Project Analysis and Evaluation - Essay Example

RОJЕСT АNАLYSIS АND АРРRАISАL Name Class Instructor Institution City State Date Table of Contents Introduction 3 Development value 4 Discussion of similarities and differences 6 Yield of the buildings 7 Gross development cost 8 Gross development cost 9 Conclusion 13 Reference 14 Introduction The site currently used for parking by nearby business is available for potential development. It is located in an important location at the edge of the city center. The site will be suitable for a tall building and a high-quality design. It is located at the edge of the city center in which is it is has a good public access by public transport. The site is also suitable as it is adjacent to proposed new bus station located at the corner of the Church Street. The project will be suitable for constructing anoffice building. As a principal adviser the following are recommendation and development proposal Development value Some of the buildings of similar category of the proposed building are: 1. Garstang Road, Preston PR1 It is a property that is located in Preston with an area of 12,020 Sq. ft. The property is near the Preston Lancs and Bamber Bridge. The property is constructed of brickworks construction with four-storey office plan and an extension of a view on the main office in each floor. It has a close to city square with office suits onsite parking sites. The sale value of the building is £ 875,000 and rental is £ 800 per week and £ 3300 per month.(Eckersley Property, (2015). (Eckersley Property, (2015). 2. 9 west bank, Chorley, PR7 The property is located in Chorley on Collison Avenue adjacent to Town Hall. With close links to a train station and national motorway the property has a space area of 1547 Sq. Ft. The building has two floors that are subdivided into floors. The property ground floor has a reception, staff toilets and boiler room. The second-floor staff toilets and a shop, it has a two packing lots one at the front of the building and other at the back of the building. . The selling price is £ 249,000 and £ 1292 monthly rental and £ 340 weekly rental fees.(Eckersley Property, (2015). (Eckersley Property, (2015). 3. premier house, church street It is a property that is located in Preston, Lancashire PR1 in the UK. It is located in northern Church Street popular for the leisure industry. The property is near Guildhall Theatre that has a lot of car parking areas. The property has two stories previously used for offices; it is made of a beam and block concrete floor with brick elevations. The property has a privateparking andan access to an electricity substation. The area of the property is 9741 sq. ft. The sale price is £ 200,000, weekly rental of £ 155 and monthly rental of £ 600(Eckersley Property, (2015).. (Eckersley Property, (2015). Discussion of similarities and differences There are similarities in all the three properties that I have mentioned above. All of the buildings have 2 – 4story and they are all Preston. Some of the differences of the buildings are that Garstang Road, Preston PR1 is close to the city center, premier house, Church Street closer and 9 west banks, Chorley, PR7furthest. The area of the buildings is also different, the premier house has a 9741 sq. ft., Chorley, PR7 has a 1547 Sq. Ft. and Preston PR1 has a 12,020 Sq. ft. Each of the property has mixed developments. The cost are different with , Preston PR1£ 875,000 and rental is £ 800 per week and £ 3300 per month., west bank, Chorley, PR7 selling price is £ 249,000 and £ 1292 monthly rental and £ 340 weekly and premier house sale price is £ 200,000, weekly rental of £ 155 and monthly rental of £ 500. Yield of the buildings According to Homebuilding.co.uk, (2015) in terms of development, Preston offers an affordable option for office as most of the companies wants to diverse their services by bringing their services closer to its customers. Office setting of any company makes it looks official and many are ready to make deals and transaction with it. UK economy is growing with more than 26% of large companies willing to invest in smaller towns e.g. Preston.In a report in 2014, it indicated that each day an average of 5 people are looking for an office to rent (Hellowell,, 2015) . In relation to commercial and residential use, most investors have preferred to use their buildings for commercial use as it saves space and increases earnings ( Campbell, 2015). The rent has increased by more than 2% in the last two years 1. Annual rental cost of, Preston PR1= £3300 x 12 = £39600 The property sale vale = £875,000 Yield = £ 9600/ £ 875,000 x 100 = 4.5% Property purchase value= 100/ 4.3 = 22.2 GDV = market rent x YP @ ARY percent = £3300 * 22.2 * 4.5/100 = £3296.7 2. Monthly rentChorley, PR7 is £1292 Annual rent= £ 1292 x 12 = £ 15,504 The property sale vale = £ 249,000 Yield = £ 15504/ £ 249,000 x 100 = 6.2% Property value= 100/ 3.38 = 16.13 GDV = market rent x YP @ ARY percent = £ 1292 x 16.13 x 6.2/100 = £1292.08 3. Monthly rental of premier house is £ 500: Annual rental cost = £ 500 x 12 = £ 6000 The property sale vale = £ 200,000 Yield = £6000/ £200000 x 100 = 3% property value= 100/ 3 = 33.3 = £ 500 x 33.3 x 3/100 = £ 500 Gross development cost The proposed development is anoffice building with four story building and which will have an area of 852.92 m. The proposed project will be located in Grimshaw Street near a warehouse. The area is good for office building because it has a lot of business in the area and it offers an opportunity for growth and increased income. In this area, the office buildings have a range of 3-4 story buildings. The rent value estimated is an average of the market and the yield expected from the investment is defined by the estimated property value, in which it is assumed that the property will be sold hence the selling coast is deducted. The purchases cost is the cost of buying the site and include all expenses e.g. stamp duty (Sayce,2015) Averagerent = 3300 + 500 + 1292 = 5092 / 3 = £ 1697 The building area is 852.92 m² and with 15 % construction area Area of building = 15/100 