A ‘feasibility study’ is defined as the process of undertaking an assessment to
identify the opportunities and risks of a property development project and to estimate the
projected costs, revenues and profit potential of the project.
The feasibility study is to be in a full report format, clearly describing the
project in all respects and it should include a financial feasibility, using either a static
analysis, dynamic analysis or DCF method of analysis
Static Analysis - With this approach costs are generally summated as at the
date of completion of the project and income is assessed as at the same date with allowances
for vacancies and letting up periods.This is the less complex financial analysis which is
suitable for preliminary feasibility studies and for calculating profit and risk or land
value. A static analysis assumes no change in prices or costs during the period of
A 'Dynamic Analysis' allows for potential movements in prices and costs
over the period of the development.
Discounted cash flow method - With this approach, both costs and income are assessed
over an appropriate time period and then discounted back to present value, generally being
the date of the commencement of the project. This is the more complex financial analysis that
should include interest rate calculations based on a 100% funded basis (an equity basis may
also be included if required).