CHAPTER TWO

REVIEW OF RELATED LITERATURE AND STUDIES

In this chapter, the researchers considered the result of various studies and scientific facts

from published documents to find a fervent probability of the success or failure of the study.

Furthermore, the content of this chapter includes related literature and studies from foreign and

local sources coherent to the subject matter.

2.1 FOREIGN LITERATURE

TITLE: TYPES OF COMMERCIAL BUILDING

PUBLISHER: CCPIA

TYPE: Article

A commercial property is defined as a building, structures and improvements located on

a parcel of commercial real estate intended to generate a profit. Touring different properties and

considering their use can help prepare you to accurately price and develop a general procedure

for your commercial property inspections.

Below is a list of the different types of commercial properties and their subcategories.

Industrial: These buildings typically have considerable square footage, loading docks for trucks,

several HVAC units, and several points of electrical distribution, an easily accessible flat roof,

and other installed features. Some industrial buildings may also have large, refrigerated spaces.

Subcategories include:
Manufacturing Facility: This type of building is used to produce goods or materials and is

categorized as either a heavy manufacturing facility or a light assembly facility. A heavy

manufacturing facility tends to make heavy-duty products and has large machinery and

equipment. These facilities are typically renovated and customized for specific owners and

tenants. A light assembly facility tends to be smaller and simpler than a heavy manufacturing

facility. These facilities also produce smaller goods.

Warehouse: This type of building is used for general storage and distribution of goods. The

layout tends to be an open space, where the ceilings open to the roof’s interior structure. This

helps to accommodate high freestanding or installed rack systems. Some warehouse spaces may

be dedicated truck terminals, where goods are loaded from one truck to another, and have less

square footage for storage space.

Flex: A building that combines more than one use in a single facility is considered a flex

commercial property. An example is an office space combined with and a light manufacturing

facility. The identifying factor for this type of property is the amount of office space. There is

always more office space in flex buildings than in other types of industrial properties.

Retail: This type of property is where goods and/or services are sold to customers. An

inspection of this kind of property could entail evaluating just one unit or an entire retail

complex. Most retail spaces have ample parking areas and bordering sidewalks, while some

may have escalators, elevators, and covered parking structures. Subcategories include:

Mall: This type of retail space is an enclosed shopping center that has many different outlets

that may include department stores, food courts, and movie theaters.
Shopping Center: This is type of property is also commonly referred to as a shopping plaza or

strip mall and can vary greatly in size and tenant type. These are open storefronts that have

several units under one roof or within one complex. Shopping centers are often home to big-box

stores (like Home Depot and Target), along with other smaller shops, restaurants, and

convenience stores.

Pad Site: A pad site is a standalone building, commonly in front or within a shopping center,

and its business types often include fast food chains, banks, and restaurants.

Office: A commercial office is a property that is used by business professionals, medical and

dental professionals, tech firms, and more. A standard office space is divided into separate

rooms, and typically includes restrooms, and a possibly a residential-style kitchen.

Subcategories include:

Office Building: This type of space is designed for higher occupancy and can range in size from

a single-story building to a high-rise. It can contain several electrical and HVAC systems, and if

the building has multiple levels, then at least one staircase, and perhaps also an elevator.

Suite or Condominium: These structures are generally built with the concept that the exterior,

roof and common areas are maintained by the owner or property manager, while the various

interior spaces are owned or leased and maintained separately by their tenants. These separate

areas could be a unit, a floor, or a wing of the building. It could also be a unit within a shopping

center or industrial complex.

Medical or Dental Office Suite: This is generally a larger space that’s divided into several

smaller spaces, including offices and exam or treatment rooms. There are typically also a
waiting room, restroom(s), HVAC unit and controls, electrical system, and multiple plumbing

basins or points of plumbing distribution. The size and complexity of such spaces can vary

greatly, and it is also common for these spaces to contain customized and permanently installed

structures.

Multi-Dwelling Unit (MDU): This includes residential properties such as condominiums,

apartment buildings and townhomes. The interior of each individual dwelling unit may be

familiar to a home inspector, but a commercial inspection for this type of property will require

you to inspect more than one dwelling unit and possibly its common areas, which may include a

communal pool and spa, and parking structure. The intricacy of this project will vary and

depend on the size of the property and the scope of work for the inspection. However, this type

of commercial inspection will likely come more naturally to a home inspector.

Luxury Home or Estate: Although a luxury home or estate is still technically a residential

property, these properties may be designed and built with commercial applications or contain

commercial features, such as substantial square footage, multiple HVAC systems, and

commercial kitchen equipment. This type of property inspection may also require you to

provide your services with great discretion, as your client may be a public figure, professional

athlete, or celebrity. In this situation, confidentiality is of the utmost importance. For example,

posting photos of the property or using any portion of your inspection report as a sample report

on your website would violate the norms of discretion.

Hotel and Lodging: Similar to a multi-dwelling unit, this type of property will entail several

individual residential units. The biggest difference is that lodging is designed for temporary

occupancy and will usually include a large commercial kitchen or on-site restaurant. Before
inspecting a commercial kitchen, check your E&O insurance policy because commercial

kitchens are often excluded in a home inspector’s insurance coverage. Some units, however,

may be suites that include multiple rooms, a kitchenette and/or a wet bar, and possibly also an in

room Jacuzzi or spa. It’s likely an elevator will be present.

Restaurant: This type of property will vary in size and complexity but will generally include a

large kitchen with commercial appliances, a storage room or pantry, a refrigerated space (such

as a walk-in refrigerator and/or freezer), an office, the dining area, and public restrooms. Before

inspecting a restaurant, check your E&O insurance policy because restaurants are often excluded

TITLE: MIXED USE BUILDING: MAKE THE MOST OF YOUR BUILDING

PUBLISHER: Urban Hub

TYPE: Article

Rapid growth in urban centers continues to spur planners to create new solutions. Some

old ideas, however, are being dusted off and given a modern update. Mixed-use buildings and

developments go back to ancient times. Today, no planner can get away with simply designing a

stand-alone office or residential building. The mixed-use building not only sustainably utilizes

resources and precious space, but also provides city inhabitants with neighborhoods that

integrate work, home, shopping, transportation, and even green spaces. The concept also allows

planners to flexibly adapt building uses as times change. Urban Hub takes a closer look at some

inspiring mixed-use buildings and the benefits.

Mixed-use buildings aren’t a novel concept at all. Traditionally, humans settled in mixed-

use patterns, pooling all their resources into one central area. Historical examples can be found in
the old market squares of ancient Rome where shops, apartments, administrative offices, and

often a library were intermixed.

The industrial age, however, brought new zoning laws and a stricter division between

living and working spaces. The emergence of the car reinforced this trend, bringing with it an

acceptance of traveling long distances between home, office, and shopping and an exodus from

city living to suburban life.

