A development opportunity can look great on paper. The location is right, demand appears strong and the numbers look promising.
But before committing capital or acquiring a site, there’s one important question to answer:
Does the development actually stack up?
Project feasibility is about looking beyond the headline figures to understand whether a scheme remains commercially viable once the costs, timescales, risks, funding and potential returns are considered.
Here are some of the key areas every developer should assess.
Start With the True Acquisition Cost
The purchase price is only part of the cost of acquiring a development opportunity.
Legal fees, surveys, due diligence, taxes and early-stage expenditure should all be factored into the appraisal. Site-specific considerations such as access, utilities, planning requirements and ground conditions can also introduce unexpected costs.
Understanding these from the outset gives you a much clearer picture of the project’s true starting position.
Get the Build Costs Right
Construction will usually represent one of the largest elements of the development budget, so realistic cost planning is essential.
Alongside the main build cost, consider groundworks, utilities, external works, specification and potential changes in labour or material costs.
Professional fees also need to be included, from architects and engineers to quantity surveyors, planning consultants and project managers.
The more accurately these costs are understood at the beginning, the more reliable the overall appraisal becomes.
Allow for the Unexpected
Even well-planned developments can encounter unforeseen costs or delays.
A realistic contingency helps protect the project against issues such as unexpected ground conditions, design changes, construction delays or cost increases.
It’s not about assuming something will go wrong. It’s about making sure the development can remain financially resilient if circumstances change.
Be Realistic About GDV
Gross Development Value (GDV) is a key part of determining whether a development is commercially viable.
Expected values should be supported by comparable evidence, local demand, specification and current market conditions rather than relying on the most optimistic outcome.
It’s also worth stress-testing the numbers.
What happens if values are slightly lower than expected, costs increase or sales take longer?
If a relatively small change significantly impacts the projected return, that may highlight a risk that needs addressing before progressing.
Factor in Time and Finance
Time has a cost in property development.
A delayed programme can mean additional finance costs, professional fees and site overheads, as well as pushing back the eventual sale or refinance.
Funding should therefore be considered from the beginning rather than once the project is underway.
Understanding how much capital is required, when it will be needed and how it will be repaid can help determine whether development finance, bridging or a joint venture structure is most appropriate for the opportunity.
Know Your Exit
A strong appraisal should consider the end of the project as carefully as the beginning.
Will the completed development be sold, refinanced or retained as an investment?
Having a clear exit strategy can influence decisions around funding, specification, programme and the amount of capital committed to the project.
It can also provide an alternative route if market conditions change during development.
Look at the Whole Picture
No single number determines whether a development works.
Acquisition, build costs, professional fees, contingency, GDV, programme, finance and exit all need to be considered together.
A project may appear profitable based on the headline figures, but a detailed feasibility assessment can reveal where margins are vulnerable and where risks need to be managed.
The earlier those questions are asked, the better informed the decision to proceed will be.
How Unite Can Help
At Unite Group, our property business consultancy combines commercial strategy with practical development expertise.
We support developers with project feasibility, development financial planning, project and risk management, quantity surveying and procurement, helping clients understand the commercial position of an opportunity before significant capital is committed.
And with experience across consultancy, development and property finance, we can look at an opportunity from more than one perspective.
Because finding a development opportunity is one thing.
Making sure it stacks up is another.
If you’re assessing your next development, speak to the Unite team about how we can help you evaluate the opportunity and determine the right route forward.