The step most buyers skip
Site feasibility is consistently the most underrated step in commercial property acquisition — and the one whose absence causes the most expensive mistakes. Most buyers conduct some due diligence: a building inspection, a lease review, a title search. Far fewer commission a proper site feasibility assessment that tests whether the asset actually works for the intended purpose — commercially, operationally, and within the planning framework governing the site.
The cost of a feasibility report — typically $3,000 to $8,000 for a thorough commercial assessment — is trivially small compared to the cost of discovering post-exchange that the asset doesn't work as assumed.
What a proper site feasibility covers
Permitted use and current use compliance
The first and most fundamental feasibility question is: what is this site permitted to be used for, and is it currently being used consistently with that permission? Many commercial tenancies operate in uses that are either unapproved or conditionally approved in ways the vendor may not fully understand. A retail shop operating a drive-through food service, a warehouse operating as a fitness studio, or an office used as a medical centre may or may not have the necessary development approvals. If they don't, the risk passes to the buyer at settlement.
Development potential assessment
For sites where development potential is part of the value proposition, feasibility must assess what the planning framework actually permits:
- Floor space ratio (FSR) — how much total floor area can be built relative to site area
- Building height limit — what maximum height is permissible
- Setback requirements — how close to the boundary can built form be located
- Car parking requirements — how many spaces are required per square metre of GFA
- Heritage controls — whether the site or adjacent development is heritage-listed
It is not uncommon for buyers to acquire sites with perceived development potential and discover, post-acquisition, that the planning controls render their development scheme unviable.
The planning gap
The gap between what a site appears capable of and what the planning framework actually permits is one of the most consistently mispriced variables in commercial property. This gap is only visible to buyers who have actually read the relevant LEP, DCP, and development consent history.
Operational and logistical assessment
For industrial, logistics, and certain retail assets, operational feasibility is as important as planning feasibility. A warehouse with a 4.5m clear height cannot accommodate modern racking systems requiring 6m clearance. An industrial facility with a 10-tonne floor loading capacity cannot serve tenants with heavy plant requirements. A retail tenancy with inadequate servicing access cannot support a food and beverage occupant without costly landlord contribution.
Market assessment
Feasibility is not only about planning and physical characteristics — it includes a market assessment of whether the asset's location and specification are supported by genuine occupier demand. A retail tenancy that is technically suitable for food and beverage is only worth its asking price if the location generates the foot traffic and demographic profile that food and beverage operators require to trade profitably.
Financial modelling
A complete site feasibility includes financial modelling that tests the asset's income and value profile under different assumptions: current passing rent, market rent, stabilised income, vacancy scenarios, and development scenarios where applicable. Exit value modelling at the intended holding period, under different market conditions, is essential before committing to exchange.
When to commission a feasibility
Site feasibility should be commissioned before exchange of contracts — not as a due diligence item after exchange. Once you have exchanged, you are committed. A feasibility finding that changes your view of the asset's value or risk profile is most useful when you still have the option to renegotiate the price or walk away without financial penalty. This means commissioning feasibility at the offer stage — ideally subject to a short exclusivity period that allows completion of the assessment before committing to exchange.
Speak to an independent commercial property advisor
Keith Garrash provides fixed-fee advisory for investors, asset managers and vendors across NSW.
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