What are the key components of a feasibility study for a CRE development?

As someone who has worked extensively with analyzing development opportunities, here are the main questions you need to ask at the beginning stages. Demand - Is this a growing market or declining market? - What is the population growth, and what are the demographics moving in? - Are new companies emerging in or being relocated to this market? Employees will follow the move and generate demand. Supply - What are the competitive projects already in the market? - What are emerging projects that are currently under planning, entitlement, and construction? Capacity - How easy is it to do business? What is the political attitude like? - What advantage do you have to develop in this market?

A feasibility study for a CRE development includes several key components. Market Analysis evaluates demand, supply, and competition. Site Analysis examines the location's suitability, including zoning and environmental conditions. Financial Analysis assesses costs, revenues, and profitability, often using DCF models. Regulatory Review ensures compliance with local laws and permits. Risk Assessment identifies potential project risks and mitigation strategies. Together, these components provide a comprehensive evaluation of a project's viability and inform strategic decision-making.

Software: Use AutoCAD for drafting, SketchUp for 3D modeling, and Revit for detailed architectural designs. Site Tools: Employ GIS for site topography and Google Earth for initial site views. Visualization: Apply 3ds Max for high-quality renders and VR platforms like Unity for immersive walkthroughs. Prototyping: Use 3D printers for physical models. Consultants: Engage architects for aesthetics, urban planners for spatial integration, civil engineers for site logistics, and environmental experts for impact assessments. Local Knowledge: Understand local zoning, land development use codes and the design guidelines described. Experience: Rely on past design experiences for insights and best practices.

Something often overlooked is the university talent pool. For a first-time developer or investment syndicate, there are a plethora of costly services and tools for this aspect. Most are worth it and quality, but not always feasible (pun intended) with a limited budget. Architectural students, engineering design students, visual or graphic media students, etc. all potentially offer quality rendering capabilities for much more affordable rates. They usually love the opportunity for resume/CV development, and a team of 2-3 will often cost less. Great for initial renderings and or for first drafts.

Software: Utilize Microsoft Excel for financial models and Argus Enterprise for property valuation. Valuation Tools: Apply the Cost, Sales Comparison, and Income Capitalization approaches. Data Platforms: Leverage CoStar, LoopNet, and Reonomy for market data and trends. Management Tools: Use software like Procore to estimate capital expenditures. Financing: Understand various loans and engage with local and national lenders. Analysis: Conduct cash flow forecasting, including rental incomes, expenses, and vacancy rates. Metrics: Calculate IRR, NPV, and Cap Rate for investment returns. Consultants: Engage CCIM professionals, appraisers, and accountants with real estate expertise.

Look at historical uses via aerials and topos, research the state dept of environmental quality GIS for onsite and nearby issues that could impact your site, factor in potential asbestos abatement costs if demolition is occurring.

This is one of the most important pieces! I love to take on risk, but you should absolutely have an analysis for the challenges you will face (there is ALWAYS challenges).

This answer might be unsophisticated, but I feel like it's a superpower anyone can use. The $50 steak. Over the millions of dollars of deals we have done so often, the turning point has come over lunch. Build a list of the vendors, local experts, and other professionals in the area likely to know feasibility inputs because of their years operating and making conneciotns there. All of those people are likely very busy, but everybody eats lunch. If you can get a hold of them and offer to buy them lunch somewhere more expensive than they would typically spend on themselves, you can get thousands of dollars of insight for the cost of a $50 steak. Then, we hire our favorite ones to become our local vendors.