“Uncertainty and Feasibility Studies: An Industrial Case Study”

Any development is impacted by differences between market conditions at the conception of the project and the market realities at the time of completion. The feasibility study needs to address the possible outcomes based on an understanding of the current market. The future is uncertain and a full feasibility analysis should be able to model the upside and downside risk pertaining to a range of possible outcomes. Feasibility studies are extensively used to determine land value, but they tend to be single point analysis based upon a single set of ‘likely’ inputs. In this paper we look at the practical impact of uncertainty in variables using a simulation model with an actual case study of an industrial redevelopment plan for an Italian Municipality. This allows the appraiser to address the issues of uncertainty involved, and thus provide the decision maker with a better understanding of the risk pertaining to that development.