Ch 12 Existing Retail Shopping Center Application of Fanning’s 6 Step Method to Retail Real Estate

Purpose of the Market Analysis Process for a Shopping Center This chapter presents a step-by-step procedure and techniques for performing a market analysis as part of a valuation appraisal of an existing retail shopping center. The application presented is only one of the many variations that could be applied depending on the characteristics of the subject property, the availability of data, etc.

Step 1: Analyze the subject property (property productivity) Analyze the site and building for competitive strengths and weaknesses Analyze the location of the subject property

Step 2: Analyze the market of users Define the trade area Profile the customer characteristics

Step 3: Forecast Demand Analyze trends: E.g., use data from a similar mall to infer sales at the subject property. Analyze demand by one of several methods. E.g. by sales per capita method –Estimate population in the trade area –Multiply by sales per capita –Multiply by % spent on the specific retail type (e.g., neighborhood mall) Reconcile findings and forecast final demand

Step 4: Measure Competitive Supply Inventory existing competition, competitive properties under construction, proposed competitive properties, and likely additional competitive space. Characteristics include size, occupancy rate, tenants and rental rates. Location characteristics are needed for comparison to the subject. E.g. central city or other market segment.

Step 5: Analyze market equilibrium or disequilibrium Estimate residual or marginal demand. Is there more square footage supply than demand? Or, is there a “market gap” created by demand greater than supply? This step can be omitted or minimized– the Buckland Example combines this into step 6.

Step 6: Forecast subject capture Analyze capture by inferred methods (historical capture of the subject, capture of comparable properties, etc.) Forecast capture by fundamental methods. E.g., pro rata share is the subject square footage (sf) divided by all sf in the market (the sum of square footages for the subject plus all competitors). Or use a competitive rating method, Table Reconcile subject capture indications derived by inferred and fundamental analyses. Table