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| Feasibility Studies |
The purpose of a feasibility study is to determine whether the objectives of the client will be achieved.
The feasibility study has to answer the single question “will this project work?”
Prior to embarking on any major development project, property owners, developers and lending
institutions need to be sure that the project meets a number of base criteria.
For any new development the following four criteria need to be considered:
Most Common Errors in Feasibility Studies:
The feasibility study has to answer the single question “will this project work?”
Prior to embarking on any major development project, property owners, developers and lending
institutions need to be sure that the project meets a number of base criteria.
- Is the development viable?
- Does the development meet an identified need?
- Where does the project ‘fit’ in relation to existing and future projected demand?
- How will the project stack up against its competitors?
- Who are its competitors and what are their strengths and weaknesses?
- What is the future likely competition and where will this arise?
- What are the clients expectations with regard to returns. Are these realistic?
- Are the overall objectives realistic or should they be amended?
For any new development the following four criteria need to be considered:
- Stake holder's concerns – will the project be a concern to the broader public. Although the
feasibility is primarily measured in relation to the client’s objectives, the success of the project
needs to be considered in light of the wider public, local authorities, etc. Particularly in light of
the Resource Management Act. - Property productivity – is the proposed use the ‘highest and best use’ of the property. Exactly
what income is the finished project going to provide. - Market characteristics – this part of the study needs to be very specific. It should analyse local
trends, absorption rates, occupancy & vacancy levels, rental estimates and any reasonable
future economic projections. - Proposed development – this covers off the detailed costing, cash flows and development
timing of the specific project.
Most Common Errors in Feasibility Studies:
- Costings are wide of the mark.
- Time is the developer’s enemy. Time overruns usually lead to budget blow-outs.
- Economic data and projections are incorrectly interpreted.
- Conclusions are overly optimistic. It is best to be conservative and consider profit above that
level to be a bonus.
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Innovation + Experience |
| PO BOX 9018, Wellington 6141 | phone: (04) 240-0124 | fax: (04) 232-4414 | email: valuer@ vcnz.co.nz Innovation + Experience |