Building Economics

Scenario

Your Client, a developer, wants to purchase a development site within the business district of Manchester, UK, to develop a four-storey Grade A office complex. A residual appraisal has been carried out which demonstrates the viability of the project. This is available as an image in the
Appendix and as an Excel Spreadsheet in the module materials on the VLE.

The project is to achieve an excellent BREEAM rating with minimum running, repair and maintenance costs to ensure that the building is let for a high rent.

The developer wants assurance that the proposed project can be successfully delivered within budget and will achieve the rental income proposed.

The project details are as follows:
Gross floor area 6,000m2
Lettable area 90%
Required yield 7%
Anticipated rent per annum £450/m2
Target construction cost £2,800/m2
Construction period 3 years
Finance rate 4%
Assume all other information not provided.

Task

Write a report to your client that critically analyses:

a. the major risks to successful project delivery discussing the impact these could have on the project’s viability.
(approximately 1,200 words)

b. the processes used to ensure that the project is delivered within budget and will achieve the rental income proposed.
(approximately 1,200 words)

c. the use of value management (VM) and value engineering (VE) methods at the briefing stage of the project to ensure the selection of optimal design solutions to meet the client’s requirements for a sustainable building.
(approximately 600 words)