Feasibility Studies in Multifamily Construction | Chicago Multifamily Contractor | ETI Construction

It’s long been said that you can’t manage what you don’t measure. In multifamily construction, this is especially true. Capital projects that move forward without reliable data tend to run into blind spots once work is underway, exposing budgets and timelines to risks that could have been prevented and opportunities that could have been optimized with a feasibility study. 

Before committing capital to a promising site or great design, you’ll want to know whether the project can actually meet its financial targets and clear basic feasibility thresholds. A feasibility study looks at costs, market demand, site conditions, regulatory requirements, and operational factors to see how an idea holds up. Instead of just giving a yes-or-no answer, it tests early assumptions and highlights challenges that might not come up in the first round of strategic conversations.

While feasibility studies are widely recognized as a critical success factor for construction projects, their value depends on the quality of the analysis. A study that glosses over submarket absorption patterns for macro-level averages or overlooks site-specific regulatory hurdles by relying on generic zoning assumptions can derail a project from the outset. And if experience tells us anything, the way a project begins is often how it ends, and thorough feasibility sets the pace from day one.

Here’s what property managers and owners should pay attention to in a feasibility study before moving a project forward.

What is a Multifamily Feasibility Study?

A multifamily feasibility study is an early test of whether a project can be delivered as planned under current conditions. Rather than validating an idea in broad strokes, it provides a forward-looking analysis of likely outcomes and stress-tests the assumptions behind them.

To get there, the study brings together a wide range of factors. It looks at market demand, demographics, and the competitive landscape, then compares those findings against budget and cost projections to see how revenue targets and profitability hold up. It also accounts for zoning requirements and site constraints, along with a risk assessment that anticipates how the project might respond if conditions shift.

From an operational perspective, the study drills down into construction costs, labor availability, and sequencing requirements alongside physical and regulatory constraints. That level of detail shows what it will actually take to deliver the project. It also helps owners identify where contingency buffers are needed, where cost escalation could put pressure on returns, and how scheduling aligns with realistic delivery timelines. While commissioning a study typically represents only 1% to 10% of overall project cost, the visibility it provides can safeguard millions once construction is underway.

Key Parts of a Feasibility Study and What to Look For

Market Analysis

The market analysis will determine whether a project can realistically attract the residents or tenants it needs to succeed. Instead of relying on headline demand numbers, it looks closer at conditions within the submarket and at the property level.

For example, a multifamily project in a high-demand metro may look promising until a review shows 1,500 units already slated to deliver within the same 18-month period. Similarly, expected rental growth may not materialize if incentives such as free rent or concessions are widespread across the competitive set.

Key elements to examine include:

• Absorption trends: Lease-up velocity of comparable properties and the time required to stabilize occupancy.
• Competitive set analysis: Current rent levels, concessions, amenity offerings, and operating strategies of nearby properties.
• Demand drivers: Employment growth, migration trends, and demographic data that influence renter demand.
• Pipeline inventory: Units under construction or in planning that may increase competition.
• Market positioning: Whether the proposed project differentiates itself in unit mix, amenities, or location.

Financial Analysis

Financial feasibility is where early optimism is most often tested against reality. Rising material prices, higher interest rates, and labor shortages can quickly shrink margins if assumptions are not carefully reviewed. A sound feasibility study identifies where a project’s pro forma is resilient and where it is exposed.

Suppose a base pro forma assumes 3% annual rent growth and stable operating expenses. A feasibility study tests those assumptions by modeling different outcomes. What if growth slows to 1% and expenses rise 5%. In that scenario, returns can dip below lender thresholds. Without that kind of testing, a project may look sound in early plans but unravel once actual costs and revenues come into play.

Key areas to evaluate include:

• Construction costs: Benchmarking budgets against current material, labor, and subcontractor pricing.
• Financing assumptions: Interest rates, loan-to-value ratios, debt service coverage, and contingency reserves.
• Operating expenses: Insurance, property taxes, maintenance, utilities, and management fees modeled over time.
• Revenue sensitivity: Testing scenarios for slower lease-up, lower rents, or higher vacancies.
• Return analysis: Internal rate of return (IRR), net present value (NPV), and payback period compared against investment benchmarks.
  

Site and Regulatory Review

The physical and regulatory environment can make or break a project. A feasibility study is invaluable in bringing possible site challenges to the forefront early, before design and budget get too far along, so they can be addressed and managed rather than discovered.

For example, if a downtown site with excellent visibility carries soil contamination from prior industrial use, it will require remediation costs that erase financial viability, or if zoning codes cap density below what the pro forma requires, it will completely restructure the project’s economics.

Important factors to review include:

• Geotechnical conditions: Soil stability, groundwater levels, and foundation requirements.
• Environmental constraints: Contamination risks, flood zones, and stormwater management.
• Infrastructure and utilities: Availability, capacity, and costs to connect essential services.
• Zoning and entitlement: Allowable density, building height, parking requirements, and potential rezoning risks.
• Permitting timeline: Expected duration, review cycles, and likelihood of delays.

Operations Assessment 

A feasibility study also looks beyond the construction phase to test how the project will perform once it is operating. By modeling revenue, expenses, and occupancy over time, it helps confirm that the development can remain financially and operationally sustainable, not just viable on paper once the ribbon is cut.

For example, a multifamily property projected to operate with 25% turnover may face serious cash flow issues if turnover aligns with the market’s 45% average. Similarly, underestimating maintenance reserves can lead to deferred capital improvements that compromise resident experience and long-term profitability.

Key operational factors include:

• Occupancy and retention: Forecasts for long-term lease-up, turnover rates, and resident demographics.
• Staffing and management: Costs for property management, leasing staff, and maintenance teams.
• Maintenance and reserves: Long-term budgeting for roofs, HVAC systems, elevators, and other capital expenditures.
• Resident experience: Alignment of amenities, finishes, and services with target market expectations.
• Operational risk analysis: Impact of higher vacancies, reduced rent growth, or unplanned maintenance.

Next Steps

Feasibility studies don’t eliminate every risk, but they give projects the best chance to succeed. Market swings, regulatory hurdles, or mid-project adjustments aren’t setbacks, they’re signs to plan smarter, allocate resources wisely, and stay adaptable.

While feasibility studies cover a wide range of market and site variables, the most decisive factors in whether a project ultimately stays on schedule and within budget comes down to construction cost and constructability. That’s where ETI’s expertise lies. 

With clear data up front and the right contractor managing the process, every finding becomes an opportunity to refine execution and keep the build on track. A project delivered on time and on budget is a financial win and proof that planning and execution worked together from the start.

Ready to see if your next project is built to perform? Contact ETI at (773) 299-6574 or request a quote online. Our team knows the numbers are only as good as the build, and we’re here to turn feasibility findings into results on the ground.