Part 2: Construction Feasibility Studies

In the first part of this continuing article, I introduced and discussed construction feasibility studies. I also discussed some of the advantages that a developer stands to gain by having a feasibility study carried out before construction work begins. The main purpose of carrying out feasibility studies, as was pointed out, is to establish the viability of a construction project. With that in mind, what then are the contents of a properly conducted feasibility study? This article outlines some of the major contents of a construction feasibility report prepared by us – Goldberry Investments Ltd. Read on.

Project Analysis

The first part of a good feasibility study is analysis of the proposed project concept, its location and suitability of the location, compatibility with surrounding land uses, among other things. The project analysis has to be spot on otherwise the developer will end up with a development or location that does not match the end users’ needs. Our consultants, while undertaking the feasibility study, will also look at the technical aspects of the proposed location and examine whether there are any special conditions on the proposed land. Some of the technical considerations to be examined include soil type and condition, topography and rock depth.

Market Analysis

This is the second part of a good construction feasibility report. After carrying out a comprehensive analysis of the construction project, our consultants will then proceed to examine project suitability to the target market. They will analyze market and demographic trends, establish the target market’s income levels and employment trends, comparative prices of similar property, interest rates, taxes and future projections. These processes will be done once a target market is established. If the client does not have a target market in mind, then our consultants will first help him or her identify one by preparing market segmentation reports. In addition to that, Goldberry’s consultants will examine the existing supply to the target market and future planned supply in the market.

Financial Analysis

Once the analysis of the market is complete, our consultants will proceed to prepare cost estimates of the construction project based on our cost indices. Usually, the main objective of developers is to gain profits from their developments once they are complete. Our consultants will therefore not stop at the cost estimates of the construction project. They will proceed to prepare projections of expected sales, expected rental prices and expected income. If the client has not identified income sources for her development, they will also identify appropriate financing sources and structures they should adopt. A comprehensive financial analysis should also determine the amount of risk they will be exposed to while undertaking the development.

Political and Legal Analysis

This part of the feasibility study will include analysis of the prevailing and anticipated political climate of the development’s location and an examination of applicable laws and regulations. This will ensure that the developer is compliant with zoning and environmental regulations, planning regulations and any other policies affecting the development.

Conclusion

These are some of the major components of feasibility studies prepared by Goldberry Investments Ltd. As pointed out earlier the purpose of feasibility studies is to establish the viability of construction projects. The answer to that core question will either be positive or negative. A positive feasibility means that the developer has a green light and can proceed with the next development steps. A negative feasibility study means that there are still issues that need to be clarified and proceeding without solving them could potentially be disastrous. The next time you or your friends intend to undertake development of real estate, you will be doing yourself a favour by seeking to have feasibility studies carried out first.

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