Chapter 6: Forecasting Ownership Benefits and

Transcript:Chapter 6: Forecasting Ownership Benefits and:
Chapter 6: Forecasting Ownership Benefits and Value: Market Research Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Multiple Factors Affect Real Estate Demand Needs for access (“linkages”) “location, location, and location” Non-locational factors Housing (style, design, size; financing available) Commercial (tenant mix and character; parking facilities) Offices (style, design, floor plate size; amenities and services; electrical and communications service) 6-2 Market Segmentation Market segmentation: Differences in preferences or needs among market subgroups Implication of market segmentation: Market research must focus on relevant market segments Corollary 1: Most real estate data is irrelevant in studying any particular property Corollary 2: Most important data for a particular market segment may not be readily available 6-3 Challenges Posed by Market Segmentation Market segmentation is an empirical notion: Cannot be described without investigating first Important facts of segmentation may vary with location and property type Research process must recognize this challenge No simple, universal procedure 6-4 The Cycle of Market Research 6-5 Writing a Market Story All market research is someone’s particular story (Best to write down the assumptions of the story) Clues about market segments can come from industry literature (ex: Urban Land Institute) Initial collection of data should depend on the assumptions about segmentation Object: Estimate critical market parameters (rental rates, sales projections, etc.) 6-6 Writing a Market Story (continued) First analysis What range of critical parameters are implied by data? Range narrow enough to be useful? Refinement necessary? Refining the research What factors affect critical parameters the most? What information illuminates those factors? 6-7 Story Approach vs. Conventional Market Research Story approach begins with property and its market segments, and then builds links to larger economy Conventional approach goes from the state of the world, to the nation, to the state, and then to the city, and finally to the property 6-8 Three Examples of Property Market Research Elysian Forest – planned unit development Palm Grove – proposed office building Plane Vista – proposed apartment expansion Why look only at development projects? No difference in market analysis questions between existing and proposed properties Much more market information for existing properties Therefore, critical parameters should be clearer for existing properties Development projects demonstrate more of the challenging data issues 6-9 Elysian Forest: Proposed Planned Unit Development (PUD) PUD characteristics Mixed density (single family to townhouses) Smaller individual lots for single family Common areas and recreation facilities Elysian Forest