Finance 454: Real Estate Market Analysis

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

Wayne Foss, MBA, MAI, CREFoss Consulting GroupEmail: wfoss@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, con’t... 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, con’t...

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, con’t...

Final Grade Weighting Policy Mid-term 30% Final Exam 35% Course Project 30% Class Participation 5%

Total: 100%

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Course Syllabus, con’t...

Grade GPA Pctg. Range A+ = 4.0 97-100% A = 4.0 93-96% A- = 3.7 90-92% B+ = 3.3 87-89% B = 3.0 83-86% B- = 2.7 80-82% C+ = 2.3 77-79% C = 2.0 73-76% C- = 1.7 70-72% D+ = 1.3 67-69% D = 1.0 63-66% D- = 0.7 60-62% F = 0.0 Less than 60%

The Final Course Grade will be based on the following Scale:

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Class ScheduleDATE 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 6Economic Base Analysis

16 Basic Concepts and Real Estate Marketability Analysis Ch 11

23 Highest and Best Use Decisions

30 Spring Break -

Apr 10 Mid-Term Examination -

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Class ScheduleDATE TOPIC ASSIGNMENT

Apr 13 Market Analysis for Shopping Centers Ch 12, 16-17

20 Shopping Centers, con’t

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 That’s An Introduction to Real Estate Market Analysis

Wayne Foss, MBA, MAI, CRE, Fullerton, CA USAPhone: (714) 871-3585 Fax: (714) 871-8123 Email: wfoss@fossconsult.com