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

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

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

4 Course Syllabus, con’t... n Required Textbook u Market Analysis for Valuation Appraisals, Fanning, Grissom & Pearson F 1st Edition F The Appraisal Institute n Course Project u Market Analysis of a Commercial or Residential Site F Group Project (3 to 4 students to a group) F Property of my choice F length approximately 30 to 50 pages including exhibits F presentation of findings in class

5 Course Syllabus, con’t... n Examinations u Type F 50% Multiple Choice or True False Closed Book, Closed Notes F 50% Short Answer or Problems Open Book, Open Notes u No Partial Credit u Calculators are permitted, computers are not u Make-up examinations are not permitted F Unless there an extraordinary circumstance

6 Course Syllabus, con’t... n Final Grade Weighting Policy u Mid-term 30% u Final Exam 35% u Course Project 30% u Class Participation 5% F Total:100%

7 Course Syllabus, con’t... The Final Course Grade will be based on the following Scale:

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9 Class Schedule DATETOPIC ASSIGNMENT Feb. 2Introduction - 9Real Estate Market Analysis Ch Real Estate Market Analysis Ch Data Sources for Market Analysis Ch 10 Mar. 2Field Assignment - 9Population Forecasting & Ch 6 Economic Base Analysis 16Basic Concepts and Real Estate Marketability Analysis Ch 11 23Highest and Best Use Decisions 30Spring Break - Apr 10Mid-Term Examination -

10 Class Schedule DATETOPIC ASSIGNMENT Apr13Market Analysis for Shopping CentersCh 12, Shopping Centers, con’t 27Market Analysis for Housing: SubdivisionsCh 14 May 4 Market Analysis for Office BuildingsCh Market Analysis for Vacant Land Ch 15 18Case Presentations of Project Papers 25Final Examination

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

12 Six Step Market Analysis Process n Step 1: Define the Product u (property productivity analysis) n Step 2: Define Users of the Property u (market delineation) n Step 3: Forecast Demand Factors n Step 4: Inventory and Forecast Competitive Supply n Step 5: Analyze and Interaction of Supply and Demand u (residual demand study) n Step 6: Forecast Subject Capture

13 Levels of Market Analysis n Inferred Demand Studies u Level A F more descriptive than analytical u Level B F relies upon broad based surveys n Fundamental Demand Studies u Level C F employs fundamental forecasting techniques u Level D F use of primary research and surveys

14 Property Productivity Analysis n Site and Improvements u Site analysis n Legal and Regulatory u Zoning and General Plan constraints n Location u Linkages u Urban Growth

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

16 Population Forecasting n Definitions of: u Projections (prediction) u Forecast n Curve Fitting, then extrapolation u Six Alternative Curves n Forecasts using building permit data

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

18 Sources of Demand n Employment u Manufacturing u Services (Office Users) n Population Growth u Housing Units u Shopping

19 Shopping Centers n Types of Shopping Centers u Tenant Mix and Size n Trade Area u defined in terms of: F Primary, Secondary, Tertiary F Driving time F Total Sales

20 Market Analysis for Housing n Market delineation to determine its components n Segment housing demand by: u housing type u ability to pay

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

22 Vacant Land n Physical and Legal determinants of use n access linkages n land use patterns and community growth n development of a land use plan including timing for potential development

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

24 So That’s An Introduction to Real Estate Market Analysis Wayne Foss, MBA, MAI, CRE, Fullerton, CA USA Phone: (714) Fax: (714)