3 Main Components of a Build to Suit Development Feasibility Study
Even if it isn’t your first time, a build to fit development’s feasibility analysis phase could still be trickier than you believe. Let’s dissect it starting with the fundamentals and moving on to the specifics.
Real estate development feasibility studies are initial steps conducted to assess viability throughout the early stages of a new project. Its primary objective is to pinpoint any problems that can arise if a project is carried out.
A complete feasibility study is also important since it helps to gather the files required for submission to the municipality, including the project management plan, grading/drainage plans, and site drawings. Before issuing a loan, most commercial lenders will want geotechnical reports and an environmental site assessment (at least Phase I).
Here are the key elements of a build-to-suit real estate feasibility study, along with some additional tips on how to make it as effective as possible.
Detailed Description of the Property
Although a thorough description of the property is clear, are all the necessary details included? Included are the parcel number(s), the quantity and placement of parking spaces, including any designated spaces for the disabled, the concept plan, the land survey, and the aerial map.
Then you need to take it a step further and consider how it will affect other businesses and the environment, governmental incentives, competitive market and neighborhood research, zoning, and other elements. Checking for any concerns with neighboring property owners and active violations is a suggestion you don’t want to forget.
You should be familiar with the components of a comprehensive field study if you are self-developing the property. This comprises the subsurface and groundwater conditions overview, the geotechnical investigation report, laboratory tests, site geology, and earthwork, among other things.
Project Timeline
The likely project timeline is another aspect to look at during the feasibility research. The entitlement timetable, which includes the timing of the municipalities, meetings and hearings, submittals, and getting permissions to start construction, would be a significant influencing factor.
Making a list of the top problems could help point out things that could endanger the timetable. Installing a turn-in lane in traffic, parking variances, repainting, zoning issues, and utilities are examples of this kind of stuff (i.e., access, grading, hydrology, erosion, and septic).
The most important environmental studies required for every commercial development are the aforementioned Phase I, geotechnical report, and ALTA surveys. It is suggested that you allot at least two months.
Economic Feasibility
Of course, without economic support, a development feasibility study would fall short. Additionally, it is more thorough in a development feasibility study than it is in a company plan’s cost-benefit analysis. If you work with a professional developer, they will evaluate the potential property’s viability from an economic standpoint, take on the risk of site acquisition, and pay for construction costs while maintaining your rent at the pre-agreed upon rate.
This is because when project costs are entered, the developer makes informed assumptions. This could entail making building cost estimates, lender terms, consultant prices, and other fees based on previous projects. If you decide against working with a developer, you must decide whether the suggested financing and capital will be adequate.
A necessary site improvement illustrates a potentially negative discovery that can swiftly escalate expenses. It might concern sanitary sewer, water, electricity, telephone, high-speed internet, or water treatment. This will need to be considered while determining the economic viability.
As previously said, feasibility studies are essential for commercial development because they help you decide whether your next project will be viable. Whatever the project size, keep these components and pieces of advice in mind to evaluate data fast. Or, think about engaging a favored developer to complete the task in accordance with your particular concept.
Summary:
Real estate feasibility studies examine early project viability. Its main goal is to identify project-related difficulties. Even if it’s not your first time, a build-to-suit development’s feasibility research could be tricky. Let’s break it down using the three essential components and some additional advice.
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