Feasibility tool
Commercial development feasibility
Value the completed asset by capitalised income or rate per square metre, then solve the land and shape the capital stack.
Inputs
Indicative only — a guide, not a formal feasibility, valuation or finance offer. Every deal is assessed on its merits. Send us your numbers for a considered view.
Understanding commercial development feasibility
A commercial development feasibility calculator values the finished asset either by capitalising its net income or by a rate per square metre, then solves the residual land value and the capital stack.
Commercial senior debt tends to be more conservative than residential, so a mezzanine or preferred equity layer is common to bridge to your target equity while keeping the blended cost of funds inside the margin.
The metrics, explained
Total development cost (TDC) is everything it costs to deliver the project — land, construction, professional fees, contingency, finance interest and brokerage. Loan to value (LVR) is total debt divided by the end value; loan to cost (LTC) is total debt divided by TDC. Lenders size senior debt to the lower of an LVR and an LTC limit, so both matter. Return on equity (RoE) is development profit divided by the equity you contribute; margin on cost (RoC) is profit divided by TDC — lenders usually want to see a margin comfortably into double digits. The blended cost of funds is the weighted-average interest rate across your debt layers — the true cost of the capital stack once mezzanine or preferred equity is added. The equity multiple is how many times your cash equity comes back.
More leverage lifts return on equity but raises LVR, LTC and the blended cost of funds — the art is fitting the layers so the numbers still clear the lender’s limits and leave your margin intact. Move to Step 2 and slide the senior and mezzanine layers to see it happen live, then send us the deal for a considered view.
Frequently asked questions
Should I value by income or by rate per square metre?
If the asset is (or will be) leased, capitalising the net operating income at a market yield is usually the more defensible approach. For owner-occupier or strata sale product, a rate per square metre can be more appropriate. The calculator lets you toggle between the two.
What LVR can I expect on a commercial development?
Commercial construction senior is typically more conservative than residential — often sized to a lower loan-to-cost, with the gap filled by mezzanine, preferred equity or additional cash. Model it in Step 2.
How does the capitalisation rate affect my land value?
A lower cap rate implies a higher completed value for the same income, which lifts the residual land value — and vice versa. Small movements in the cap rate can move the feasibility materially, so test a range.
Can BluCow fund mixed-use projects?
Yes. Mixed-use is common in our work — see commercial development finance and get in touch with the specifics.