Appraisal is essential to ensure that the economic, social or environmental implications of a design or alternative design solution is known at the beginning to establish whether to build or not, to modify a design or simply to progress to the next stage of the development process. This chapter focuses on the appraisal of design based on the analysis of key variables and their impact on costs and benefits at different time periods during the life cycle of a project. Key variables include land cost, yield, building cost, planning, professional fees, marketing costs and interest rates and their effects on profitability and value of a scheme.
There are various methods used for the appraisal of design. This chapter examines the principles of design appraisal using examples of a discounted cash flow (DCF) technique and non-discounted method called the residual valuation method to explore the implications of design variables on project costs and development value.
The factors affecting design costs and benefits, and their implications in terms of capital costs have been discussed extensively in Chapter 2. Using the design costs and benefits matrix (reproduced in Table 2.1), various design alternatives and associated design variables can be explored to determine the best solution.
Some costs such as land, planning, design ...