Welllll, I actually have a background in architectural model making, so I might be able to shed some light on the process. I used to work for Presentation Studios International, in Chicago, and we built presentation quality models for architects' real estate clients. As with many crafts these days, the process starts with the computer.

Once we received drawings from the designer, we would lay out parts and laser cut acrylic for everything from large wall and floor plates down to tiny bits that get glued together. Everything was then cleaned up, squared up and fitted by hand, assembled and painted. We would have a stock of scale figures, cars, and landscaping elements to add a bit of life to the building, but since these models were intended to show off a crisp, new design, we didn't overdo it with the "life" around the building. 

Here are a couple photos of models built at PSI. The people in the model are about the size of your fingernail, which is a much smaller scale than the sets above.