We get a lot of questions about feasibility studies, so we thought we’d gather some of the common questions:
What makes a feasibility study accurate?
Feasibility studies are a crucial aspect of any property acquisition and are often the centerpiece of a sale. That’s why developers need reliable studies that dig deeper to provide valuable insights and help them make better financial decisions.
It's not enough just to consider the typical deliverables—a good feasibility study not only provides baseline yield information, it anticipates future programmatic and design decisions that might otherwise erode. A gut check, based on experience, ensures the study provides information that a developer can use with confidence to make sound investment decisions.
While standard parameters—like height, number of stories, rentable area, and parking and unit counts—are important, they alone don’t guarantee reliability. To produce results you can trust, it’s essential to evaluate components like efficiency and building massing for the most accurate analysis.
How do you get to maximum efficiency?
Determining the net-rentable to gross-building area ratio is a key step in determining a study’s accuracy. A desirable efficiency for a building typically falls between 0.83 and 0.89. Studies that show an efficiency greater than .90 should be taken with a grain of salt, as they may not account for all of the back-of-house and service areas that a modern building requires.
The shape of the building will determine the number and type of residential units that are possible, and flawed assumptions could commit a developer to a unit mix they may not want or produce non-viable areas that can’t be rented or sold, resulting in wasted space and money. For example, a structure that exceeds 75-80 feet in width can accommodate studios and open or urban one-bedroom units, but it creates oversized and inefficient one-bedroom units. Two-bedroom units are suited to the outside corners of a building, but adding wings and projections may also create inefficient inside corners that are difficult to use.
How do you know a feasibility study is right?
Clients have shown us studies they previously commissioned that have unrealistic yields or that don’t take full advantage of the site. Studies like this could cause our client to pay too much for the site or to miss out on a great opportunity. We have extensive experience in multifamily that we can bring to bear on accurate, insightful studies that allow our clients to make well-informed decisions.
How does building massing play into this?
Let’s say you have a site that is 100 feet wide, and you had zero setbacks and so in your feasibility study you designed a multifamily building that’s 100 feet wide by, let’s say 300 feet long. It’s a long block. That doesn’t work because your ideal building size is a double-loaded building with a corridor down the middle and units on both sides. If you go with anything larger than about 75, or 80 feet, then you end up with non-saleable or non-rentable area in the building. The units are just too deep. And every square foot beyond a certain amount, the developer will be giving away for free.
The building's shape and size need to fit the site so that the building does not have too much mass to envelope, resulting in deep-dwelling units. For an efficient building with enough exterior wall for vents and windows, you need to balance the ratio of envelope to mass. With this balance and reasonable unit design, you will generate quality, rentable units.
Reach out to Michellek@tiscareno.net if you have a site to look at.
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