Running a barony isn’t all a matter of assigning personnel, taking advantage of opportunities and dealing with problems. Successful rulers are expected to build monuments to their nation’s power and prosperity and having a functional purpose that benefits the peasants also helps.
You will need to leave some time for buildings to be completed. Each one boosts a certain stat for your kingdom.
The currency of building is Building Points (BP), which are accrued on a weekly basis, although certain dialogue options, quests, events and projects can yield additional build points, and generally the more developed your economy is, the more Build Points you’ll earn each week.
(1 of 3) You can attend to many kingdom affairs even when you’re not present at the capital - just as long as you’re on your own territory.
To check your kingdom’s current stats, hover your cursor over the “Stats” bar at the top left of the screen. The categories that appear under the stats bar lists your kingdom’s capabilities, resources and level of development in various categories. These can be improved by completing events and projects, but events are fickle, and a bad stroke of luck could just as easily lower these stats. The sure-fire way to improve them is by building cities, which requires time, Build Points, and planning.
To start building, click on the selected settlement’s icon on the map to view its own personal contributions to your kingdom’s stats on the left, and the buildings comprising the city on the right. Click the “Enter” button (the one on the screen, not on your keyboard!) to get a view of your city - or rather, what will soon be a city, as the case may be.
Note that there are buttons on both sides of the screen, with the left-hand buttons, “Stats” and “Built” providing identical information to what you saw on the previous screen. At the top of the screen some basic information is provided: - the name of the city, your BP, and the number of plots available. On the right side of the screen are more interesting buttons, “View” and “Build”. View merely lets you look at the area without the clutter of the Build UI, so click on Build to get to work.
Clicking on the “Build” button will bring up a list of structures available for construction, as well as a grid representation of where you can build these structures. Each building requires Build Points to create, as well as time to construct, another task you should endeavor to take care of between bouts of adventuring. In return, constructed buildings provide various benefits to the city they’re in, as represented by boosts to various kingdom stats. A Barracks will improve your Military might, a Shrine will increase your Divine rating, while Shops and Taverns will improve the Economy.
This is all rather straightforward stuff, but to complicate matters, some buildings have greater effects when one is built next to another (an Adjacent Bonus) while others will benefit so long as another building is located anywhere within the same settlement (Coexist Bonus). These bonuses can only apply once per pairing, so building a Smithy flanked by two Shops will not do you any good.
Also, some buildings can only be built in specific spots, and are usually color-coded to make this simpler to plan out. Walls can only be built in green areas (at the boundary of your settlement), a Pier must be built adjacent to water (marked by a blue square), and Windmills and Watchtowers must be placed on isolated squares.
As a further complication, as you build up settlements they’ll naturally get larger, for instance graduating from a village to a town. Larger settlements will allow for a more diverse selection of buildings to be constructed, and will also fortunately unlock more open building spots on your settlement grid.
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Don't go mad building. You will need BPs for more important things than the small stat boosts that buildings give. Trade deals are mostly not worth it - large expense of BP to gain a few extra BP each week. Do the math. One or two of them might be worth it. Mostly not.
There is a free Shrine available given by Ezvanki Keeg, High Priest of Erastil, if you passed a Diplomacy check back when you were made Baron (if you spoke to him there). He will turn up in your Throne room soon if you did and you can then build a Shrine for free in your Capital.
Start with; Bulletin Board (Lawful) +2 to resolving Problem events in the region (this is HUGE; a good reason to play as a Lawful character), Stocks (any Evil) +1 to resolving Problems. Other must haves; Piers, (Walls?) and then, when possible Aviaries (needs to be built in a Town and allows you to conduct Kingdom affairs from all neighbouring regions even if you don't control the region you are in. It also shaves a day off how long events take). Also build Teleport Circles/Mage Towers - there seems to be a random bug in the game still regarding these so I can't offer any definitive details on how you get them (Divine III plus Arcane II are spoken of as reqs in various forums, possibly Arcane III, but even then some people can and some can't build them!).
UPDATE: Found one post that mentioned having Magister rank II is a requirement. I guess that would involve a Throne room event to improve your Magister's skills.
In order to upgrade to a Town you must have at least 6 buildings in your Capital/Village (not counting Pier, Wall or Lighthouse) and control 3 Regions (total).
To build a 2nd Town you need 6 Regions (total) and 6 buildings in the Village you want to upgrade (not counting Pier, Wall or Lighthouse).
For a City, 9 Regions with 3 Towns (one being your Capital) and your Capital needs 16 buildings (not counting the 3 mentioned). If you get Varnhold it comes as a ready made Town so you can time your other settlement upgrades around when you get it and then upgrade your Capital to a City straight afterwards.
By all means build useful Kingdom Stat boosting buildings when you have spare BP but, always keep a healthy reserve of BP (minimum of 100, later on, more). Going into negative (there are events which auto deduct BP) is REALLY bad for your Kingdom. Buy to get back into positive immediately if that happens.
Economy boosting buildings are good. Artisan Workshops are a must - when you meet them & recruit them. Make use of additional stat boosts from the adjacency bonuses.
Your settlements get more building spaces when they upgrade to Town (20) and then City (40). You can demolish existing buildings and then rebuild them for free (you get half the BP back when demolishing but the rebuild cost is half = no cost) although it will still take the usual amount of time to rebuild them. You should be able to reposition buildings to make best use of adjacency bonuses in this way. Some upgrades take up more space (which means they now front a larger number of adjacent spots).
Bear in mind that there are several (4 iirc) different settlement layouts. Your later settlements will not have the same block set up as your Capital. When placing new Villages it is probably a good idea to Save beforehand and reload to try alternative locations to find the one you like best. All of them should be on a River however, for the Pier (good for Economy - very important).