But now developers are once again embracing mixed-use development. People are

returning to cities, and high-density development is trending. In addition, a relaxation in mixed-

use zoning laws since the 1990s has helped to pave the way for architects and city planners to

develop creative concepts that fulfill a variety of city dwellers’ needs in a single location.

Mixing up the formula

A mixed-use building aims to combine three or more uses into one structure such as

residential, hotel, retail, parking, transportation, cultural, and entertainment. Whatever the

combination, it brings together several uses within either one building or a small area. The two

most common forms of mixed-use design are:

Vertical. As a single, multi-story building, a typical mix places apartments on the upper levels

and retail or offices at street level. A basement level provides parking and/or access to

underground public transportation.

Horizontal. Spread over several buildings, such as a city block or around an open space or

courtyard, these individual buildings serve one or two specific uses while creating a microcosm

within a neighborhood.

Mixed-use building is good for the neighborhood

As urban populations boom, the pressure for buildings to “do” more with less increases.

Yet, a successful design for mixed-use development comprises more than cramming as much as

possible into one building. It must bear in mind the needs of its future occupants as well as its

impact on its surroundings and how the wider neighborhood can profit.

When a mixed-use building or development seamlessly adapts to its context, the combined effect

is greater than the sum of its parts. Some benefits include:

 Greater housing variety and density

 Better energy efficiency and sustainability

 Stronger neighborhood character

 Better integration with city services, like public transportation

 More flexibility to adapt to changing needs, thus increasing the building’s long-term life

cycle

Mixed-use planning can transform a business district that closes down at night into an area that is

vibrant around the clock. It can bring people together who normally wouldn’t meet, take cars off

the street, and even provide much-needed oases of nature.

Access control and movement in mixed-use buildings

 Mixed-use buildings always need some kind of access control system to ensure that

residents, hotel guests, shoppers, and business people only have access to common areas and

their own private areas. Transportation solutions play a major role in keeping these areas

separate while getting people to their destinations as quickly as possible.

An “elevator enhancer” can assign users with access permissions and preferences to a

certain part of a building like a hotel or a business. Smart elevator systems help curb peak rush

times by predicting elevator traffic while also ensuring private access to residential areas –

guaranteeing security, speed, and efficiency in a shared building.

Vía Vallejo in Mexico City: inviting mixed-use solutions

Vía Vallejo integrates commercial, residential, health services, and a hotel on a site about

the size of a city block in the heart of Mexico City. In designing the mixed-use development,

planners enhanced the area with numerous terraces, fountains, and walkways. The result is an

inviting combination of indoor and outdoor spaces for residents and visitors.

Mixing it up is the way to go

A building with multiple uses that adapts to the needs of its surroundings supports the

creation of neighborhoods that are diverse. Mixed-use buildings do more than save resources,

although sustainable building is a compelling and important benefit of these structures. They

help us rethink how we can design metropolitan spaces so that growing urbanization becomes a

boon rather than a bane.

(https://www.urban-hub.com/buildings/mixed-use-buildings-for-diversified-sustainable-sites/ )
TITLE: MIXED-USE DEVELOPMENT: A REVIEW OF RELATED LITERATURE

PUBLISHER: Joseph S. Rabianski, Ph.D., CRE J. Sherwood Clements, MBA Department of

Real Estate Georgia State University Atlanta, GA

TYPE: Research

A mixed-use development is a real estate project with planned integration of some

combination of retail, office, residential, hotel, recreation or other functions. It is pedestrian-

oriented and contains elements of a live-work-play environment. It maximizes space usage, has

amenities and architectural expression and tends to mitigate traffic and sprawl. This definition

was presented at a recent conference on the topic sponsored by four professional organizations in

the real estate industry -- ICSC, NAIOP, NMHC & BOMA.

This definition of a mixed-use development contrasts to a multi-use development that has

two or more land uses on a single site but does not have the degree of project planning and

integration posited for a mixed-use development. In fact, integration of the uses may be totally

lacking. The live-work-play element is not present and the project is not pedestrian oriented. A

classic example of a multi-use project is a single site developed with an unanchored strip center

next to a small office building for tenants such as insurance agents, dentists, doctors, etc.

A mixed-use development is not a standardized product form. It can differ in location

because it can be built in an urban setting or a suburban setting. The density levels are generally

higher in an urban setting but not necessarily. It can differ in relation to its surroundings. It can

be a higher density infill project in an established urban setting or it can be a development in the

growth corridor in a suburban setting. It can also differ in configuration. Consider the next

paragraph.
 A mixed-use development can take four general forms.

• First, it can be a single high-rise structure on a single site that contains two or more uses

integrated into the structure. Typically, this form of the mixed-use development has retail on the

street level with offices over the retail and either residential units or hotel space over the office

space.

• Second, it can be two or more high-rise structures on a single site with each structure holding a

different use. The office building, residential tower (condominium ownership) and a hotel are the

typical combination. Retail, but different forms of it, can also exist on the ground levels of each

use

• Third, the mixed-use development can be a combination of different low rise structures on a

single site with retail on the ground level with residential units above in one structure and office

space above in another structure.

• Fourth, it can be a single mid-rise structure on a single site typically in an urban setting with

retail on the ground and residential or office above. Depending on the developer’s insights and

opportunities, each of the four forms of mixed-use developments in the previous paragraph can

be built in an urban or a suburban setting, and it can be considered an infill project or an

expansion project. Two differentiating terms about the uses in a mixed-use development appear

in the literature. They are “cornerstone use” and “dominant use.” The cornerstone use is the most

viable and profitable use in the project. It drives the development concept as well as the

decisions about the suitability and compatibility of the other uses in the project. The dominant
use is the use that takes up the most space in the project. The dominant use might not be the

cornerstone use but it needs to be financially strong.

Factors Making the Mixed-Use Development Popular

From the developer’s perspective a mixed-use development is identified as being a

popular format because it is perceived as providing the following benefits:

• Convenience of live-work-play options in a single location.

• Satisfying the desire to live in more of a small-town (e.g. "Main Street") environment.
This desire is brought about by changing demographics and psychographics favoring the
property type.
• Reducing traffic congestion Again from the developer’s perspective a mixed-use d
evelopment is fostered by the following occurrences:
• Rising land prices
• Encouragement by local public agencies (economic development, planning, zoning b
oard, etc.) Finally, a developer’s “optimal land use plan” for a mixed-use
development has been stated as:
• Highest land density
• Most rapid absorption of finished sites at the highest price
• Highest present value of the project

Financial Feasibility of a Mixed-use Development

The focus of this literature review is financial feasibility of mixed-use development.

Financial feasibility defines the situation when the return on the investment in a mixed-use

development meets or exceeds the expected or the required return of the developer and/or the

investor in the project. An alternative but less precise expression is the financial success of the

project. Measurement tools for financial success discussed in the literature are expressed in

different ways. Discounted cash flow analysis generating an IRR is an important tool. The rates

of return such as cash on cash return are also considered useful tools.
 The issue of risk in mixed-use development does not have a definitive answer. Some

developers believe that a mixed-use project diversifies risk across the uses. Other developers

believe that the added financial and physical complexity of a mixed-use development heightens

the uncertainty associated with the project and thereby increases the level of risk. In fact, both of

these situations can arise for a specific project.

