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Feasibility Studies – A must for Property Investment

24th January, 2020

A feasibility study is an early stage assessment into the viability of a project to meet the end needs of the developer. In the case of a property developer, the end needs of a development are profitability if selling the developed units or the rental yield produced by the units.

In many cases, an address for the project and a basic dimensioned sketch highlighting the approximate number of storeys and the Gross Internal Floor Area (GIFA) are all that is required for a quantity surveyor to provide a feasibility study.

The feasibility study allows the developer to assess the viability of the project for a minimal cost. If the results of the study are positive the developer can then proceed to get planning drawings completed by the architect and begin to progress with their project with relative confidence that the end result will be profitable for them.

The quantity surveyor will use cost data from previous projects, BCIS, Spons etc. to provide an elemental cost analysis for the client. This will consider location, likely method of construction and costs associated with these. The Elemental Cost Analysis would look something like this:

These outline costs can form the project budget with a target cost to meet in each element of the design. The quantity surveyor will then remain in-situ throughout the project providing cost advice and cost control to the project in the post contract phase, ensuring the project stays within the forecasted budget.

The most important cell in this spreadsheet is the cost per unit value. If a unit is going to cost £277,127.52 to construct but is worth £400,000 for the developer to sell then the development is economically viable, the client should proceed with planning drawings and get the financial commitments put in place. Adversely, if the unit is only worth £280,000 for the developer to sell they should pull the plug on the project, only being out of pocket a small amount for the feasibility study.

This highlights the critical importance of conducting a feasibility study, giving the developer peace of mind that the development makes financial sense.

If you require help finding a suitable company to provide you with an affordable feasibility study please get in touch with us. mail@thequantitysurveyor.com

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