How Developers Assess Feasibility Before Buying Land

What "Feasibility" Actually Means

When a property developer says they're "running feasibility" on your site, they're building a financial model that answers one question: at what price can I buy this land and still make my target return?

The output of that model is called Residual Land Value (RLV) — the price the land needs to be at, holding everything else constant, for the project to clear the developer's hurdle rate. If your asking price is at or below RLV, the deal works. If it's above, the developer either walks away or restructures.

Understanding the feasibility model is the single most powerful thing a landowner can do before negotiating with a developer. Below is the exact framework developers use.

The Feasibility Equation

The simplified version every Brisbane developer uses:

Residual Land Value = GRV − Construction Costs − Professional Fees − Finance Costs − Statutory Costs − Sales & Marketing Costs − Contingency − Developer Margin

Each input matters. Get one wrong and the answer can swing by hundreds of thousands of dollars.

1. Gross Realisable Value (GRV)

The total revenue the developer expects to earn from selling the completed product — every apartment, townhouse, or lot, summed.

GRV is built from comparable sales, not aspirational pricing. A developer buying in Coorparoo will look at the last 12-18 months of completed apartment sales in Coorparoo, Camp Hill, and Stones Corner, then apply a discount for risk on stock that hasn't yet been built or pre-sold.

2. Construction Costs

The single biggest cost line. In Brisbane in 2026, indicative construction rates (excl. GST) are roughly:

• Townhouses: $2,400 – $3,000 per square metre
• 4-6 storey apartments: $4,000 – $5,200 per square metre
• High-rise (10+ storey): $5,500 – $7,000+ per square metre

Construction cost inflation since 2020 has been the single biggest squeeze on feasibility — sites that worked at $3,200/sqm in 2020 may now require $4,800/sqm to deliver. This is why some sellers expecting 2021-era pricing are getting offers that look "low".

3. Professional Fees

Architect, town planner, structural and civil engineers, hydraulic, mechanical, electrical, fire, acoustic, traffic, landscape, surveyor, project manager, quantity surveyor. Typically 8-12% of construction cost.

4. Finance Costs

Acquisition debt, construction debt, equity-return obligations to capital partners. With current Brisbane senior-debt rates around 8-10% and construction durations of 18-30 months, finance costs alone can consume 6-10% of GRV.

5. Statutory Costs

Council infrastructure charges, plan-sealing fees, contributions, headworks. Brisbane City Council infrastructure charges for residential development can range from $20,000 to $40,000+ per dwelling depending on the suburb's charge area.

6. Sales & Marketing

Agent commissions, display suite, marketing collateral, online advertising, project launch event. Typically 3-5% of GRV.

7. Contingency

A buffer for the unknowns — typically 5-7% of construction cost.

8. Developer Margin

The reward for taking development risk. The benchmark in Brisbane for institutional-grade developers is 20%+ of GRV (some accept 18%, none accept less than ~15% on traditional product).

Worked Example — A Real Brisbane Site

Suppose a developer is assessing a 1,200 sqm site in Coorparoo, MU1 zoning, 3-storey height limit. The site can yield 18 apartments averaging 90 sqm each.

That's the headline number — about $1.37m. But a sophisticated vendor will dig into the inputs:

• If GRV is conservative (sales agents pre-marketing pre-sales at $980k avg), RLV moves to ~$2.4m
• If construction comes back at $4,200/sqm via competitive tender, RLV moves to ~$2.1m
• If margin is taken at 18% rather than 20%, RLV moves to ~$1.7m

Each of these is a legitimate negotiation lever. ACRES routinely runs counter-feasibility studies on behalf of vendors to test the developer's assumptions.

Where Most Vendors Lose Money

The biggest mistake landowners make is trusting a developer's feasibility at face value. Common compression tactics include:

1. Conservative GRV — using last year's sales rather than the current trajectory
2. Hidden contingencies — burying margin inside construction-cost line items
3. Inflated finance costs — assuming worst-case interest rates
4. High target margins — quoting 25%+ when 18-20% is industry standard
5. Excluded upside — ignoring rezoning, height-limit increases, or amalgamation potential

A second-opinion feasibility from an independent advisor (or a competing developer) often unlocks 10-30% additional value.

Levers That Move RLV in the Vendor's Favour

If your headline price is above the developer's RLV, the deal can often still be salvaged with structuring:

• Long settlement (12-36 months) — defers the developer's land cost while pre-sales accrue, often unlocking $200-500/sqm of additional RLV
• Deferred payment — pay 30-50% on settlement, balance on DA approval or first sale
• Vendor finance — vendor lends part of the purchase price at a structured rate
• Joint venture / profit share — vendor takes equity rather than lump sum
• Site amalgamation — combine with the neighbour to unlock height bonus or yield uplift

These are the structures ACRES routinely negotiates. Done well, they can turn a "no" feasibility into a "yes" without either side losing.

When the Feasibility Genuinely Doesn't Work

Sometimes the project just doesn't work — at any reasonable structure. In those cases the right answer for the vendor is usually one of:

• Wait for the next cycle (rates down, construction costs cooling, or rezoning)
• Sell to an owner-occupier rather than a developer (residential value vs. development value)
• Land bank with a long-dated option agreement to a developer

ACRES advises vendors honestly when feasibility doesn't support development pricing today — selling at the wrong moment is more costly than holding.

Daniel McCormack

Managing Director, ACRES — Australian Commercial & Residential Group

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