Feasibility analysis can be adapted to a prospective view asking the question, “what will

the project earn if it is developed,” and a retrospective view asking the question, “what did the

project earn?” Regarding the prospective view, three insights are shared.

• Financial success depends on a faster time to build out and lease up the project. The

shorter the construction phase and the higher the initial occupancy, the better the prospects are

for achieving feasibility objectives. “The optimal land use plan is rarely the plan that provides

the greatest possible density. … Rather, it is the plan that provides for the most rapid absorption

of finished sites (driven by end-user demand for space) at the highest price.” Substitute “uses”

for “sites” and this comment is appropriate.

• Financial success depends on minimizing the outflow of funds. This is not to say that

the project is done on the cheap but that initial equity is minimized by finding lenders willing to

provide higher loan to value ratios. Also the ability to obtain development incentives for the local

jurisdiction is an important aspect of minimizing the outflow of funds.

• Financial success depends on “being able to maximize and mix the uses in a way that

responds to market conditions, opportunities and economics…”

Using financial feasibility in a retrospective view, a comparison between the expected

pro forma and the actual performance of the property is the best measurement of financial
success. Factors Leading to the Financial Success of a Mixed-use Development Factors leading

to the financial success of a mixed-use development can be grouped in the following categories:

• Economic and Market

• Financial
• Physical
• Design
• Public Issues

Economic and Market Factors

The economic factors are property market factors. Each use on the site must attract a

significant level of market demand in its own right. This is often stated as attracting an adequate

or threshold demand in the market for each use on the site. The uses need to be compatible and

complementary. They need to be mutually supportive, and they need to achieve synergy among

themselves. If this synergy is achieved, it increases both the investment value and the market

value of the project. How is synergy achieved in a mixed-use development? The following

explanations appear in the literature.

• Each use is able to generate revenue from the other uses on the site. Occupants of the

residential and office uses shop at the on-site retail facilities. Office and retail space users live in

the residential units.

• Each use is an amenity for the other uses. Office users need restaurants and hotels in

close proximity to attract tenants. Hotels benefit from visitors to the office space.

• The combination of uses provides a place for supply to meet existing, unfulfilled

demand in the geographic market area. Moreover, it could be a catalyst to redevelop a blighted
area which increases the future level of demand. It could be a “town center” for a suburban

community which will attract consumers from further distances. It could be a starting point for

additional development projects.

Generating and maintaining strong linkages to other land users external to the mixed-use

development are also important market factors. The on-site restaurants also need to serve

potential customers (residential users and office space users) living or working in close

proximity to the project. Retail establishments should also be able to do the same. Competition

with external projects needs to be considered. For example, building retail space near a highly

successful super-regional mall surrounded by power centers, community centers and a lifestyle

center may lead to high retail space vacancy when the office and residential components are

successful. Similarly, building hotel space on the same site could be a problem if the existing

economic node has excess hotel space.

A word of caution is offered in the following statement. “Just because you have high-end

retail doesn’t mean you have a high-end condo market.” Our interpretation of this word of

caution is not that a strong level of demand for one use signals a strong demand for other uses.

Each use needs to be analyzed with regard to it own demand and supply position.

Market analysis is important in determining the demand and supply positions of each use.

It should be used in the same manner as it is used to analyze a single use project. “… many

tenants’ businesses will depend on demand from the surrounding area.” But, then it should

evaluate the potential rent premium (integration or synergistic effect) brought about by multiple

uses on a single site.

 “Market factors are not static, and change with time and other influences.” Economists

tell us that these other influences are the traditional variables that cause a change in the position

of demand – the number of consumers, disposable income, tastes and preferences and the price

of both complementary and substitute goods. Therefore, market analysis should be dynamic not

static. “Two keys to success are to do your homework up-front, and to revisit it regularly at every

phase and after build-out. These market analyses need to be fine-grained and tailored enough to

your locale, for you to identify both shifts in preferences and niches that aren’t served. This

requires a dual pronged approach – one to evaluate the market at that point in time and the other

to assess how well you’re meeting it. As the market changes, so should your project.”

Finally, the geographic extent of the retail trade areas of each of the anchor tenants and

the majority of the non-anchor tenants needs to be considered. One mistake that can be made is

the assumption that the retail trade area for the retail establishments in the project are all the

same. Some of the shops will attract customers from a greater distance than other shops. A three-

mile ring could be too much geography for some stores and not enough for other stores. A

related mistake is assuming that the retail trade area for the most prestigious retail store is the

trade area for the project.

The mixed-use development has phasing and timing issues that go beyond those

typically experienced in single use development. The issues appearing in literature are:

• Each phase should be able to survive on its own if subsequent phases are not built.
• The first phase sets the theme, the tone and the quality level of the project.
• Each phase need not have the same length of time or mass.
• The financial feasibility of the next phase need not reflect that of the earlier phase(s). It
could be better, or it could be worse.
 • Phasing is more difficult because enough critical mass has to be created at the
beginning. This makes normal absorption analysis difficult.

Note: The information contained in the above bullets was taken from a convenience

survey sample of NAIOP mixed-use developers that was not shown to be statistically significant.

Financial Factors

The financial factors are discussed from different perspectives. One discussion thread

considers complicating issues that make it more difficult to finance the mixed-use development

than a single use project of equal or equivalent size18. This financial perspective includes the

following points:

• Equity requirements can be substantially higher for the mixed-use project than for a

single use development of equal size.

• The mixed-use development requires a longer development period with phasing over

longer periods. This makes it more difficult to finance a mixeduse development than a single use

development of equal size.

• Larger capital requirements limit the number of potential development firms and

financial institutions that have the resources to undertake a mixed-use project.

• Additional complexity occurs as each use is underwritten separately.

• Financial entities tend to focus on specific single use property types and view the

mixed-use development as too complex and complicated.

 • Investors providing initial equity understand mixed-use development as an investment

opportunity and perceive it as a higher risk investment.

• More money in the capital markets for real estate is causing developers to take on

mixed-use projects in the wrong location, with wrong structure, without the proper understanding

of the market. [based on August 2007 research] Another discussion thread considers how

financial arrangements and costs for a mixed-use development compare to those for a single use

project of equal or equivalent size.

• Initial planning costs are much larger for the mixed-use development.

• Sites for mixed-use development require the ability to serve different property markets

so the land costs are generally higher.

• Construction costs for a single structure mixed-use development are generally higher.

• Land carrying costs could be greater than or less than those for a single use project.

They could be greater due to the need to the larger site and the timing and phasing of the project.

They could be less than those for a very large single use project. (Like an office park or a

residential subdivision because the uses could be developed earlier than the phasing in the office

park.)

• The contributory value of one use should not subsidize the other uses on the property.

