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 ?
Sources said PM Nawaz Sharif while approving the feasibility report directed that plan be evolved to initiate this project as soon as possible that what measures can be taken for purchase of land and laying of railway track.
A feasibility report, containing all expenditures, is being prepared in this regard and will be sent to the Punjab government next week for approval", he added.
Therefore protection of this lake is the focal point of our feasibility report.
Khetaguri said that a tri-lateral agreement was signed on the level of ministers for the project and that a company was now being founded in Romania which would draft the feasibility report and then begin to search for investors to build terminals are related infrastructure in Georgia and Romania.
But the feasibility report says, ``The ecological factors do not pose an insurmountable obstacle to the scheme.
Permitting applications are in preparation and a full feasibility report may be completed within 24 months.
com/research/02e2f4/market_feasibility) has announced the addition of the "Market Feasibility Report - France Pharmaceutical Products Industry" report to their offering.
ISLAMABAD -- Feasibility report of Islamabad-Muzaffarabad bullet train service has been completed and briefing in this respect has been given to the Prime Minister (PM) Mohammad Nawaz Sharif.
Tenders are invited for Detailed Hydrographic Survey And Their Feasibility Report In Region I For The Proposed New Waterways
In a handout issued here on Friday, he said that feasibility report for Gwadar-Mastung railway line project had been prepared.
The final prospectus feasibility report from Industra Engineers Inc.