feasibility study

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feasibility study

An analysis of the marketplace to determine if it is economically practical and desirable to develop a particular project. Contrast with a market analysis, which merely identifies whether a defined market or trade area desires what you propose to build. A market study determines demand for the real estate development;a feasibility study determines whether that demand is willing to pay what the project will cost,plus a profit.

Example: The demand for first-class office space in downtown Elm City exceeds the available space. There are no vacancies, and potential tenants must take space in the suburbs or settle for less desirable space downtown. The market analysis determines that a market exists for a new midrise office building. The feasibility study then analyzes all acquisition and construction costs, the length of time until a new building would be at break-even occupancy, the cost of funds for construction financing, and the expenses of operating such a building. According to the feasibil- ity study, the building would have to command rents in the range of $28 to $30 per square foot per year in order to be a viable project. Current market rents downtown for similar space range between $19 and $23 per square foot per year.

This constitutes the feasibility study—what will it cost,what must I charge,what will the market pay? The portion of the study that asks “What will the market pay”is the portion with the most risk, the most in need of salesmanship when one is talking to lenders and investors,and the truest test of a seasoned developer with good instincts. In the preceding example, the market may very well respond positively to a new building with rental rates significantly higher than anything else downtown.On the other hand,it might not.One has to choose,in the end,after all the analysis has been completed.

References in periodicals archive ?
The feasibility analysis will highlight the costs required and will compel the seller to consider whether they are willing to pay for the repairs or hand the property over to a buyer to complete the property upgrades.
Feasibility analysis assesses the possibility of a project's completion, including technical possibility, financial feasibility and various social factors.
Each training recipient was asked (he or she knew this in advance) to use their newly gained knowledge by: (1) training an additional 10 technical assistance providers in their state, and (2) presenting a feasibility analysis and a business plan for a designated agricultural marketing cooperative in their community.
Therefore, a feasibility analysis should also consider certain ownership and capitalization issues.
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Over the next approximately six months, the four institutions will work closely with the LMDC to conduct a detailed feasibility analysis of their proposed programming, funding capacity, and space requirements.
In the end, this report discusses the 4 Million Boxes/year Human Use Rabies Vaccine project feasibility analysis and investment return analysis and gives related research conclusions and development trend analysis of the industry.
The scope of services includes providing the Village with a market feasibility analysis of development for both the Downtown and Uptown areas.
Tom Montvel-Cohen, a real estate and economic development consultant, has been hired to conduct a market and feasibility analysis -- jointly funded by City Council member Kenneth Fisher and the Downtown Brooklyn Council -- to examine redevelopment of the Bond Street parking garage located on the corner of Bond and Livingston Streets in Downtown Brooklyn.
Finally, the report discusses the 10K Sets/year Linear Guideway project feasibility analysis and related research conclusions.