Introduction
The construction industry has been booming for the last few years across the globe. Real estates, housing plots and residential flats occupy a major role in the economics of a country. At this juncture, property development is gaining more and more popularity among the populace. A large number of projects are available nowadays and hence the process of selection of the best alternative calls for careful analysis. Projects are usually analyzed using feasibility studies. Feasibility studies can be undertaken in many ways and financial feasibility is one of the most popular ones. In a financial feasibility study, projects are evaluated in terms of the economic benefits, which are compared against costs to find the best project. (The Economics of Property Development).
Property development is usually carried out in line with customersâ/clients, property requirements. It is an essential operating tool for the clientsâ business. The traditional property developers used to sell the freehold lands to those affordable to pay for it in much the same way as financial securities are traded. âThe investment value of a property is the product of its market rental value and the reciprocal of the negotiated investment yield.â (The Economics of Property Development).
The present essay dwells on the intricacies of the economics of property development and its valuation. The essay used the previous yearâs data of scheme A for developing cost estimation and feasibility analysis for a new plan- Scheme B. In the feasibility analysis, the time value of money concept has been applied, which converts the future benefits from the property into its current value so that comparison will be possible for money occurring at different points of time.
Desk study to show planning position
This is one of the commonly used methods for gathering data on a certain phenomenon without any physical exercise. When compared to other modes of collecting data, desk study is relatively a cheap way of gaining a large amount of data. This part of the paper examines how to gain data on property development projects using desk data. One of the advantages of desk study is that ground related hazards can be ascertained at an early stage. âA rapid desk study carried out before purchase of land can often detect unknown factors that could push up the cost of development. Most project delays and cost over-runs are due to âunforeseen ground conditionsâ being encountered once construction works have commenced on site.â (Desk Studies). A typical report of a desk study on property development includes data on âSite history, Geology and geomorphology, Groundwater, Topography and drainage, Vegetation and land use, Underground features such as existing foundations, services or tunnels, Archaeological potential, Contamination, Geo-hazards and Seismology.â (Desk Studies).
BCIS Data Hosting
The analysis of construction projects is performed by all construction consultancies in conformity to the previous data which have been collected and recorded systematically. However, some firms find it hard to capture such data and its proper recording, especially those having several offices/branches across different locations. BCIS has a data bank that collects processes and maintains data for the use of similar projects in the future. The data analysis on the project should always revolve around the similar project of the same firm or similar firms. As per the official sources of BCIS, the data hosting solution of the company is a unique one as it is characterized by the following:
- âA consistent record of all of the firmsâ projects
- Benchmarking of the firmsâ projects to industry averages
- Provision of cost analyses to clients
- Availability of cost analyses in an exportable form compatible with most QS cost planning software
- Ability to apply the power of BCIS Online search, updating, adjustment and statistical analysis facilities to the firmsâ data
- All cost data validated by BCIS
- Links to in house project recordsâ (The Bcis Data Hosting Solution).
Table 1. Benchmark the Initial cost estimate against BCIS data:
The above table exhibits that the total cost of scheme B comes to 16304147, which is far better than Scheme B. The cost per M2 GIA is 2717.358. Among the various costs incurred for the property, the cost for External walls, which uses High Quality Curtain Wall, is the maximum that comes to 3580200. The lowest cost incurred is for developing Car Parking facility and it amounts to 2040. For preliminaries and contingencies 12% is reserved. The payment to local authority is 250000. The maximum per unit cost incurred is for passenger lifts that amounts to 36000. The lowest per unit cost incurred is for installing fire fighting installations and incoming mains and services.
Analysis of Lifecycle cost estimate
It is clear from the above analysis that the life cycle costs occurring at various time points of the project in future. In the analysis time value of money (TVM) concept has been applied, which converts the future costs from the property into its current value so that comparison will be possible for costs occurring at different points of time during the life cycle of the project. In the analysis, al future costs have been converted into present values using the Present Value Factor for corresponding years and interest rate. The present value factor is identified from that table for 55 years for ÂŁ1. These factors are multiplied with the concerned cost to get the present value. The project has a life span of 55 year and is likely to be demolished in the year 60. During the demolition period also, the project incurs certain costs, which comes to ÂŁ24,300. The areas where costs have been incurred include internal recondition, gasket renewal, refurbishment, renewal of services, and demolition expenses.
Proposed design and specification changes (Scheme B)
The gross internal area of 6000m2 is permitted. The planners permitted maximum 6 storey high. The building must respect the medieval church and existing neighboursâ rights to light. There must be parking faculty for vehicles underground. To ensure proper construction an archaeological investigation is advised before work is commenced. Inner city redevelopment site with piled foundations, high water table within 1.5 m. Sub soil is alluvium, so single storey basement on raft (inc. sheet piling) required to spread load, counteract height. Basement not required if height reduced to 4 storeys Speculative medium rise sanitary, water and disposal system. Speculative – full air conditioning VAV ductwork, Electrical mains and sub-mains, landlords lighting and power, High quality speculative, lighting and power, 4No 8-10 person passenger lifts Firefighting installation-hose reels and dry risers, General builders work with air conditioning, lift and electrical installation.
Work Cited
Desk Studies. Geotechnics. 2009.
The Bcis Data Hosting Solution. BCIS. 2008. Web.
The Economics of Property Development. Trilogie. 2008.