Taking the time to conduct a feasibility study before jumping into a new real estate development project is always a good idea.
While you may think your idea is brilliant (and it very well might be), it’s always best to determine its feasibility beforehand.
Market research can help you secure investments, uncover gaps in the market, realize new target markets, develop marketing strategies, and much more.
In this blog post, our feasibility study market research company will explore:
- The definition of feasibility studies
- The benefits of feasibility studies benefits for contractors and land developers
- A real-world example of a feasibility market research project
- The cost of a real estate development feasibility study
Interested in conducting a real estate development feasibility study with Drive Research? Our costs start at $1,000 and depending on the components of the project will go up from there.
Essentially, a feasibility study is a predictive analysis of a new product, service, location, or other business venture that takes many factors into account including:
Market research studies have the power to uncover extremely valuable information for those looking to pursue a new project in the near future.
For land development companies...
For land development companies, investing a little bit of money into research is always a good idea before investing a lot of money in a real estate project.
For developers, feasibility studies provide clear insights into what the future of a potential property or real estate investment may hold.
A feasibility study market research company is helpful in determining all aspects of the project, uncovering any potential problems, and determining if the project is worth undertaking.
Increased Chances of Success
Real estate developers do not go into new projects blind. The decision to choose a location or type of business is based on consumer interest, competitor advantage, and likelihood to generate a greater return on investment.
A feasibility study gathers this type of insight in a matter of weeks. The information uncovered can drive business, marketing, and sales strategies.
It is far superior than basing a major investment on guesses and assumptions.
Earn More Investment Dollars
Say after conducting a real estate feasibility study, your market research partner discovers 76% of respondents in your target market are likely to visit this new location.
This data point is not only exciting for your team but for potential investors. If you can prove the success of your new business venture even before it is open to the public, investors are much more likely to get on board with the project early on.
Greater Return on Investment
In some instances, the concept or location which architectural, engineering, construction, and development companies ask Drive Research to test is not supported in the market research findings.
Instead, the market research points to other concepts that would be more of a success.
Without market research, real estate development clients could have jumped into this major investment blindly without realizing better opportunities with a larger return on investment (ROI).
Our real estate development feasibility studies company finds the best way to explain this type of market research is through a real-world example.
For this section, we will discuss a recent project Drive Research executed with an architectural, engineering, construction, and development company.
Getting Started with a Third-Party Feasibility Studies Firm
The client came to our market research firm with a few different theories for the property including senior apartments, a market-rate apartment complex, offices, services, or other living opportunities.
Drive Research conducted a feasibility study to offer guidance for the concept strategy and provide the client with relevant data to assist with their decision, help minimize any risks, and maximize their return on investment (ROI).
Determining the Components of a Feasibility Study
Each feasibility study Drive Research conducts is unique and designed with the client in mind.
In this case, our market research firm recommended a four-component study using a combination of qualitative and quantitative research methods.
The recommended components included:
- In-depth interviews (IDIs) with eight key stakeholders in the geographic area
- Market analysis and demographic trends of the market area
- Competitive analysis of like-properties in the market area
- Online survey with respondents who match the demographic for the concept
Each of these components was recommended by our experts to provide the real estate developer with a comprehensive overview of the theorized concepts for the property.
Component 1: Discovery Interviews
Drive Research started the feasibility study with in-depth interviews of eight key stakeholders. The goal was to have in-depth discussions with those who could offer knowledge, expertise, and insight into the potential success of the property.
The feedback collected through these interviews was also helpful in the development of the remaining three components.
The selected interviewees lived within the geographic area of the proposed property and had professional experience in a related field such as economic development, the office for the aging, or county/town planning and development.
The main objective of these interviews was to explore the concepts of housing, retail, offices, services, and other living opportunities and discover how those concepts might potentially fit in the proposed location.
Each interview was pre-scheduled, conducted via phone call or video chat, and digitally recorded.
Each interview lasted approximately 20 minutes. Interviewees were offered a $100 honorarium as a thank you for their time in feedback, which could either be accepted, donated to a charity of their choice, or forwarded to another individual.
Component 2: Demographic Trends and Market Analysis
Using proprietary, in-house software, Drive Research was able to understand population trends and demographic shifts in the market which may impact the concept.
The data system used by our market research firm allowed our team to analyze the county and the town the property was proposed to be located in.
The demographic and market analysis were conducted to provide the real estate developers a better understanding of the current and expected market.
For this feasibility study, demographic data reported included:
- Household sizes
- Household incomes
- Children in the home
- Own and rent statistics
Other secondary data was also reported on and detailed in the market analysis.