• The effects of other financial factors are generally not certain or unequivocally clear;

they could be greater for the mixed-use development or less. These factors are:

Density of development

Operating costs
 Parking area costs

Common area costs

Performance in achievable rents and occupancy.

Physical Factors

ysical site factors suitable for a horizontal mixed-use development on a single parcel of land

containing residential, retail and office include the following statements extracted from the

literature.

• Appropriate site size and shape to hold all the elements of the development.
• Easy access onto, and egress from the site and its parking area.
• Access to modes of transportation other than automobile.
• Convenient and attractive pedestrian circulation among the uses.
• Easy access and connectivity to adjacent and proximate land users.
• High visibility of the project but not necessarily of all the component uses -- also
highly visible and attractive street or monument signage.
• Attractive visual orientation internal to the project, attractive streetscapes.
• Proper topography, flat acreage for the retail is preferred. Structures not directly linked
to the retail can be on elevated ground.
• Attractive landscape and streetscape.
• Easily readable and clear internal signage for both drivers and pedestrians.
• Vehicle circulation that is unobtrusive for both drivers and pedestrians.
• Storm water drainage capability.

Design Factors
 The mixed-use development must be based on a master plan. In that master plan, the

biggest issue associated with the design of a mixed-use development is parking that provides

benefits to the mixed-use development but also creates additional costs for the mixed-use

development. In a mixed-use development “you can reduce the total amount of parking” and

“since parking demand peaks at different times during the day for different uses, shared parking

is important because it is a very expensive item in the total construction costs.” However, many

big issues underlie the concept of shared parking. Space users want the standard parking ratios;

retailers want five spaces per 1,000 square feet of gross leasable area. Residential users want

their parking area separated from the commercial parking areas even in a shared structure, and

they want their own entrance and exit separated from the commercial entrances and exits.

The other big issue in the design of the site is that “mixed-use is all about place

making.”The best definition in the literature for place making is “the creation of vibrant,

pedestrian-friendly areas with a mix of complementary land uses. In terms of retail, place

making means shopping or dining that is less about selling and more about creating an

experience.” Some hints about what comprises place making are:

• The mixed-use should be sensitive to the market area’s history or its future outlook and
tie its design features into it. The mixed-use needs to be high quality in all of its aspects;
it could be moderate quality in some aspects but not all.
• Developers often make the mistake of making the buildings look all the same when they
should go out of our way to make the buildings look eclectic. We want the project to look
like it was built over multiple decades and designed by different architects. It should look
like a real town, which it is.
• There needs to be a successful integration of open spaces with the buildings and the
buildings should also be integrated.
• The common area or areas are important design features to make a “place.”
• Even though parks and squares do not pay rent, stores near them have increased sales
volumes.
 Critical on-site design elements that need to be incorporated in a mixed-use development
include:
• Noise abatement by separation or soundproofing between uses.
• Fire retardation measures through construction techniques.
• Odor suppression by separation or proper venting of the odors.
• Loading areas for commercial uses hidden from sight.
• Connectivity of pedestrian and cycling among the uses.
• Transition areas – separate uses with landscaping, screening, buffer zones, setbacks,
etc.
• Open space

Integrating the project with the neighborhood is essential to winning community

approval. Create points of connection between the mixed-use development and the surrounding

areas. Consider the mixed-use development’s density related to that of the surrounding area.

Finally, one key to success in an urban, horizontal mixed-use project is the proper incorporation

of all components to create a seamless whole. Another key to success provides that each use

should have a “front door” that is distinct and separate from the other uses. And, the mixed-use

development needs to balance night and day activities so that everything on the site does not shut

down at the end of the workday. Build a day-night balance.

Public Issues

The policy issues needed for the financial success of a mixed-use development include

the following statements taken from various sources in the literature.

• Development plans for the mixed-use development should highlight transportation and
infrastructure use (water, waste treatment, school capacity, etc.
• Development plans should highlight economic benefits of the mixed-use development
(economic and fiscal impact studies).
 • The zoning ordinance should allow multiple uses on a single integrated site. Most
zoning ordinances are geared to a single use on a single site.
• The zoning ordinance should allow higher density development in the mixeduse
development than in surrounding areas.42
• Availability of tax increment financing (TIF)
• Assistance with land assembly
• Property tax abatements
• Transfer of development rights

Challenges, Obstacles or Barriers to Mixed-use Development

Various challenges, obstacles or barriers affecting mixed-use development are identified

or listed in the literature. These items appear below without any ranking or relative importance

associated to them. Very often these items simply appear in an article without any elucidation.

Some of these items have been addressed in a previous section of this article.

Mixed-use development must contend with:

• Extraordinary planning, management, political patience, capital resources and risk

• Assembling land parcels
• Inadequate capital planning
• Lacking knowledge of available public/private benefits
• Maneuvering through zoning regulations
• Addressing environmental issues
• Working with planning agencies
• Working with the community
• Working with multiple development teams

• Working with multiple owners

 • Securing project finance/capital

• Addressing transportation issues

• Designing parking

• Designing a pedestrian-friendly environment

• Managing the financial challenges of a sequenced roll-out of project parts

The following items appear in a specific article.

• External trip generation to all uses but mostly to retail and office

• Street capacity

• Water usage

• Air emissions

• Sewer capacity

• Endangered habitat limitations

The following items appear in a specific article.

• Economic and market cycles

• Congestion and traffic issues

• Location

• Management

• Healthy balance of uses

Saving Yourself from Fads and Repetition

“One of the most insidious problems with all development is the tendency to

blindly follow the latest trends and fads, without tailoring them to the unique situation.
 Just as problematic is proposing something without really understanding how it’s

supposed to work, problems with past applications and how the market and economics

work for the project. What worked before elsewhere may or may not work on your

project. Many projects have been planned recently with a major Cineplex and

entertainment element, and there is now a glut of such projects in different markets and

an overextended cinema industry.”

“Another case is blind repetition of ‘New Urbanism’ solutions…. Despite

evidence that strictly interpreted ‘new urbanism’ isn’t successful in many situations, his

planners proposed a design that discouraged foot traffic in retail areas, created isolated

‘big boxes’ and a ‘quasi-city block layout. This spread out the retail so it seriously

diluted its critical mass and synergies.” An apropos statement on this issue is “make it

real, not Disney.”

(https://www.cdfa.net/cdfa/cdfaweb.nsf/ord/e85f455bb30951708825793600673c68/$file/
mixed-use.pdf )

TITLE: DEVELOPMENT OF A COMMERCIAL BUILDING SITE SELECTION

FRAMEWORK FOR MINIMIZING GREENHOUSE GAS EMISSIONS AND ENERGY

CONSUMPTION

CITATION: Weigel, B.A.(2012). Development of a commercial building/site evaluation

framework for minimizing energy consumption and greenhouse gas emissions of transportation

and building systems. adsabs.harvard.edu

AUTHOR: Brent A. Weigel

TYPE: JOURNAL
 According to Weigel (2002) in urbanized areas, building and transportation systems

generally comprise the majority of greenhouse gas (GHG) emissions and energy consumption.

