What Is A Feasibility Study?
In real estate development, a feasibility study is an analysis that determines whether or not a real estate development project is viable for a given location given internal and external constraints in a given environment. The study tells the real estate developer the likelihood of a development project coming to completion and whether the value of the project exceeds its costs.
Why Conduct A Feasibility Study?
Real estate developers, investors, and financial institutions need to know if a development project is possible and profitable before they go too far. Commercial real estate development projects are ambitious endeavors that require enormous investments of time and money.
The feasibility study provides them with the information, analysis, and economic projections that let's them assess the costs, risks, and rewards of moving forward with a project or investment. The wrong decision can result in large financial losses and legal liabilities that a proper feasibility analysis can help avoid
What Does A Feasibility Study Cover?
The feasibility study puts pen to paper to identify and quantify all the aspects of a development project that must come together. Feasibility studies can include a market analysis, financial analysis, evaluation of the legal and regulatory environment, and architectural and engineering concerns.
The scope of the feasibility study will depend on the project and the parties involved. However large or small the development project may be, the feasibility study begins to bring together all the facets of a real estate development project together.
At the conclusion of a feasibility study, all parties should know whether there is a viable path and if there is the possibility of a beneficial result in pursuing a commercial real estate development project.