investors get their money's worth.
“A lot of other developers experienced 15%-20% or more of hard cost escalation during 2022, meaning if they budgeted $100M for the development, a year later the cost was now $120M,” Goldberg said. “We were able to mitigate all that and I think we ended up with our costs increasing maybe just under 3%, which, given market conditions, was a huge win. And we're very proud of that.”
Working with the architect, general contractor and various subcontractors, LG began the Phoenix project by “thinking backwards” from what the team wanted to achieve on the 2-acre site, he said. This upfront work included understanding what prospective tenants would expect in their new homes.
“We discussed the most efficient way to create the structure,” he said. “For example, where should we place the elevators to create the most efficient path of traffic for our tenants? You're kind of thinking with the end in mind when you start.”
Goldberg said subcontractors and vendors were consulted early in the design process to determine everything from the electronics needed to control the elevators to the tiles on bathroom walls, and then to lock in material costs. This way, LG and its team avoided the sort of supply chain hiccups that create added costs, time delays and finger-pointing on many projects.
“We have enjoyed partnering with LG Group on our opportunity zone development at 601 North Central,” said David Coelho, chief investment officer of Bridge Investment Group's Opportunity Zone Funds. “LG Group has a powerful vision to transform the downtown Phoenix market, and we are thrilled to partner with them as we execute on that vision.”
Founded in 2005, LG adopted its approach to project planning long before the pandemic-related supply chain delays of recent years. Goldberg described the process as “doing the design before the building is designed.”
That might sound like a paradox, but he said it is the result of lessons learned early in his career that inspired LG to embrace a robust approach to pre-construction and adopt the design/build/develop project delivery method.
“We started to understand very early on that if you have multiple independent third parties working on these larger developments, then you have a lot of people trying to attack problems with solutions that might be a little biased by their goals, and those goals may not be aligned,” he said.
LG still works with multiple parties, whether the project is a high-rise apartment building or individual home. But streamlining the process and making sure that stakeholders are on the same page are major priorities.
“We would see situations where sometimes the client’s own architects and designers didn't get along,” Goldberg said. “We started thinking, ‘How can we bridge this gap on behalf of the client? And when we're developing, how can we bridge the gap on behalf of the investors so that the building is amazing and high-quality but also at a reasonable cost?’”
Goldberg said LG’s vertical integration allows it to simplify and streamline projects for its clients. This can be the case even if LG takes a more limited role in a job, where it may serve as solely the developer, designer or contractor or, as he said, “frankly any combination thereof.”
LG recently had a unique opportunity to put its ideas into action when it redeveloped a building in Chicago’s popular River North area to serve as its new headquarters. Goldberg said the 25-year-old building required an “awful lot of work” to bring it up to contemporary standards, but LG’s vertical integration and emphasis on pre-construction planning brought the job to a successful conclusion for the owner — which, in this case, was LG itself.
“We designed and built everything, including the mechanicals, technology systems and the finishes, knowing how we wanted it all to work together, and we were able to get everything we needed for the project delivered on time,” he said. “Between the open office layout and updated tech, we've created this entirely new, energized and cohesive environment. We're so much more efficient.”
Goldberg said creating an environment that benefits LG’s employees was important to him.
“We've got incredibly talented and passionate people here who enjoy what they do,” he said. “I’m proud of the collaborative energy here where people commit to being the best that we can be no matter what we do, whether it’s for a client, investors or, in this case, ourselves.”
This article was produced in collaboration between LG Group and Studio B. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
