Does It Pencil?
shoptalk
Does It Pencil?
/duz ĭt pĕn-səl/
A real estate term used by developers when they’re assessing whether a project makes financial sense.
Credit…Melanie Lambrick
By Conor Dougherty
This article is part of Shop Talk, a regular feature that explores the idioms of the business world: the insider jargon, the newly coined terms, the unfortunate or overused phrases.
The exploding cost of housing has prompted cities, states and the Biden administration to create a raft of programs aimed at getting developers to build housing people can afford.
Why aren’t developers doing this on their own? Why do they keep churning out McMansioney farmhouses and luxury apartment towers when so many Americans desperately need a budget-friendly place to live?
When public officials ask these questions the answer is often delivered through a real estate cliché: It doesn’t pencil.
A project that pencils is one that makes financial sense. Real estate is a risky industry, subject to heavy regulation, a boom-and-bust cycle and floating interest rates that can take a project from successful to bankrupt in the space of a Federal Reserve meeting. When developers say something pencils, they are saying that whatever they want to build has a chance of making enough money to overcome the many chances of failure.
