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Absorption
Short-term capture or amount of leasing or sales in the short-term (as opposed to "share of the market" which is long-term capture)
Active (seller's) market
a market characterized by growing demand, and a lag in supply, thus an increase in prices
Capture
the rate that a property or market leases or sells
Competitive supply
the goods or services that compete with a defined good or service
Demand
the desire and ability to purchase goods/services
Depressed (buyer's) market
one characterized by a drop in demand, with a relative oversupply, and thus a decline in prices
Disaggregation
differentiation of the subject versus other properties
Economic base analysis
study of the sector of a market that imports money & exports goods or services from a defined area
Fall-out demand
tenants/owners moving from a higher to lower class building
Household
people who live in one housing unit
Long-term (secular) cycle
function of longer term demographic changes in a market such as employment, population, income, etc.
Market analysis
identification and study of the market for particular economic goods/services
Market definition
buyers & sellers who contact one another for transactions for a particular good or service
Market disequilibrium
too much supply or demand relative to the other
Market equilibrium
when supply and demand are in relative balance
Market analysis
identification and study of the market for particular economic goods/services
Market definition
buyers & sellers who contact one another for transaction for a particular good or service
Market disequilibrium
too much supply or demand relative to the other
Market equilibrium
when supply & demand are in relative balance
Market segmentation
the process of identifying and analyzing submarkets in a larger market
move-up demand
tenants/buyers moving from a lower class to higher class building
real estate cycle
successive periods of expansion, peak, contraction & trough in teh real estate sector of an economy
Share of the market
long-term capture
short-term cycle
market interaction over a shorter time horizon, largely a function of interest rates
Strong market
also a seller's market; one characterized by much activity
submarket
smaller specialized markets taken from a larger market
Supply & demand
the amount of a good/service available for sale. The availability of a real estate product (supply)
Weak market
also a buyer's market, characterized by little activity.
Characteristics of real estate vs. efficient markets
1. Efficient - Homogeneous items
2. Efficient market large number of buyers/sellers
3. Prices relatively uniform, stable, and low
4. Efficient - self regulating
5. Efficient - supply and demand in balance
6. Efficient - market buyer and seller knowledgeable and fully informed.
7. Efficient market - has an organized market mechanism
8. Efficient market - goods readily consumed, quickly supplied, and easily transported.
Types of real estate markets
1. Residential
2. Commercial
3. Industrial
4. Agriculture
5. Special Purpose
General to Specific Approach to Market Analysis - Steps
1. Economic Overview
2. Inventory of Competitive Supply
3. Estimate of Probable Demand
4. Equilibrium/Residual Analysis
5. Capture Analysis
6. Tests of Subject Property Type Under Alternative USes to Determine Most Productive Use
7. Marketing Strategy
8. Probable Performance of Subject Property (income forecast)
Specific to General Approach to Market Analysis Steps
1. Property Productivity & Alternative Use Scoping
2. Economic Overview
3. Inventory of Competitive Supply
4. Estimate of Probable Demand
5. Equilibrium/Residual Analysis
6. Capture Analysis & Determination of Most Productive Use
7. Marketing Strategy
8. Probable Performance of Subject Property (income forecast)
Delineation of Specific Real Estate Market
1. Property Type
2. Property features
a. occupancy
b. customer base
c. quality of construction
d. design and amenity features
3. Market area
4. Available substitute properties
5. Complementary properties
Housing Demand Market Analysis Steps
1. preliminary economic overview - economic base analysis, income levels, population; survey number of residential sales, construction levels, financing and absorption rates


2. Market and property identification - likely buyers and consumer profile, market area may be time-distance relationships, social/political boundaries, location of competitive properties; perform preliminary analysis of legal, physical & locational attributes of subject & competition
3. Demand Analysis
a. size of current & projected population & households
b. segment by owner/renter
c. segment by income levels and determine number that can meet mortgage payments (or rents).
d. factor in vacancy
e. project demand
4. Competitive Supply Analysis
a. inventory existing competitive properties, under construction & planned (with and without permits)
5. equilibrium analysis - compare potential demand and anticipated supply
Retail Demand Market Analysis Steps
1. Preliminary economic overview - economic base analysis, income levels, population; study retail sales, construction levels, absorption rates
2. Market and property identification - defined trade area for the subject by using gravitational models & customer spotting, or adjust trade area boundaries for geographic, demographic and economic characteristics of area; perform preliminary analysis of legal, physical and locational attributes of subject and comparables.
3. Demand Analysis
a. ID leasable retail space in trade area.
b. $ for subject like retail = # households x mean or median income x % household income on retail x % of retail @ subject like center
c. SF of retail @ 100% occupancy = $ for subject like retail divided by retail sales psf
d. SF with vacancy adjustment = SF of retail @ 100% divided by 1 minus vacancy %
e. Adjust for income from outside the subject area and for leakage (sales leaving the subject area)
4. Competitive supply analysis
a. inventory existing competitive properties, under construction & planned (with & without permits)
b. rate the subject for competitiveness
5. Equilibrium analysis - compare potential demand & anticipated supply
Office Demand Market Analysis Steps
1. Preliminary economic overview - economic base analysis to determine business/industries that make up total employment; determine total % of employment in office
2. Market and property identification - segment market by type of tenants leasing office units; segment by class of office building, location & tenancy
3. Demand analysis
a. project employment for total market area
b. determine office workers (% of total employment)
c. forecast space by office workers x space per employee (typically, 125 to 150 sf)
d. factor in vacancy
e. project demand.
4. Competitive supply analysis
a. inventory existing competitive properties, under construction & planned (with & without permits)
b. rate the subject for competitiveness
5. Equilibrium analysis - compare potential demand & anticipated supply; check reasonableness & consider move-up or fall-out demand (going up or down class of buildings)
Note: absorption is short term capture & market share is long-term capture
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