Question:-
A client proposes a shopping mall with a Gross Internal Floor Area (GIFA) of 20,000 m2. The site has already been purchased and planning permission has been obtained.
The Gross annual rent is estimated to be £250 per m2 of lettable space, and the building cost is estimated to be £950 per m2 of GIFA. The building is designed to achieve a gross to net area of 80%.
Consultant's fees are to be 15.5% of the building cost, and legal and agency fees to be 2.5% of the Gross Development Value (GDV). Building finance is averaged over 24 months and is equivalent to 14% of half cost of building. Developer’s profit is estimated at 10% of GDV.
Given the life of the building is 35 years and the yield is expected to be 7.5%, determine and discuss the profitability of the proposed scheme.
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