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 report concludes, ``The capital cost of the full scheme would be almost pounds 55m but this could be reduced by pounds 4.
According to the official sources, feasibility report had been prepared to link all feeder/speedo transport routes to Metro Bus Service and Orange Line Metro Train corridor.
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.
This feasibility report gives exporters in developing countries information on some main developments in the pharmaceutical products market in France.
LAHORE -- The Punjab government has finalised a 'modern travel facility' feasibility report according to which 1574 air-conditioned buses will be plied on 122 routes in eight phases in the provincial capital.
According to a spokesperson of the education department, funds will be allocated after the approval of feasibility report.
RAWALPINDI -- Small Dams Organization has demanded Rs 48 million for the preparation of feasibility report of Dadu Chah Dam after taking formal approval from District Administration(Distt Admin).
A spokesman for education department said here on Saturday that, the secretary schools education had also directed districts administrations to formulate committees to conduct survey of these schools and forward feasibility report within a month.
Development of In-plant Rail Layout and Junction Arrangement with Indian Railways Preparation of Feasibility Report and obtaining approval from Railways Obtaining Rail Traffic Clearance from Railway Board
It is pertinent to mention here that Rs110 million was allocated for Polyclinic expansion project in 2016-17 Federal Budget, however, Rs 100million could not be released for want of feasibility report.
Due to non issuance of NOC, construction work has not been started on site, while Rs 40 million will be spent on feasibility report and more than Rs 7 billion on the construction of dam.
ISLAMABAD -- Pakistan Museum of Natural History,(PMNH) will submit feasibility report for Construction of six new blocks soon following that new PC-1 would be prepared.