A rigorous cost-benefit analysis is the single most useful tool for deciding whether a construction project should proceed, be redesigned, or be shelved.
A construction cost-benefit analysis compares the full life-cycle cost of a project (land, design, construction, financing, operation, maintenance, and eventual disposal) against every quantifiable and qualitative benefit it will produce over its useful life.
In Kenya's current market, three inputs move the needle most: land cost, construction cost per square metre, and expected rental yield. Getting even one of these wrong by 10% can flip a project from profitable to loss-making.
Use a discounted cash flow (DCF) model over at least 10 years, apply a realistic discount rate (12%–16% for private developers), and stress-test with a downside scenario that assumes 20% higher costs and 15% lower rents.
Include intangible benefits — brand positioning, tenant retention, ESG credentials — but never let them replace hard numbers. If the base case does not stand on its own, the project should be redesigned before ground is broken.
- Model full life-cycle costs, not just construction
- Stress-test the plan with a defined downside scenario
- Apply a realistic discount rate for your risk profile
- Never rely on intangibles to save a weak base case