Finance 454: Real Estate Market Analysis

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Finance 454 Real Estate Market Analysis

• A Short Course in the Analysis of Residential and
  Commercial Real Estate Markets

Wayne Foss, MBA, MAI, CRE Foss Consulting
Group Email wfoss_at_fossconsult.com
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Introduction

• Student Introduction
• Name
• Academic Level
• Real Estate Experience
• What do you expect to get from this course?
• Future Goals
• Instructor Introduction

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Course Syllabus

• Objectives
• To develop an analytical approach to identifying
  and solving real estate problems
• Course Coverage
• techniques of real estate market analysis
• development of market analysis theories
• forecasting techniques
• Prerequisites
• Fin 351 or equivalent

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Course Syllabus, cont...

• Required Textbook
• Market Analysis for Valuation Appraisals,
  Fanning, Grissom Pearson
• 1st Edition
• The Appraisal Institute
• Course Project
• Market Analysis of a Commercial or Residential
  Site
• Group Project (3 to 4 students to a group)
• Property of my choice
• length approximately 30 to 50 pages including
  exhibits
• presentation of findings in class

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Course Syllabus, cont...

• Examinations
• Type
• 50 Multiple Choice or True False
• Closed Book, Closed Notes
• 50 Short Answer or Problems
• Open Book, Open Notes
• No Partial Credit
• Calculators are permitted, computers are not
• Make-up examinations are not permitted
• Unless there an extraordinary circumstance

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Course Syllabus, cont...

• Final Grade Weighting Policy
• Mid-term 30
• Final Exam 35
• Course Project 30
• Class Participation 5
• Total 100

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Course Syllabus, cont...
The Final Course Grade will be based on the
following Scale
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(No Transcript)
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Class Schedule

• DATE TOPIC ASSIGNMENT
• Feb. 2 Introduction -
• 9 Real Estate Market Analysis Ch 1-5
• 16 Real Estate Market Analysis Ch 7-9
• 23 Data Sources for Market Analysis Ch
  10
• Mar. 2 Field Assignment -
• 9 Population Forecasting Ch 6
• Economic Base Analysis
• 16 Basic Concepts and Real Estate Marketability
  Analysis Ch 11
• 23 Highest and Best Use Decisions

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Class Schedule

• DATE TOPIC ASSIGNMENT
• Apr 13 Market Analysis for Shopping Centers Ch
  12, 16-17
• 20 Shopping Centers, cont
• 27 Market Analysis for Housing Subdivisions Ch
  14
• May 4 Market Analysis for Office Buildings Ch
  13
• 11 Market Analysis for Vacant Land Ch 15
• 18 Case Presentations of Project Papers
• 25 Final Examination

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Market Analysis

• Market Analysis is the study of real estate
  market conditions for a specific type of property
• A Market Study
• Macroeconomic Analysis that examines general
  market conditions of supply, demand, pricing,
  demographics of a specific area or property type
• A Marketability Study
• Microeconomic study, examines the marketability
  of a given property or class of properties.
• Investment Analysis
• Feasibility Analysis

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Six Step Market Analysis Process

• Step 1 Define the Product
• (property productivity analysis)
• Step 2 Define Users of the Property
• (market delineation)
• Step 3 Forecast Demand Factors
• Step 4 Inventory and Forecast Competitive
  Supply
• Step 5 Analyze and Interaction of Supply and
  Demand
• (residual demand study)
• Step 6 Forecast Subject Capture

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Levels of Market Analysis

• Inferred Demand Studies
• Level A
• more descriptive than analytical
• Level B
• relies upon broad based surveys
• Fundamental Demand Studies
• Level C
• employs fundamental forecasting techniques
• Level D
• use of primary research and surveys

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Property Productivity Analysis

• Site and Improvements
• Site analysis
• Legal and Regulatory
• Zoning and General Plan constraints
• Location
• Linkages
• Urban Growth

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Highest and Best Use Decisions

• Highest and Best Use Analysis
• Land or Site as though vacant
• Property as Improved
• Systematic Approach to analysis
• Legally Permissibility, Physically Possible,
  Financial Feasibility, Maximally Productive
• Timing
• Feasibility Rent

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Population Forecasting

• Definitions of
• Projections (prediction)
• Forecast
• Curve Fitting, then extrapolation
• Six Alternative Curves
• Forecasts using building permit data

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Economic Base Analysis

• Use is to determine the concentration of an
  industry in a given place
• Definitions of
• Economic Base
• Development of Location Quotients
• Types of Data utilized
• Basic versus non-basic employment

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Sources of Demand

• Employment
• Manufacturing
• Services (Office Users)
• Population Growth
• Housing Units
• Shopping

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Shopping Centers

• Types of Shopping Centers
• Tenant Mix and Size
• Trade Area
• defined in terms of
• Primary, Secondary, Tertiary
• Driving time
• Total Sales

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Market Analysis for Housing

• Market delineation to determine its components
• Segment housing demand by
• housing type
• ability to pay

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Office Buildings

• Building Types
• Office Building Terms
• Gross Building Area
• Rentable Area
• Rented Area
• Net Occupied Space (Useable)
• Efficiency Ratio
• Segment office demand by
• type of office building
• location
• ie CBD vs. Suburbs

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Vacant Land

• Physical and Legal determinants of use
• access linkages
• land use patterns and community growth
• development of a land use plan including timing
  for potential development

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Case Presentations and the Market Analysis
Report

• Case Presentations
• 3 to 4 students to a group
• 15 to 20 minute presentation of findings
• The Market Analysis Report
• Complete Self-Contained Format
• 30 to 50 pages

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So Thats An Introduction to Real Estate Market
Analysis
Are there any Questions?
Wayne Foss, MBA, MAI, CRE, Fullerton, CA
USA Phone [phone] Fax [phone]
Email wfoss_at_fossconsult.com