A Study on the Benefit and Cost Analysis of Redevelopment Project Type

We examined the economic impacts of redevelopment projects and their feasibility with proportion methods and real option models. As traditional feasibility assessments for redevelopment projects relying primarily on the proportion methods were likely to have limitations in reflecting market fluctuations and uncertainties, this study adopted the real option models to analyze optimal investment timing and economic viability for different project types. This study selected specific redevelopment projects and wrote business scenarios which reflected private participations and private contributions. This study also introduced the proportion methods to each scenario in order to evaluate economic feasibility and perform simulations for the change in business conditions. In addition, this study analyzed the scenarios with the methods to come up with optimal investment timing and economic feasibility. The results are as follows. The increase in the floor area ratio (FAR) led to greater housing supply and profits. However, public contributions such as land donation and public rental housing provisions did not offset all negative effects on the feasibility. Furthermore, the analysis of real options showed that current economic conditions did not reach the critical point and controlling investment timing could enhance the feasibility according to changing market conditions. This study pointed out the limitation of single assessment on the analysis of the economic feasibility of the redevelopment projects and the combination of the methods with the models for evaluating sophisticated feasibility. This study suggested that public participations in the projects should require an appropriate policy approach with both FAR incentives and public contributions. Finally, this study provided policy insights for activated redevelopment projects.