FLEXIBILITY IN DESIGN - Title Page - MIT

de Neufville + Scholtes D R A F T September 30, 2009Box 3.1_____________________________________________________________________________Parking garage details 7The developer can lease the land for 15 years, after which the land and the garage revert to thelandowner. The cost would be $3,330,000 per year.The site can accommodate 250 cars per level. Due to variation in traffic, we assume thatthe average utilization of capacity over the year does not exceed 80% of installed capacity, i.e.,the effective capacity per level is 200 cars. The construction consultant estimates that given thelocal conditions it will cost $17,000 per space for pre-cast construction, with a 10% increase forevery level above 2, that is, beyond the ground level and the 1 st level up. This premium coversthe extra strength in the columns and foundations to carry the load of additional levels of thestructure and the cars.The average annual revenue per space used will be $10,000, and the average annualoperating costs (staff, cleaning, etc.) about $3,000 for each space. The entrepreneur uses a 10%discount rate.An expert consultant projected demand for parking spaces over the next 15 years.Based upon local conditions, future demand is assumed to be determined by 3 parameters:• Initial demand for parking during the first year of operation (750 spaces);• Demand growth during the first 10 years of operation (an additional 750 spaces, leadingto a demand of 1500 spaces in year 10); and• Demand growth after year 10 (an additional 250 spaces, leading to a saturation demandof 1750 spaces).These demand parameters would typically be estimated using demographic projections and pastdata from similar projects, and then used to define a ramp-up curve to the final demand of 1750spaces. Our example assumes this curve is of the formd(t) = 1,750-a*exp(-bt)with a and b chosen to match the year 1 and year 10 demands. This gives the demand curveover time shown in Figure 3.1 and Table 3.1.[Figure 3.1 and Table 3.1 here]____________________________________________________________________________Part 1: Chapters 1 to 3 Page 56 of 69