The locations of building sites have significant influence on the built environment’s energy and

GHG emissions efficiencies. Thus, the decision point of site selection and schematic/conceptual

design for buildings represents a critical opportunity for minimizing life cycle GHG emissions

and energy consumption. Green building design and rating frameworks provide some guidance

and incentive for the development of more efficient building and transportation systems.

However, current frameworks are based primarily on prescriptive, component criteria, rather

than performance-based, whole-building evaluations.

Growing international concerns over climate change and sustainable development have

highlighted the need for major reductions in anthropogenic greenhouse gas (GHG) emissions,

particularly in urbanized areas which now contain more than half of the world’s population. In

the U.S., for example, the buildings and transportation sectors account for approximately 38

percent and 34 percent respectively of direct domestic CO2 emissions [1,2]. Thus, to achieve

substantial reductions in GHG emissions, improved energy efficiencies are needed in urban

buildings and urban transportation systems.

The objective of the research presented in this paper is to develop a commercial building

site selection evaluation framework that leads to minimization of whole-building energy

consumption and GHG emissions. This research will develop analysis methods for estimating

the site dependent energy consumption and GHG emissions associated with:

1. Architectural energy systems:

a. Heating, ventilating, and air-conditioning

 b. Lighting c. Conveyances

2. Transportation energy systems:

a. Tenant journey-to-work trips

b. Other work-based trips

3. Utility and on-site energy sources

4. Building material use/reuse (future research).

( https://www.irbnet.de/daten/iconda/CIB_DC23134.pdf )

TITLE: FOREIGN INVESTMENT IN AUSTRALIAN COMMERCIAL PROPERTY

CITATION: Foreign investors’ demand for commercial buildings in Australia has been strong

in the past few years, as captured by their rising share of transaction values. Foreigners have

generally purchased established properties, although there has also been some interest in

developing new commercial buildings or converting existing buildings to apartments. These

purchases have probably boosted net financing to the sector and also construction activity.

AUTHOR: Kevin Lane, Adam Sinclair and David Orsmond

TYPE: ARTICLE

Commercial buildings comprise offices, shopping centres, industrial facilities and hotels,

and are generally owned by commercial landlords and institutional investors rather than their
occupants.1 Investors own commercial buildings for their relatively predictable rental income

and the typically low correlation of their values with those of other assets, such as equities and

bonds.

Demand from foreigners for commercial property in Australia has been strong in the past few

years. The available data suggest that foreign investment in Australian commercial property has

increased significantly since the mid 2000s, both in gross terms and after accounting for

divestments by foreign institutions. Since 2008, foreigners have accounted for around one-

quarter of the value of major commercial property purchases, up from one-tenth in the previous

15 years. This article discusses the factors that underlie this trend, and the effects of foreign

investment on commercial property and the Australian economy.

The Legislative Framework and Approvals for Foreign Investment

In Australia, foreign investors are allowed to purchase existing commercial buildings as

well as vacant sites to develop. To purchase commercial properties, ’foreign persons’ must first

obtain approval through the Foreign Investment Review Board (FIRB) in any of the following

circumstances:

• the land is vacant;

• the foreign investor is a foreign government

investor; or

• the building is already developed and sells for $54 million or more (the threshold is
lower for heritage-listed buildings and higher for investorsf rom New Zealand and the United
States).
 To date, nearly all proposals for investment in commercial property have been approved,

although some conditions may have been applied regarding the subsequent development of

vacant sites.

The FIRB publish data on approvals for proposed foreign investment on an annual basis. The

value of these approvals has increased substantially in

recent years, from $11 billion in 2009/10 to nearly

$35 billion in 2012/13 (Graph 1). Approvals to

purchase established commercial properties increased

most significantly, while approvals to invest in vacant

land also increased from a low base.

Approvals data do not, however, provide an accurate

estimate of the value of actual direct foreign

investment. The Bank’s liaison with industry participants suggests that vendors often require

interested foreign buyers to obtain foreign investment approval before bidding, and several

approvals may be granted to different foreign investors for the purchase of the same building,

which may then ultimately be sold to a domestic entity. In addition, purchasers of developed

commercial properties do not need to seek foreign investment approval for properties valued at

less than $54 million, or less than $1 078 million in the case of private investors from New

Zealand or the United States. The FIRB data also do not provide information regarding the type

of property for which approval is being sought – be it an office building, shopping centre,

industrial facility or hotel – nor the type of foreign investors (e.g. sovereign wealth funds,

pension funds) gaining approval or the country in which they are based. Furthermore, since
foreign investors do not need approval before selling properties, the data provided by the FIRB

cannot be used to estimate the value of net investment by foreign investors.

Trends in Foreign Investment

Several real estate services firms collect detailed information on major commercial property

transactions involving Australian and foreign institutions. Importantly, unlike the FIRB’s data on

foreign investment approvals, these data cover actual transactions. However, there are also a

number of other differences between these data and those reported by the FIRB. Specifically, the

transaction-level data provided by real estate services firms:

• record purchases valued at more than $5 million, thereby capturing transactions that fall

below the thresholds enforced through the FIRB5

• classify investors based on the location of their headquarters, whereas the FIRB

classify foreign investors depending on whether they have a foreign controlling interest

• relate to transactions of offices, shops and industrial properties, whereas the FIRB

approvals data also include applications to purchase hotels and motels from 2009 onwards.

These transaction-level data show that while foreign investors have been purchasing Australian

office, retail and industrial properties since the late 1980s, the purchases and sales by foreign

investors were both around $1 billion per year for much of this period, resulting in negligible net

investment by foreign investors. Foreigners’ purchases of commercial property increased sharply

in the mid 2000s, and have exceeded foreigners’ sales in each year for nearly a decade (Graph 2).
Foreigners have accounted for around one-quarter of the value of commercial property purchases

in Australia since 2008, up from one-tenth in the previous 15 years.

Foreign buyers were especially active in the first half of 2014, purchasing nearly $5

billion worth of commercial property, about 40 per cent of the value of properties that were sold.

Net purchases (which also account for sales) by foreigners amounted to $4 billion in the first half

of 2014, close to its level for all of 2013.

The recent increase in foreign investment has been most pronounced in the market for office

property. Foreigners’ purchases have accounted for around one-third of the value of turnover of

office buildings since 2008, with purchases consistently exceeding the value of foreign sales

(Graph 3). The value of foreign purchases of retail and industrial assets has also increased,

although purchases by foreigners accounted for only around 15 per cent of the value of these

transactions in the past few years. Foreigners’ preference for office buildings partly reflects the

greater availability of large, high-value buildings. Retail and industrial assets are generally

smaller, with lower values, and are often owned by wealthy private investors rather than large
institutions. Foreigners have been most active in acquiring commercial properties in New South

Wales, reflecting the larger size of its market and an apparent preference by overseas investors

for property in the state. Since 2008, foreign buyers have accounted for 40 per cent of the value

of purchases in New South Wales, compared with 20 per cent of turnover in Victoria,

Queensland and Western Australia. Foreigners’ preference for New South Wales reflects their

strong appetite for office buildings in the Sydney CBD, which industry participants attribute to

the greater liquidity of the market and the large amount of prime-grade office space (Graph 4).

