Feasibility Study Guide For Construction Projects In Kenya

After years of preparing feasibility study reports, Integrum has noted that there’s still a lot of confusion surrounding the whole subject – particularly when it comes to the feasibility study specifics for construction projects in Kenya. 

If you’re seeking construction financing, for instance, prospective investors and banks will ask you to submit a comprehensive feasibility study report – but they won’t reveal exactly what it should cover. 

And if you tried searching for feasibility study examples, you’d have a hard time finding relevant reports for private building projects in Kenya. 

But, that’s not all. The same level of uncertainty applies to feasibility study companies. Aspiring real estate investors and developers often face challenges identifying the ideal feasibility study consultants for their upcoming projects. 

For example, you might be torn between hiring an architectural firm and proceeding with a financial analysis agency that happens to offer feasibility study services. 

It’s because of these concerns that we’ve decided to compile an in-depth feasibility study guide for construction projects in Kenya. While our previous guide gives real estate investors just a general overview, you’ll notice that this one dives much deeper into the matter to uncover the finer technical details about construction-related feasibility study reports.

In essence, you get to find out:

• How feasibility studies fit into the Kenyan construction scene. 
• The specific areas that your feasibility study contents should cover. 
• The core feasibility study consultants that you’ll need for a well-detailed report. 
• Where to start if you intend to undertake a construction feasibility study.
• All the deliverables you should expect from your feasibility study company. 
• The types of developers who should consider getting a real estate feasibility study report.

So, you might want to follow along until the end. 

What Is The Role Of A Feasibility Study In Building Projects? 

A common misconception about construction feasibility studies is that the resultant report is more like a business plan for your building project. 

Ok, we understand why people might think so. But, that’s not quite accurate. 

You see, while a business plan outlines the roadmap for your business/real estate venture, a construction feasibility study reviews the economic, legal, technological, scheduling, and operational factors of the building itself to determine if the project is actually viable. 

Confusing? 

Well, here’s a much simpler way to look at it. The role of a feasibility study in construction is to assess all the relevant project variables, and subsequently, establish if the building project is doable, plus whether it’s worth the investment. 

But, don’t get us wrong. Your project’s viability isn’t wholly defined by just the ROI projections. Rather, the construction feasibility study report addresses: 

• All the relevant market opportunities. 
• The best approaches to take as you pursue the building project. 
• All the professionals and expertise you’ll need before and during construction.
• The potential problems and risks that might develop as you pursue the building project. 
• The funding required to complete the construction project. 
• All the technical requirements from project inception to completion. 
• All the statutory construction approvals that you’ll need.  
• Your building plan approval costs.
• The relevant planning guidelines that’ll apply to the project. 
• The project budget relative to the client’s requirements. 
• How various location and physical factors will impact the project.
• The project procurement options. 
• The project programme and the accompanying schedule of tasks. 
• All the operational and maintenance issues before, during, and after the building project. 
• The possible cash flow during and after the construction project. 
• The potential positive and negative outcomes of the building project. 

Now, make no mistake about it. This is not a week-long assignment. To cover all these aspects accordingly, bonafide feasibility study companies in Kenya typically take about 4-6 months.

At least that’s sufficient time for your feasibility study consultants to assess all the client requirements, conduct thorough site appraisals, compare similar developments in the area, analyze market opportunities, review all the legal considerations, define the technical requirements, develop suitable Architectural Outline Designs, review preliminary Bills of Quantities, and compile a comprehensive feasibility study report. 

In the end, therefore, you can expect an accurate breakdown of all the relevant figures and projections, accompanied by factual development recommendations. 

A construction feasibility study report shouldn’t be based on vague assumptions and standard building cost estimates – rather, it should make well-informed design recommendations, and then generate factual findings from the resultant Outline Design drawings and preliminary BoQs. 

With that said, have you ever wondered who even needs all that in the first place? Are feasibility studies for construction projects in Kenya intended for just NGOs and government bodies? Or maybe it’s only a thing for large real estate projects? 

Who Should Consider Getting It?

Well, it’s indeed true that NGOs and government bodies, in particular, typically insist on conducting thorough feasibility studies for their proposed construction projects. 

Findings published in the resultant feasibility study reports are then used to make informed decisions – for the sake of safeguarding the interests of both the public and the projects’ funders. 

Take, for instance, this Nairobi Bypass Construction Feasibility Study Report that was published in 1988. This is what the Government of Kenya used to determine the viability of building the Nairobi Southern Bypass from Mombasa Road to Kikuyu. 

(Here are our findings on the Road Construction Costs in Kenya.)

Another area where the government heavily relies on feasibility studies is PPP. If you’re planning to venture into a Public Private Partnership with Kenya, you’ll be required to submit an in-depth feasibility study for your proposed construction project. 

(Check out this detailed guide for building developers seeking to capitalize on Kenya’s PPP framework.)

It’s worth noting, however, construction feasibility studies are not exclusive to NGOs and government agencies. Even private developers are now engaging feasibility study companies in Kenya to provide insights into the viability of various construction ventures. 

If you haven’t noticed already, the stakes in Kenya’s real estate market have changed quite considerably in recent years. Industry reports suggest that real estate investments no longer guarantee high returns. 

In particular, things have been tough for small to large-scale properties that were blindly developed based on market assumptions. 

It’s this realization that has inspired strategic real estate companies to change tack and work closely with feasibility study consultants. At least then, they get to safeguard their real estate returns in Kenya through well-calculated moves that are based on accurate market insights. 

(Find out the Low Capital Real Estate Investment Options.)

All in all, therefore, we can conclude that a feasibility study is suitable for anyone who intends to understand all the critical parameters that’ll influence their construction project. 

This is the first step to establishing if your building project is truly worth the investment. Plus, you’ll get guidelines on how to optimize the construction process for the best possible balance between quality, building costs, and project ROI. 

