1. Development Appraisal Day 2 Exercises

2. Objectives Identify sources of information for assumptions Build more detailed appraisals Understand about viability of different uses Understand complexity of real life development appraisals

3. Real life appraisals………… ……….they can get complicated!

4. Appraisal Inputs Sources of information 1.Employing the professionals 2.Phoning the professionals 3.Buy access to a database 4.Published research 5.Other sources

5. Appraisal Inputs Gross floorspace (GIA) Gross site area Net/gross site ratio Site coverage Density

6. Appraisal Inputs Net floorspace (NIA) Typical values: – Houses:100% – Flats:85% – Offices : 85% – Retail:95% – Industrial:95%

7. Appraisal Inputs Value of floorspace

8. Build costs Depends on design & procurement High = Grade A offices & high density flats say, £1,500psm Low = Retail warehousing & industrial say, £500psm Appraisal Inputs

9. Site preparation & infrastructure Earth moving/removal Utilities Highways Demolition Remediation Flood protection etc

10. Appraisal Inputs Fees & marketing/sales Core development team & additional consultants: 10 – 20% of build costs Marketing: 2-3% of value Letting agent & legals: 10% & 5% of rent Sales agent & legals: 1% & 0.5% of value Other professionals

11. Appraisal Inputs Finance Costs Proportion of development costs borrowed varies Interest rate reflects: – Developer strength – Risk of development – Proportion of costs borrowed Finance drawn down

12. Appraisal Inputs Other Costs External works Car Parking Developer’s contingency Code for Sustainable Homes Developer Contribution

13. Appraisal Inputs Timing Some receipts received before completion Void on commercial space unless pre-let Some costs are “upfront” Build costs often assumed as “S Curve”

14. Development Appraisal Exercise Notional 1 hectare site in “typical” town

15. Key questions: What is the net/gross site ratio & coverage? What is the development mix? What are the values/costs of the uses? How many storeys are the buildings? What are the site acquisition costs? What other development issues are there? Development Appraisal Exercise

16. Scenario 1: Office development Scenario 2: Residential & office development Scenario 3: Residential & retail development Scenario 4: Retail & leisure development Development Appraisal Exercise