In contrast, foreigners’ purchases of retail and industrial assets have been more evenly

distributed across Australia. In liaison, analysts note that investors that purchase a building in

one state often acquire buildings in other parts of Australia as well, partly reflecting the

significant costs involved in researching a country’s legal arrangements and market structure. As

a result, many industry participants anticipate foreign investment broadening out beyond New

South Wales in coming years.

The transaction-level data also provide information on the type of foreign investors and their

nationality (based on the location of the investor’s headquarters rather than the original source of

funds). These data show that foreigners from many parts of the world have become more active

in Australian commercial property markets, although much of the rise in net investment in the

past few years reflects an increase in purchases by investors based in Asia and North America.

Net investment from Europe has also increased, albeit by much less (Graph 5). The recent

increase in net foreign investment has been driven by private institutions such as listed trusts,

investment firms and developers (Graph 6). Pension funds and government-related entities,

mostly sovereign wealth funds, have also increased their exposure to Australian commercial
property, accounting for nearly one-third of foreign purchases since 2008, following very little

activity in the previous two decades.

Foreigners have tended to purchase existing

buildings, with purchases of sites to develop less common (Graph 7). This preference reflects

foreigners’ desire for commercial buildings as passive investments, valuing both their relatively

predictable income stream and the low correlation between their prices and those of other assets.

In addition, foreigners may lack the country-specific expertise required to develop new

properties. There have been some examples where foreigners have purchased sites to develop,

although the direct effects on construction activity have been small. In 2013, for example,

foreign buyers invested a little over $600 million in sites and buildings to develop as new office

buildings, which was around one-tenth the value of office construction activity that commenced

in the year. In cases where foreigners have been involved in developing new buildings, they have

often partnered with a domestic firm, which was better placed to absorb the majority of the risk

associated with construction costs and securing tenants. In recent years, foreigners, particularly

from Asia, have also become more active in purchasing older office buildings to convert to other

uses, especially apartments. Almost all of these investments have occurred in Sydney, where
available and centrally located land is relatively scarce and demand for apartments has been

particularly strong, from both domestic and foreign residential buyers. Since demand for lower-

quality office space has been weak, developers suggest in liaison that residential apartments

represent the ‘highest and best use’ of these sites.

Industry participants point to a range of factors to explain the strength in foreigners’ demand for

Australian assets in recent years. Most notably, yields on Australian properties are high relative

to those on comparable assets overseas, although differences in leasing conditions make direct

comparisons difficult. In addition, even though conditions in Australian commercial property

markets are weak relative to history, they are stronger than in many other advanced nations.

Research analysts add that foreigners are attracted to Australia’s exposure and proximity to Asia,

combined with a transparent system of property rights. Nonetheless, Australia is not the only

nation experiencing strong capital inflows into commercial property. Several other advanced

nations have also recorded substantial investment from North America and Asia, owing to the

low cost of capital, the low level of returns on alternative assets, particularly bonds, and the

growing stock of available capital at pension funds and sovereign wealth funds. In general,

analysts do not expect these factors to unwind soon, and so many expect foreign investment in

Australia to remain strong in coming years.

Economic Effects of Foreign Investment in Commercial Property

The increased demand from foreigners has had several effects on Australian commercial

property markets. As noted by analysts, the strength in foreign demand has contributed to the

recent increases in capital values, which have occurred even as leasing conditions have remained

subdued. This has probably helped to support construction activity, partly by allowing domestic

developers to diversify their activities.

While not particularly active in leading the development of new buildings, foreigners have

contributed financing, directly or indirectly, to new construction activity. As discussed above,

some foreigners have purchased shares in sites and buildings that the existing owner was in the

process of building or expanding. Foreigners have also purchased existing buildings from

domestic firms that went on to ‘recycle’ this capital into the development of other new buildings

in Australia. By providing funds and pushing up capital values, foreigners have effectively

supported the financial position of domestic developers and enabled them to undertake additional

construction activity. Foreign purchases have also enabled domestic firms to diversify their

portfolios by purchasing or developing buildings in other regions or sectors.

Although foreigners have been most active in the New South Wales office market, these indirect

effects on construction activity have been much broader, since many domestic developers

operate across several states and sectors. The construction activity that has followed these sorts

of transactions has contributed to the stock of commercial space available to tenants, placing

downward pressure on the rental costs faced by occupying firms. As discussed above, foreigners

have been active in purchasing lower-quality office buildings to convert to apartments,

particularly in and around the Sydney CBD. This activity is likely to help alleviate the shortage

of land, and raise the stock of housing in areas where demand for housing is strong. More
generally, greater development activity overall also leads to more work and employment in the

construction industry, and provides further benefits to domestic manufacturers of building

materials.

Foreigners’ appetite for Australian properties has also enabled domestic firms to limit their use

of bank funding, which is useful given the risks commercial property can pose to financial

institutions during downturns (Ellis and Naughtin 2010). The greater foreign presence potentially

adds to the sensitivity of capital values to variations in economic conditions overseas. For

example, an adverse shock overseas could cause foreigners to try to divest Australian assets to

cover liabilities offshore. However, relative to other assets, commercial properties are less likely

to be sold urgently, since the selling process can be protracted and incur substantial transaction

costs. The effect of deteriorating international conditions could also be lessened to the extent that

pension funds and sovereign wealth funds continue to account for a greater share of foreign

purchases, since these institutions are less likely to be influenced by temporary changes in their

own country’s economic conditions. Also, the greater foreign ownership of commercial

buildings may reduce the volatility of Australian property values to the extent that domestic

business cycles are not perfectly correlated with those in other economies.

Finally, the recent increase in foreign investment in commercial property may have placed

upward pressure on the value of the Australian dollar. However, these amounts have been small

relative to total capital inflows (of $93 billion in 2013), and the effect will have been mitigated

to the extent that some foreigners financed their purchases by borrowing from domestic banks in

Australian dollars, in part to hedge currency-related balance sheet risk.

( https://www.rba.gov.au/publications/bulletin/2014/sep/pdf/bu-0914-3.pdf )
2.2 FOREIGN STUDIES

TITLE: ECONOMIC IMPACT STUDY

PUBLISHER: BOMA International

TYPE: Article

BOMA (2016), the commercial real estate industry is a significant driver of thenation’s

economic engine. According to the latest numbers, the 10.5 billion square feet of commercial

office space located within the markets served by BOMA International’s U.S. local associations

generated $89.1 billion in operational expenditures in 2015—$7 billion more than in 2013—

to the benefit of workers and businesses within their host jurisdictions, contributing nearly $235

billion to the national gross domestic product (GDP). For each dollar laid out in building

operations expenditures, the U.S. economy gained $2.64. These numbers reveal that this

otherwise “hidden” industry—frequently is overlooked by the millions of office workers who

take for granted the properties they occupy each work day—is a major force in U.S. commerce.