x 852.92 m² = 127 m² = 852.92 m² – 127 m² = 725.92 m² value of rent = 725.92 m² x £1697 psm = £1,231,886.2 Annual purchase in perpetuity is 6% = 16.667 Gross development value = £1,231,886.2 x 16.667 = £20531847.3 Cost of sale deduction assumption of 5%: 5/100 x £10,993,553.2 = £ 1026592.36 Net sales income = £20531847.3 - £ 1026592.36 = £ 19505255.06 Gross development cost -External work It is measured depending on the meter in which is worked on (Baum et al., 2006). This is very essential to ensure that work done is of good quality. In relation to from Spon’s Architects’ and Builders’ Price Book 2015, contains the construction cost estimates. From the book, the external work is 0.94% of the project cost. - Professional Fees It affects the overall property cost of the project, depending on the complexity of the project, and the size of the project the professional fees will be 12%. This levied by regulatory authorities and charged by the technicians such as engineers and architects.(Southampton, 2014). - Ancillary Cost Taking into consideration of nature, size and location of the project and project investment objectives the Ancillary Cost of the project will be 2.5 % of project cost (Lopez, 2015) - Contingency This is the money to avoid the risk associated with the project that can cause the project to stop. Depending on size and complexity of the project currently it has it has not been stimulated due to improvement and realization of the project (Baccarini. D, 2014). The contingencies are 3% of building cost - Site Investigation They are a fee for investigation and land survey and it assist in avoiding project risks. (Wilkinson et al., 2008). - Planning Fees These are paid on the local authority depending on the nature and scale of the project. In this project, there will be no cost to be incurred (Jones-Lee, 2015). - Marketing Fees These include advertisement such as the use of media; written, audio and visual. URBanise’s had incurred £255,000 in marketing the proposal(Jones, 2015) - Building Cost The building costs rely on upon the gross outside territory and possibilities are sudden expenses managed while the property is in development period. Also, proficient charges include consumptions for amount surveyors and engineer. (Scarrett, 2008) - Finance Broker expenses are identified with the improvement account game plan and the engineer needs to pay bank's course of action charges for the bank .These expenses demonstrate the span of the advance required and it is between 5% - 7% of the credit esteem (Wilkinson et al., 2008). - Demolition Cost Taken a toll in the UK cost are £12,500-£15,500 for a property of 200msq - 250msq. Be that as it may, the expense will be decreased in the event of the vicinity of materials with rescue esteem (Homebuilding.co.uk, 2015). In this proposition land, there won't be requirement for destruction in light of the fact that the site is not having a property to wreck; it is just auto stopping (Moir. K, 2009) - Site Clearance Before any building is constructed it is very essential to remove the waste, stumps, and hardcore to ensure that the site is clean and tidy before building starts. The project will have no site clearance fees (Hayward, 2008). - Letting Agent’s Fees It is maintained in the letting in the finished advancement and it will take a measure of cash for the operators named. It is an estimation rate of the estimation of rent which is utilized as a part of gross improvement esteem. There are expenses for operators' administration that is expected as 7% (Scarrett, 2008). - Finance Risk Demonstrates the procedure of improvement expense, the rate of the aggregate expense of improvement is a sum accused of extent from 10% - 25%. The level of the benefit and chance relies on upon the advancement many-sided quality, result unpredictability and capacity to guarantee productivity for degree (Scarrett, 2008) Conclusion The project of building an office building in Prestonfrom the above consideration will be profitable to the organization hence a good investment plan for the company. The growing trend of business offices and location of the project make it a prime investment. Reference Eckersley Property, (2015). Property Search - Eckersley Property. [online] Available at: http://www.eckersleyproperty.co.uk/property-search/?location=0&type=8&tenure=0&viewpage=1 [Accessed 12 Jan. 2016]. Homebuilding.co.uk, (2015). Guide to Demolition | Homebuilding & Renovating. [online] Available at: http://www.homebuilding.co.uk/advice/beginners/plots/demolition [Accessed 12 Jan. 2016] Moir. K, (2009). Cost and Process Guidance. [online] Available at: http://www.kmeconsultancy.co.uk/doc/Appendix%201%20Cost%20and%20Guidance.pdf [Accessed 12 Jan. 2016]. Baum, A., Mackmin, D. and Nunnington, N. (2006). The income approach to property valuation. 5th ed. London: EG Books. Scarrett, D. (2008). Property valuation. London: Routledge. Wilkinson, S., Reed, R. and Cadman, D. (2008). Property development. London: Routledge. Hayward, R. (2008). Valuation. London: Estates Gazette. AECOM, (2014). Spon's Architects' and Builders' Price Book 2015. Hoboken: Taylor and Francis Jones-Lee, M., 2015. 5. Dealing with safety in UK public sector project appraisal. Benefit Cost Analyses for Security Policies: Does Increased Safety Have to Reduce Efficiency?, p.117. Lopez, R., Chong, H.Y., Wang, X. and Graham, J., 2015. Technical Review: Analysis and Appraisal of Four-Dimensional Building Information Modeling Usability in Construction and Engineering Projects. Journal of Construction Engineering and Management, p.06015005. Sayce SL. 4 Project appraisal and the triple bottom line. Developing Property Sustainably. 2015 Jun 5:65. Campbell, H.F. and Brown, R.P., 2015. Cost-Benefit Analysis: Financial And Economic Appraisal Using Spreadsheets. Routledge. Hellowell, M. and Vecchi, V., 2015. The Non-Incremental Road to Disaster? A Comparative Policy Analysis of Agency Problems in the Commissioning of Infrastructure Projects in the UK and Italy. Journal of Comparative Policy Analysis: Research and Practice, (ahead-of-print), pp.1-14. Read More