Development Revenues
RKG collected rental rate data for relatively new luxury developments which included efficiency
(studio), one-bedroom, two-bedroom, and three-bedroom apartments. The market rental rates were
used as a baseline for the analysis and compared to information obtained from developers. Generally,
new units rent for between $2.24 and $3.38 per square foot depending on the unit type. Within the
model the rents can be modified by the user. For more information about rental rates, see Appendix
1.
The sales values of housing units were determined through a combination of market research and
utilizing the City Assessor database to parse the most recent sales values by bedroom count. The
results are used for the baseline assumption in the model. For more information about sales values,
see Appendix 1.
Income streams outside of traditional rent and sales value stem from parking revenues. For rental
units, it was assumed in the model that parking revenues of $75 per space were attainable. No parking
revenues are included in ownership units because the parking space is inherently included in the price
of the unit.
Development Costs
The amount of money a developer can pay for a piece is land is a critical component to the financial
feasibility of a project. The higher the land value, the more a developer needs to offset their costs
through things like higher density, lower parking rates, or increased sales prices and rents. The price
of land is one of the key factors that can affect financial feasibility; and this is especially true for projects
on the financial margin. From a cost perspective, the cheaper a developer can obtain the land, the
greater the potential financial return. This is because in terms of development, construction and
financing costs are relatively fixed. Whereas the price of land and its developable potential can
significantly impact the viability of a project.
The price of land in Nashua has become high in recent years and fluctuates based on the underlying
zoning and the total number of units which can be developed. An example being that a single-family
home with a double lot can easily sell for $400,000 as a tear-down project which is then replaced with
two units each selling for $500,000. This indicates that developable land is in scarcity in and around
Nashua.
Developers typically calculate the residual value of the land to determine what they would be willing
to pay for the land on a per unit basis. This calculation considers construction costs, financing
expenditures, and expected returns. The general approach towards determining the land value is to
calculate the income expectations for the developed land, subtract all expenses associated with this