Commercial real estate also is one of the leading employers in the United States. Office building

operations both directly and indirectly support 1.75 million jobs locally, statewide and

nationally. In addition, last year, buildings owned and managed by BOMA members provided

work space for an estimated 46.9 million office jobs—meaning roughly one-third of all U.S.

workers work in BOMA office space.

 The highlight of one sector of commercial real estate to give you an example. In a 2014

study, the Building Owners and Managers Association (BOMA) International provided the

following information commercial office buildings: about the impact of commercial office

buildings:

• The office building industry contributed $227.6 billion to the U.S economy in 2013 alone,
roughly twice the annual contribution, made by pharmaceutical or auto-industry Research &
Developments industry annually.

• The more than 10 billion square feet of office space located in the 93 markets served by
BOMA's local associations is equivalent to 373 square miles or 16 Manhattan islands. •
Those 10 billion square feet of workspace house an estimated 46.6 million office jobs,

representing a Gross Domestic Product (GDP) contribution of $4.93 trillion-or 29 percent

of all GDP.

• During 2014, commercial office buildings in Chicago contributed nearly $750,000,000 in

property taxes to the city alone.

(https://www.boma.org/BOMA/Advocacy/Economic_Impact_Study.aspx )

TITLE: THE BENEFITS OF MIXED-USE BUILDINGS

PUBLISHER: Engineering Design Group

CITATION: The concept of mixed-use buildings is not new but its popularity has ebbed and

flowed throughout the centuries. Most recently, the concept of living, working, shopping, and

socializing all within a small geographical area has once again been revived. Let’s explore

exactly what mixed-use buildings are and the benefits of owning and operating one.

TYPE: Article
What is a Mixed-Use Building?

Mixed-use buildings are defined as a combination of residential, commercial, industrial,

and retail spaces within close proximity to one another forming a live-eat-work community.

Think of a traditional “Main Street” in a town, where businesses and shops lined the street and

residential homes naturally rooted around that source. Many of the ground floor businesses on

Main Street housed upper floor dwellings for the owner or renters to live. As zoning laws

progressed, we were then regulated on what businesses could function where thus blurring the

live-eat-work style of the community. Over time, land use became more distinct. This is

illustrated by large retail plazas, industrial parks, and residential home developments. More

recently, younger generations have embraced the diversity, walkability, and vibrant social life of

true city life. They were drawn to the idea of a closer proximity lifestyle so the popularity of a

mixed-use building lifestyle has resurfaced.

Types of Mixed-Use Buildings

“Main Street” - This concept has survived long term but has evolved accordingly. Where “mom

and pop” stores once stood, now you will find entertainment venues, restaurants, services, and

hospitality storefronts. Above or behind these storefronts, you will find apartments or

condominiums. Many downtown city areas have been revitalized because of this mixed-use shift.

Vertical Mixed-Use Developments - Vertical mixed-use developments house a wide range of

different businesses. The lower floors will most often house government offices, restaurants,

coffee shops, or any other office space where foot traffic is encouraged. The upper floors will

usually house private condos, loft apartments, or even hotels.

Horizontal Mixed-Use Developments - With a larger plot of land and building to dedicate,

horizontal mixed-use developments often become communities within a community. The

combination of private dwellings and retail shops with the walkability of the public, allows

residents to stay close to home but also have their needs filled easily. You will often find older

industrial buildings revamped into horizontal mixed-use developments.

Department Store/Mall Conversions - With the rise of online shopping, many large shopping

malls and department stores have been forced to close their doors. This leaves vast prime real

estate open for a mixed-use conversion. Many of the empty retail centers have been redeveloped

into property more useful for the current time and economical climate. A great example of a mall

conversion is in Montgomery, Al. The abandoned Montgomery Mall was converted to house a

fire station that was in desperate need of more space. Once established the city is discussing

plans to convert other portions of the large shopping facility for other needs of the Montgomery

Police Department.

Benefits of Mixed-Use Developments

Mixed-Use Buildings Appeal to a Wide Range of Ages - Both senior citizens and young

professionals appreciate the simplicity and walkability of mixed-use buildings. There is a lot to

be said to be able to walk or ride a bike to pick up dinner from your local grocery store, visit the

dry cleaners, and also have a nice night of entertainment. Business owners rely on the

relationships built from this live-work-eat lifestyle also. Easy access and good location are huge

selling points when setting up a business in a mixed-use building.

Brick and Mortar Businesses are Still In Demand - Even though some retail brick and mortar

stores have been forced to shut down with the competition of online ordering, service-related

retail stores will always need a home base of operation. Salons, doctor’s offices, restaurants, and

coffee shops will always have foot traffic and can benefit from mixed-use developments.

Commercial Tenants Are a Breath of Fresh Air - If you are leery of doing business with

residential tenants, then commercial tenants may be a breath of fresh air! The motivation of

keeping a nice-looking storefront for their customers helps ensure that they keep the property

well maintained on their own. In addition, many property owners may choose to take advantage

of net-lease agreements. A net-lease agreement is an agreement between the owner and tenant in

that the tenant will pay property taxes, building insurance, and maintenance fees in exchange for

a lower rent charge. There are different options for net lease agreements should you choose to

pursue one.

( https://edgalabama.com/benefits-of-mixed-use-buildings/ )

TITLE: FEASIBILITY STUDY FOR MIXED USE DEVELOPMENT

PUBLISHER: Prospectus.com

TYPE: Article

If your company is considering developing land for a mixed use development and needs to

ascertain whether the project is viable, our team at Prospectus.com can assist with your property

feasibility study. Property and development feasibility study analyses are common for companies
to create prior to breaking ground on a construction project. The report will give needed insight

to the principals who can then determine whether their project is even ‘feasible’ to continue.

Our seasoned management team employees consultants and engineers to assist with a feasibility

project, anywhere in the US and beyond. Our fees are highly competitive and our time frame for

completion of such projects is faster than most industry firms, giving our clients a needed

advantage when deciding to undertake a real estate or land transaction. Indeed, scores of firms

outsource their work to our group as we are known as straight forward and adhere to all budget

requirements.

Important Prerequisite for Real Estate Developments

Before spending needed capital on a real estate project, many companies will first need to define

their business model. But almost simultaneous to a business plan would be the writing of a

feasibility study. Although the costs associated with a feasibility analysis can seem pricey at first

sight, not having such a report provided can cost companies many times the amount in loses if a

project goes bust. In most cases, such pitfalls can be avoided by writing a feasibility study,

especially for property development.