The 8 Critical Feasibility Study Areas For Construction Projects In Kenya 

When commissioned to conduct a feasibility study for a construction project in Kenya, Integrum principally focuses on the following eight areas. These are the core chapters that should make up your feasibility study contents:

The Official Feasibility Study Template For Real Estate Projects

#1. Chapter One: Project Overview – This is where you introduce the proposed construction project, and then provide an overview of the feasibility study objectives. 

#2. Chapter Two: Economic Overview – This part of the report provides high-level macroeconomic insights into the subject area – for the sake of identifying all the opportunities and threats that would be relevant to the project. 

We normally review the population demographics, urbanization trends, planned future developments, key infrastructure, GDP, inflation, economic indicators, investment indicators, etc. 

#3. Chapter Three: Market Assessment – While Chapter Two is all about economic analysis, Chapter Three assesses the market a bit more contextually. 

Your feasibility study report should review the market supply in terms of the current positioning of primary and secondary competitors, and then use the findings to work out the market capacity, as well as the projected future supply trends. 

#4. Chapter Four: Demand Analysis – This is where we apply fair share analysis along with project-specific considerations to determine not only the expected occupancy levels, but also the average daily rates for the proposed development. 

Additionally, the feasibility study report should reveal all the primary demand generators, penetration index, target positioning, plus forecasted operating performance. 

#5. Chapter Five: Site and Location Analysis – Chapter 5 of the feasibility study is where the technical analysis begins. The feasibility study consultants usually visit the proposed project site to conduct a rigorous assessment of the whole area. 

This is meant to determine the technical opportunities, risks, and constraints for the upcoming development, as well as the appropriate mitigation measures.

#6.  Chapter Six: Development Advisory and Recommendations – At this stage, we normally review all the findings we’ve made from the beginning of the feasibility study (Chapters 1 – 5), and then evaluate them against the client’s requirements/business plan. 

That provides clarity on how best to approach the proposed project. These are the insights that are passed on to the design team (architects and engineers) as recommendations/guidelines for developing the project’s Outline Design. 

(Please refer to this article for clarifications on what Outline Design Proposals entail)

#7. Chapter Seven: Technical Evaluation – Once the project’s Outline Design has been reviewed and approved by the client, the feasibility study consultants dive into the details of the whole thing to establish what it’ll take to successfully complete the project. 

This part of the feasibility study report typically highlights the technical requirements, legal requirements, procurement options, the project programme, plus the servicing strategies that come after construction. 

#8. Chapter Eight: Financial and Investment Analysis – In the final chapter of the feasibility study report, we perform a preliminary cost analysis to accurately estimate the building expenses that’ll be incurred during the project. 

(Here are the exhaustive breakdowns of the 2021 construction rates in Kenya and the building costs in 2022.

Then to help you determine the overall viability of your real estate investment, we further provide the post-construction Operating Projections, Cash Flow Statements, plus a detailed Profit and Loss Statement that spans about 10 years. 

All these numbers are ultimately crunched to reveal the expected profitability in terms of the project’s Returns on Investment (ROI), Returns on Equity (ROE), and Internal Rate of Return (IRR). 

5 Feasibility Study Consultants You Should Have In Your Team

Going by the feasibility study areas we’ve identified, you can already tell that this is not a one-man job. 

For a complete and accurate analysis of all the relevant viability parameters, your feasibility study company ought to undertake the whole assignment with appropriately skilled collaborators. 

Basically, there are five core feasibility study consultants that you should always have in your team:

#1. Construction Project Manager: Your Project Manager is pretty much the lead feasibility study consultant. They are the ones who review your project needs, coordinate the entire study, and then prepare a detailed feasibility study report writeup. 

#2. Architect: As the lead designer of the project, the Architect performs a site appraisal and then develops an appropriate Outline Design based on the recommendations forwarded by the Project Manager. 

They are usually engaged at Chapter 6 of the Feasibility Study, after the Project Manager and the Economic Analyst have crunched the market numbers. 

Without the Architect’s Outline Design, the Technical Evaluation and Investment Analysis stages would be based on blind assumptions about the upcoming construction project. 

#3. Engineers: Engineers collaborate with the Architect as part of the design team. They come up with the preliminary structural, mechanical, and electrical specifications – which are then used to establish accurate construction cost estimates. (Here’s a breakdown of the charges for engineering services in Kenya.)

#4. Quantity Surveyor: The Quantity Surveyor is the one who reviews the Architect’s Outline Design plus the Engineers’ specifications, and then advises on the expected building costs. 

#5. Financial Analyst/Investment Analyst/Economic Analyst: As the money expert, this is the feasibility study consultant who develops all the financial projections, including the Operating Costs, Inflation Rates, Cash Flow Statements, plus post-construction Profit and Loss Statements. Then from all that, you get to accurately establish your construction project’s ROI, IRR, and ROE. 

Other Relevant Feasibility Study Consultants: Other professionals that you could potentially engage in your feasibility study – depending on the scale and specifics of the proposed project – include interior designers, urban designers, landscape architects, surveyors, and property valuers. 

Over To You: How To Get Started

Since the findings of the feasibility study will ultimately guide your entire project even after construction, you cannot afford any errors in your report. Besides, with the way Kenya’s real estate industry is evolving, now’s not the time to make investment decisions based on blind assumptions and speculative figures. 

Now, that’s where we come in. Integrum has just the right balance of experienced Project Managers, Architects, Engineers, Quantity Surveyors, and Finance Analysts who know just how to generate accurate findings across all the relevant construction and market factors.

To get started, you can go ahead and send us an email today with a brief description of your proposed construction project. We’ll promptly get back to you with a proposal of how exactly we intend to handle your Feasibility Study.