development, and the remainder is the land residual. The decision to pursue the project depends on
whether the developer can acquire the land at a favorable price.
Within the model RKG created a land value override where the model user can input their own land
value assumption. This allows the user to test financial feasibility based on the different land costs,
since they may vary significantly based on development size and underlying zoning.
To determine construction costs, RKG interviewed several developers and utilized the March 2021
Marshall & Swift Valuation Services booklet to build out customized per square foot construction
costs for traditional townhouse, stick, and stick over podium construction. RKG assumed that new
construction would have either “excellent” or “good” interior or exterior finishes. Construction costs
are adjusted by using a local Nashua multiplier supplied by Marshall and Swift. The Marshall and
Swift numbers are an industry standard based on market data. However, in conversation with local
developers the price of materials and labor has been rising quickly since the start of the COVID-19
pandemic, and the Marshall and Swift data does not capture these pricing changes. RKG therefore
factored into the Marshall and Swift construction cost number adjustments based on the price inflation
identified by developers.
Within the model the appropriate construction cost is applied to the development based on its type
and size. RKG quantified the costs for the three different construction styles, and these costs can be
assigned to the typologies (Fee Simple, Multifamily Stick, and Multifamily Podium) the City of
Nashua wants modeled. RKG assumed for this model that all projects would take one year to
complete, and construction would begin in 2021. Appendix 1 has more detailed information about
construction costs.
Within the model two types of parking costs were included: surface and structured podium parking.
The types of parking have dramatically different cost estimates. Surface parking is by far the cheapest
option for parking. Typically, this type of parking is done on smaller projects which have sufficient
land area to accommodate the parking requirements under zoning. Structured podium parking
typically occurs in multifamily developments which are constrained for space.
The parking calculations are based on the number of parking spaces required by the city based on the
total number of residential units and typology. The City of Nashua requires two parking spots for
every single family or townhome and requires 1.5 spots per multifamily unit. Appendix 1 has more
detailed information about parking costs.
Financing
Development financing is possibly the most important element of any real estate deal. The ability to
secure long-term financing at an affordable rate allows a developer to complete their project. Different
types of financing are available depending on the scale of the project. For very large projects, financing
might be obtained from a national bank, institutional investors, or a debt fund. These types of entities
invest capital in projects for investors, and typically provide favorable interest rates given the track
records of large-scale developers.
