©2011 Cengage Learning. Chapter 10 COMMERCIAL AND INDUSTRIAL MARKETS ©2011 Cengage Learning.
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Transcript of ©2011 Cengage Learning. Chapter 10 COMMERCIAL AND INDUSTRIAL MARKETS ©2011 Cengage Learning.
©2011 Cengage Learning
Chapter 10COMMERCIAL AND INDUSTRIAL MARKETS
©2011 Cengage Learning
Business Real EstateIncludes both commercial and industrial real
property.Typically valued on ability to generate income.
©2011 Cengage Learning
©2011 Cengage Learning
Figure 10.3
Road to Value
The rate of new construction, conversions, and demolitions effect supply of business real estate
Important supply characteristics:Changes in supply are slow due to construction time for
new product.Government regulations and political considerations can
slow or stop developments.The “pipeline effect” must be considered in analyzing future
supply.
©2011 Cengage Learning
Major Value Influences
Business Property MarketsBuyers and sellers often highly
knowledgeable about real estate market.Easy access to professionals, including
attorneys, accountants, appraisers, etc.Institutional market playersProduct knowledge
©2011 Cengage Learning
LeasesMarket users often lease property Leases are typically long term and
complexRisk for the landlord is a major
consideration when leasing properties.Lease terms include who pays for repairs,
utilities, insurance, etc.
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Commercial Property aka Income Property Retail
Office
Lodging
Multiuse
©2011 Cengage Learning
Forceslocal community forcescomparative advantage forcescustomer convenience forcesunique forces of a particular type of
business
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Local Community Forces - trends in population, demography, taste and purchasing power.
Comparative Advantage Forces - location, transportation, customer location, governmental controls, combination of stores, etc.
Customer Convenience Forces - location to customers, location to similar businesses, etc.
Unique Forces of a Particular Type of Business - locational requirements
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Commercial NeighborhoodsCentral Business DistrictsLinear StripsLocal Commercial ClustersShopping and Big Box Centers
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Commercial property location influencesTransportation changes where users locate.To save money consumers shift their dollars to
warehouse clubs or big box, low cost retail outlets.
Huge automobile dealerships locate along freeways creating auto clusters.
Convenience food services grow as a result of increased disposable income.
The economy shifts from producing goods to services, space requirements change.
©2011 Cengage Learning
Community Economic ChangesCommunity economy effects commercial
property
Short-term local changes
National business cycles
Long-term trends
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Community population change relates to economic change
Demographic ChangesRetirementsJob GrowthSpending HabitsTaste
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Institutional FactorsTransportation/travel patternsGovernmental controls including
zoning and general plans.Pollution controlsHealth and safety regulations
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Supply characteristicsNumber of existing buildingsTenant turnoverRent levelsLease renewalsValue of propertiesPending new construction
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Industrial PropertyDemand tied to swings in the business
cycle and mortgage funding.
Industrial site selection includes linkage, accessibility & good shipping system.
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Industrial Locations
No one location is idealChoice involves compromisesCost of landSkill level of laborTransportation costsAccess to raw materials
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Business seeks locations that reduce its costs and increase profits
Greenhut’s Reasons for Plant Location
Demand for the manufacturer’s product (demand sites)
Cost Savings (cost plants)
Personal Reasons
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Other Plant Site Location AlternativesMarket-orientedMaterial-orientedLabor-orientedFootloose
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Industrial TrendsIndustrial parks, with pleasant settings
& employee parking lots.Large, one-story buildings instead of
multistory. Locations near airports, freeways, and
major shipping ports.
©2011 Cengage Learning
When analyzing overall community real estate activities and trends, these institutional factors are important:
Are property tax rates reasonable?Are community attitudes receptive to
industries of particular types?Is zoning appropriate?Are transportation systems adequate?What are the environmental constraints?Are the educational facilities adequate?Are needed support facilities adequate?
©2011 Cengage Learning
Supply CharacteristicsAge, condition and vacancy of existing
buildingsRate and absorption of new constructionTurnover of existing usesLocation, volume, & price of vacant property
sales
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A particular commercial neighborhood can be either stagnant, stable, or improving. A market survey is a careful study of a commercial neighborhood and all of the forces that influence the neighborhood.
Transportation, labor, materials, community attitudes, and markets are significant factors that help determine industrial locations. There is a recent trend toward large suburban industrial parks.
©2011 Cengage Learning
