Chapter 3: Feasibility Study in 
Development Process

Introduction
oDevelopershaveastrongintuitivef eelforaproject's
viabilitybasedonearlystages.Balancing Feasibility Analysis
oOverdoingthefeasibilityan alysiscan extendthe
developmentprocessandwastetimeandmoney.Elements of Cost Estimates
oLandcost
oSiteandinfrastructurecosts(on-siteandoff-site)
oDesignfees(architectureandengineering)
oHardcosts(laborandmaterials)
oEntitlementcosts(consultants,publicagencyfees)
oFinancingcosts(loancommit mentfees,intere st,
loanfees)
oMarketingcosts(promotion, advertising,lea sing
commissions)
oPreopeningoperatingcosts
oLegalfees
oAccountingandauditcosts
oFieldsupervision(inspection)costs
oOverhead
oPropertytaxes
oContingencies
oDevelopmentfees
Feasibility Analysis
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Features and Amenities ???????????????????Key Points of Graaskamp's Definition
oFeasibilityneverdemonstratescertainty
oSatisfyingexplicitobjectives
oExecutionandtimingmatter
oTestedwithinspecificconstraints
oBroaddefinitionbeyondvalueexceedingcost
Initiating the Feasibility Study
oA typicalfeasibilitystu dyincludesanex ecutive
summary,marketstudy,re venueprojections,
preliminarydrawings,maps,costes timates,
financinginformation,gove rnmentconsiderations,
andvalueestimates.Maps, Drawings, and Other Visuals
oMaps,drawings ,andothervisualsshowthel ocationan d
siteofthed evelop menttoori entreviewers.Architectural
renderingsandphotographso fthesubje ctproperty,as
wellascomp lement aryandcompetitiveprojects,help
completethevisualsummary.Complex Project Example
oExample:A5,000-acremas ter -plannedcommunity
(MPC).Involvesex tensiveinfrastructure,lo ng-term
trends,andnumerousp rofession alssuchas
architects,planners,andengineers.Steps in a Market Study
oExaminenationaleconomicconditions
oSegmentationofthepopulationfore castan dthejobgr owthforecastisusuallyan
extremelyimportantpartoftheanalysis.oInvestigatecomparableproperties
oTode terminethefeatures,function s,andbene fitsofthosepropertiesthatar e
importanttothemarket.oProjectabsorptionschedules
oHowmany unitsatwhatp riceoverwhattim eperio dwillthetarg etmarketbelikel y
toabsorb?Communication with Contractors
oDiscussingcostestimateswi thcontractor sand
subcontractorshelpsrefinepr ojectdetails,makin git
moreattrac tivetotenants,lessexpensiveto
construct,andmorecost-effectivetooperate.Critical Analytic Elements
oSensitivityanalysis
oReviewofrisks,wi thappr opriateriskmanagem ent
techniques;and
oConfirmationoffeasibilityforeachparticipant
The Market Study
oThemark etstudyisthebasisofthefea sibili ty
analysis.Consistency and Teamwork
oUsingthesamearchit ectandengineerthroughoutthe
entireprocesshel psmaintainconsistency ,minimizes
learningcurves,andprom otesunderstandingofth e
developer'sobjectives.Responsibility for Management
oDeterminingresponsibilityiscruc ial:Isitthe
developer,thetenant,orhasthe riskbeenp assedon
throughanuncondi tional presaletoalong-term
investor?Definition of Feasibility
oA realestatepr ojectis'feasible'whenitsati sfies
explicitobjectiveswith inspecificconstraintsand
limitedresources.Preliminary Drawings