There can be little room for errors when dealing with a land development. Incorrect assumptions

on zoning laws or the structural engineering design can bankrupt a real estate project. A

feasibility study will outline the requirements needed in order to successfully navigate the many

issues that arise in real estate development, whether constructing from the ground up, or tearing

down an existing structure and then rebuilding.

Development Assessment – Land and Property

Most real estate firms will conduct a property assessment or a land assessment before

committing to development. Such a an assessment will determine if the project is even ‘feasible’

or worth the time and money to continue. A feasibility plan or development assessment for real

estate or construction will also outline the costs associated with the overall project. In some

feasibility studies, there will also be sales forecasts based on comps, whether for single family or

condo home sales, or hotel occupancy rates. The land and property feasibility study development

assessment will help clarify the budget and give needed insight into the potential revenue streams

as well as the costs associated with construction.

Feasibility Study vs Business Plan

A business plan is regarded as a road map of sorts. For any business to succeed they must

understand their market, their numbers, and the opportunity. Business plans are utilized for all

types of businesses, including real estate and development related projects. A feasibility study is

like a business plan in that it outlines the overall opportunity and allows for an educated decision

about whether to move forward or not. As such the feasibility study is the ‘business plan’ for a

land or property. Said another away, if the proposed development of land or property had a

business plan, it would be called a ‘feasibility study’. Both are imperative for any project to

succeed, and certainly to raise capital.

What’s Included in a Feasibility Study

A feasibility entails many aspects of a real estate development project. Whether one is

developing a hotel or many single-family homes, or a school, the report will outline anything

from the permit process to the land usage rights. Below are some, but not nearly all, features of a
real estate feasibility study report, all of which can be classified as undertaking due diligence

before construction begins.

 Civil Site and Public Infrastructure Improvements

 Land Use and Environmental Permitting

 Geotechnical Investigation

 Structural Engineering

 Environmental Study and Report

 Survey (boundary, title research)

 Site Planning, Development Program, and Code Review/Compliance

 Traffic Plans, Neighborhood Impacts, Schools in the Area

 Water/Sewage

 Architect

The aforementioned points are just a glimpse of the many features of a feasibility study.

Why Write or Make a Feasibility Study?

There are numerous benefits to creating a feasibility study. First and foremost, you would want

to ensure that you can actually develop on the proposed land. The property zoning laws may

permit or prohibit certain features of the project, such as the height and size of the development.

Here are few main reasons for preparing a feasibility study for a real estate development project.

 Knowledge: As noted above, knowing whether you are allowed to develop and under what

terms will save needed time and capital. If a negative picture is portrayed, then you would

stop development. If positive news transpires from the feasibility report then you would

continue. Knowing the options is more than half the battle.

  Property Assessment: Before committing capital to any development you would ensure that

the concept itself is viable and therefore tested. Conducting a land assessment prior to

development can save the company money and time.

 Project Confidence: Similar to writing a business plan, a feasibility can give the principals

the needed confidence boost to move forward with the project. If the feasibility report shows

promising results, both financially and strategically, this can give convince the team that their

assessment for development is correct. This can help when capital is needed to be raised or

allocated from investors. A confident management team, with a factual feasibility document in

hand, can add great strength to the company’s mission.

 Funding and Capital Raising: As noted, a well written feasibility study, similar to a well

written business plan or prospectus, can aid in the strength of the business and alleviate fears

from investors and lenders. While the feasibility study is usually prepared for the management

team to decide if the given project is even feasible to develop, the document itself can be used

as a powerful tool when raising capital and approaching investors.

Financial Feasibility Study for Property Development

During the initial phases of the feasibility study’s development, the writing of the financial

projections and budgets needed to implement the feasibility study would be undertaken. Creating

the financials at the onset of operations will also benefit the company in terms of making the

correct decisions moving forward. If the numbers do not make sense then the project would end.

If the numbers work then the project would continue. All the more reason why this feature of the

property feasibility report is conducted at the beginning of the process and not the end.

Since the outcome of any business – real estate related or not – is to make a solid return on

investment, knowing the ins and outs of the financial feasibility study of the development project

makes it imperative to create such a report. Here is some information on the development steps
of a property according to the financial feasibility report protocols that Prospectus.com and our

clients would undertake together:

Initial Concept Meeting

We would discuss usually via phone (or in person if needed) the project’s details and your needs.

Land and Project Evaluation

Prospectus.com’s team would be undertake an analysis of the overall land and site, including:

 Zoning law

 Land and physical restrictions

 Traffic and access points

 Buildings in the surrounding environment

 Sewage and water

 Competitive summary of new projects and similar existing developments

Description of the Development and Industry Insights

A thorough description of the usage of the land along with the overall industry would be

discussed.

Market Analysis

A comprehensive market analysis would be undertaken as well. The market analysis section will

detail needed information about the market opportunity’s strengths and weaknesses, including:

 Population of the surrounding area and trends, including projected growth

 Age of the demographic and target market

  Income statistics

For tourist developments, additional market characteristics would be detailed, such as:

 Existing market size

 Historical numbers and market growth

Market Comparison

In addition to the demographics, a feasibility study would examine existing structures or

buildings in the near vicinity of the projected land development. Information would include:

 The location of a similar project

 Development similarities and project description

 Historical financials and pro formas, if available

 Proposed construction costs

Yearly Project Usage Analysis

A detailed summary of the proposed project, usually over a 5 year period. The yearly analysis

will include:

 Market size, demographics, etc.

 Competitive analysis

 Analysis of existing similar projects and their positioning

 Project location and parts needed to complete project

 Concept Development and Planning for the Project

Prospectus.com’s team and engineering group would create the necessary plans to market and

supply the target market and its future growth. We assist with master planning, as well as the

architectural and design plans, including suggesting:

  The types of services offered

 The overall size and functions of the space

 Land and property needs

 Architect plans, diagrams, graphics, videos, pictures, power point presentation or investor

deck

Financial Analysis

A comprehensive real estate financial analysis of the proposed project would be undertaken at

this point. The projections would normally take into account the consecutive 5 years, however

projections for 10 years out is also common. The financials would include:

 Revenue projections, proforma statements

 Budget expenses, operating projections

 Profit and loss

 ROI

Project Expenses – Development Recommendations

Prospectus.com will allocate an expense analysis for the entire project. We will give our opinion

regarding the feasibility of the overall project.

Preliminary Property Development Feasibility

Often, prior to a comprehensive feasibility study being written or prepared, a preliminary

property development feasibility study is written. For those who do not want to spend capital on

a more thorough feasibility study, the preliminary report can serve an important function. While

it is not as thorough as a feasibility study, the preliminary report will note the costs associated

with preparing a full feasibility study. For example, a company that wants to do build a hotel has
a $10,000 budget. They do not yet want to pay for a full feasibility study as they would first need

to know the costs involved. They would pay for a preliminary property development feasibility

study and in this report we would outline the actual costs associated with creating a full

comprehensive feasibility assessment report.

( https://www.prospectus.com/feasibility-study-for-mixed-use-development/ )

2.3 LOCAL LITERATURE