After doing a quick search on this forum, the main way people seem to be estimating replacement cost is either talking to development guys (in-house or via a broker) or using a third-party service (e.g. costar).
Both of these approaches imply that you are already in the RE business. My question is - if you are not already in the RE business but am curious about RE investments (let's say you want to DD selected assets of a REIT portfolio), how would you go about estimating the replacement cost of an asset based on public information?
I'm situated in the Asia region (think Beijing/Shanghai/Hong Kong/Singapore) - so if there are Asia-specific tools please feel free to elaborate as well.
Cheers.
I am an analyst at a multifamily developer. If I am looking outside of a city I have been talking to local contractors in, I am as lost as you are, if I come back to the same city I had experience in 5 months earlier, I am knowledgeable, but still not accurate. Most people that throw out they are buying assets below replacement cost are trying to sell you something, or estimating in a very general way. The answer to your question is work and connections, that is all I can think of.
Unfortunate to hear but thanks for the insight
Not sure about Asia, but in the US i'd always preface soliciting estimates that I either own the assets or have a project for them. Most contractors are willing to throw a price for something that will lead to actual work.
I'd ballpark that you'd be able to get anything less than $1mm you can get a real estimated breakdown for quickly. Anything more than that you'd be spit-balling until you got in bed with design documents.
Echoing the comments above. It's an obvious question, but that doesn't mean it's easy to answer.
You can start with cost per s.f. numbers, either from databases like RS Means or local contacts who are plugged in. That only gets you in the ballpark. If you want to get more accurate than that, you need to talk to people who have strong construction backgrounds AND are pricing stuff currently. (I've been burned by cost estimates from guys who have 30 years of experience but have been out of the game for a couple of years.) Typically the people you want to talk to are GCs or professional cost estimators who used to work for GCs.
Based on public information? Hm. Go look for a building similar to what yours is (e.g. multifamily, office, etc) that has recently started construction. If your local municipality has a service like NYC's ACRIS (public records database), then you can go on there, find that project, and look at what the construction/acquisition loans were for. Assuming the rate on the loan is reasonable, you can back into a close-enough guess of the construction cost, since it's rare in the States to see traditional construction loans break the 65% LTC barrier. Obviously adjust for lending conditions in your market.
Otherwise, just ask a GC what they're building for. They'll probably give you a decent answer. Or ask a lending officer what they're seeing.
Not going to be the most precise answer, but most REITs with active development will disclose total dev costs of individual projects in their supplemental. Might need to do a little research to tease out the land basis and financing costs.
https://www.rsmeans.com/products/books/cost-books/building-construction…
Came here to just point them to RS Means too
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