PE7007 Construction Economics, Coursework Brief – 2024/2025 , NU, UK

Coursework title: Development Appraisal

learning Outcomes tested in this assessment

Knowledge & Understanding:

•  MLO1: Critically analyse the key strategic technical, legal and financial frameworks and theories underpinning construction development and procurement.
• MLO2: Critically appraise and evaluate the tools and professional procedures used in the cost management of construction projects. Intellectual /

Professional skills & abilities:

• MLO3: Critically analyse information, identify solutions, demonstrate judgement and communicate findings.
• MLO4: Apply appropriate professional practices to complex contemporary development scenarios at different stages of the procurement process.

Personal Values Attributes (Global / Cultural awareness, Ethics, Curiosity) (PVA):

• MLO5: Demonstrate the capacity for independent, evidence-based thinking and decision-making.

Project Information

A private sector client is considering the acquisition of a vacant freehold land of 1.2 acres off Benton Lane, Newcastle Upon Tyne to develop a Grade A office development and has appointed you as the consultant to appraise the development proposal. The client plans to achieve the BREEAM Excellent rating as a minimum standard. The main contractor is expected to comply with the requirements of the Considerate Contractor Scheme. The client has provided the necessary data and appointed you as the consultant to appraise the development option.

The data provided by your client are as follows: 

• Land Price = £400,000 • Construction Area (GIA) = 4000m2
• Expected tender date = November 2025
• Construction Period = 2 years
• Pre-build Period = 1 year
• Letting Void = 6 months
• Discount rate = 4%

Task 1 – Order of Cost Estimate

Prepare an Order of Cost estimate for the proposed new build using the information provided. No drawings are available at this early stage. The building is expected to be two storeys, on a brownfield site which will require new road access, car parking, pavements, drainage, fencing and landscaping.

Instructions

•  Collect 3 samples, each of minimum of 30 suitable cost analyses, from BCIS online database. Each sample should be based on a different set of BCIS search criteria; for example, ranges of floor areas and number of storeys etc
• Compute average building cost (£)/m2, Standard Deviation and Confidence Intervals of each selected sample.
• Select the sample with the narrowest Confidence Interval and use this to produce the Order of Cost Estimate.
• State your BCIS search criteria (you can use relevant downloads from BCIS as evidence) and state any assumptions you make in preparing the estimate.

Task 2 – Whole Life Costing

The client is interested in exploring an alternate design option (Design B) that will allow a better energy efficiency rating to be obtained by the building. In line with its commitment to sustainability, the client is especially concerned with reducing its whole life carbon emissions. The client, however, is wary of the risks associated with each design option and would like to know which option offers the best value for money in terms of life cycle cost. Conduct a Whole Life Cost study using the data below to appraise the options below and prepare your advice to the client. The expected life of the building is 50 years. Where major renovations or demolition is scheduled, it should be assumed that general repairs will not take place that year.

Task 3 – Development Appraisal

You are required to appraise the proposed development and produce a development appraisal with necessary recommendations in light of assisting client to decide whether to proceed with the development.

In addition to the above data, you are required to make sensible assumptions for the following variables.

• Rental rate
• Purchasers costs
• Professional fees
• Developer contingency
• Promotion/marketing of the finished development
• Letting Fees
• Finance (interest) rate (for both land purchase and construction costs)
• Associated other cost items Indicate all sensible assumptions and provide evidences that you have used to make these assumptions.

Task 4 – Evaluation and Recommendation

Summarise the findings from the tasks above and provide a clear, thoughtful evaluation of the project based on the calculations and evidence presented. Consider the current socio-economic context of both the region and the country, and critically assess potential issues such as estimation accuracy, project location, environmental impact, risks, and financial considerations, including taxation, that may affect the development. Where relevant, support or compare your argument with examples from similar projects. Finally, synthesise these key points and offer recommendations that align with the study’s findings. You should always communicate effectively with appropriate language, impeccable presentation, and polished and reader-friendly style/layout.

Answer

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