Report by REP Academics published by the RICS Research Trust

The research is titled “Performance metrics, required returns and achieved returns for UK real estate development” and was carried out by Professor Neil Crosby, Dr Steven Devaney and Professor Peter Wyatt.

The aim of the research was to improve understanding of the form, extent and variability in financial returns sought by developers in both the residential and commercial real estate sectors. Existing information on the returns that developers want and the returns that they achieve is fragmented and so the researchers reviewed academic literature, published appraisals, company accounts and published performance data, as well as undertaking interviews and an online survey of developers, in order to understand more about this topic.

The findings from surveys and interviews reveal that simple, traditional appraisal models and profit metrics are still very prevalent in UK market practice, despite the availability of more sophisticated cash-flow based models for development appraisal. However, appraisal practices vary according to the size of developer, type and length of scheme and stage of the development process.