In addition to Census data, Drive Research also reviewed several other planned and proposed developments of like-properties. These new properties were profiled, outlined, and detailed in the report.
This is an important part of the market analysis because these incoming concepts could have a significant impact on the client’s proposed concept.
Component 3: Competitive Assessment
The purpose of a competitive assessment is to have a comprehensive overview of the existing competitors in a given market.
Why a competitive assessment?
Competitive assessments are an important aspect of any feasibility study as success or failure of competitors can paint a clear picture of how the concept being tested may turn out to be.
Competitive assessments analyze strengths and weaknesses within the market and bring new opportunities to light, making the future property even more competitive.
For our real estate developer client, the competitive assessment provided a complete inventory of senior living apartments and market-rate complexes.
Drive Research highlighted in detail the properties which would be the concept’s biggest competition.
The competitive assessment included:
- Square footage
- Cost analysis
- Number of units
- Occupancy rates
- Important news updates
- An overview of amenities
- Other noteworthy features
The information reported in the competitive assessment was collected through a variety of market research methods including online research, telephone research, mystery shopping calls, and mystery shopping emails where the Drive Research staff inquired for more information than the apartments advertised online.
Component 4: Online Survey
Drive Research worked closely with our real estate development client to create a survey. The purpose of the online survey was to examine interest, appeal, and likelihood to reside at the property concept.
The survey helped to identify:
- The potential need for housing in the area
- Profiles of likely users
- Cost of rent and pricing
- Geographical draws for the property
- Concept testing of potential amenities and features
If any of the tested concepts (i.e., market-rate apartment, senior living apartments, mixed-use services/offices, etc.) were to move forward, the online survey lends insight into marketing and other strategies to help make the property more successful beyond the planning stages.
To collect responses, Drive Research turned to social media paid advertisements targeted at specific demographics and within the market area.
The survey took approximately 5 minutes to complete and included 20+ questions, including a handful of open-ended questions. If qualified, respondents could enter to win one of three $100 Amazon gift cards.
Feasibility Study Findings, Conclusions, and Recommendations
Although the major findings of the study remain confidential with the client, we can tell you a little bit about what the final report looked like.
The client received a full market research report with detailed sections from each of the four components of the market research study.
The report was composed of several components including:
- Executive summary of the key themes
- Recommendations made by Drive Research based on data
- Respondent personas
- Cost analysis
- Appendix of data
The findings of the market research were used by the real estate developer to obtain approval, gain funding, and set the development project up for success.
The cost of a real estate development feasibility study oftentimes starts at $1,500. This is for a non-customized/off-the-shelf market analysis report which all types of market and demographic data on your proposed geography.
Fully-customized feasibility studies typically range from $15,000 to $25,000 depending on the components you choose (market analysis, competitive analysis, secondary research, etc.) the cost will increase.
Our AEC market research company outline these components below and tell how they can drive the expense UP (⬆️) or DOWN (⬇️).
The market analysis often includes in-depth interviews with stakeholders of the new concept. Typically these stakeholder interviews are a fixed cost.
⬆️ Cost increases: as the number of interviews increases and the length of the interview is greater than 30-minutes.
⬇️ Cost decreases: with fewer interviews and less-specific criteria of target participants.
There is a major cost difference between testing 5 competitors and testing 40 competitors.
Each competitive analysis includes desk research, mystery shopping calls, and reporting of the findings. With each additional competitor, there will be more project management time to gather this type of insight.
⬆️ Cost increases: as the number of competitors increases.
⬇️ Cost decreases: as the number of competitors decreases.
An online market survey gathers feedback from your target audience to determine their needs and preferences as it relates to your new concept.
Factors that determine the cost of a market survey include respondent criteria, survey length, number of responses, and incentives.
⬆️ Cost increases: as the number of responses and questions increases, as well as specific quotas of respondent demographics.
⬇️ Cost decreases: as the number of responses and questions decreases, as well as target a general population of respondents.
Are you interested in conducting a feasibility study with our market research company? Drive Research provides your business with the data it needs to determine the likelihood of success or failure of your new idea.
To learn more about partnering with our team, contact us through any of the four ways below.
- Message us on our website
- Email us at [email protected]
- Call us at 888-725-DATA
- Text us at 315-303-2040
Elizabeth has a curious mind and is never afraid to ask “why?” She discovered her passion for research and exploring data while completing her bachelor’s degree at Marist College. As a researcher, she believes you’re never truly done learning.