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Market Feasibility Studies

by Administrator on Feb 7, 2012 Feasibility Studies 1570 Views

Some appraisers offer will complete both appraisals and market feasibility studies (MFAs) as part of their appraisal consulting services.  MFAs are studies of specific markets and they answer the question "will the market support the profitable use of my proposed development?"  If you are going to spend hundreds of thousands or millions of dollars constructing; an elderly care facility, an RV park, an apartment complex, a storage facility or other specialized building improvement you need to know (beyond a guess or cursory analysis) whether success is or is not attainable.
It's important as an appraiser completing an MFA to know the market that will be served by the proposed development.  That generally begins with knowing industry trends and trends within the specific market area.
If for example storage facility developments are suffering from abnormally high vacancy rates and / or falling rental rates, that is important information if you are considering the construction of a facility of that type.  The location (geography) of competitive facilities is also important.  A developer generally does not want to build in a market that is already saturated with storage units while other areas in the same metropolitan area are under served.
The composition of the market (demographics) is also an important factor you don't develop storage units for example in an area that has a stable and affluent population.  Storage unit developers generally prefer areas with a transient population.  The movement of potential rental customers (mobility) is also important since it helps to identify and predict how the market will change over time.  If an Air Force Base or a major plant is closing and many previously transient customers are going to leave an area that mobility change may destroy the potential success of a project.
A consultant / appraiser would identify competitors for a proposed property / business in a broad and a specific market area within a feasibility study.  Usually a feasibility study would address the supply and demand for mini-storage units (for example) and the appraiser would identify all competitive units.  Some products and services have little value if they exceed a typical driving distance.
Like most development types storage facilities have customers that demand a range of unit types typically from 5'X 5' or 25 square feet in size to 10' X 20' or 200 square feet or larger.  It is important for your Client to know what unit mix will likely provide the greatest return.  An appraiser completing a feasibility study would like provide research that details the price paid by unit type and the number of each unit type that are rented in the current market.
The "answer" sought by those seeking a market feasibility study is the absorption of the storage units planned for development by type.  How long will it take to rent each of the unit types, what will each unit type return and what stabilized occupancy is reasonable.
Market feasibility studies are at times more difficult to complete than appraisal reports since data on special use properties that must be analyzed is often not readily available and extracting it is an arduous process.
For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.
 

Article source: http://www.appraisalarticles.com/Feasibility-Studies/2795-Market-Feasibility-Studies.html

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