What areas of knowledge describe real estate? Legal Market/economics Financial Investment Real estate services Chapter 1 Introduction

Supply and demand for real estate knowledge Educators Universities Industry organizations CCIM, AI, NAR Industry Corporations Small shops Chapter 1 Introduction

In a commercialized area, why is there a bank or gas station on every corner? Look at a map; why do major cities located where they are? Why are all fast food restaurants about the same size? Chapter 1 Thoughts …………….

Why are Home Depot and Lowe’s located across the street from one another? Who owns the larger pieces of real estate we see from day to day? (malls, skyscrapers) What does the lease look like for a grocery store in a shopping center? Chapter 1 …….. More Thoughts

Chapter 2 Real Estate Markets What is a market? General real estate markets: – Space – Asset Important to analyze both in any setting

Chapter 2 Real Estate Markets Types of space? – Residential – Office – Retail – Lodging – Industrial – Agricultural

Chapter 2 Real Estate Markets Idealized Supply & Demand Model – Many buyers and sellers – Knowledge of the market – Products are identical or similar – Supply is flexible in short term – Purchases are small and frequent – Space is not a factor in the analysis

Chapter 2 Real Estate Markets Real Estate Supply – Real estate improvements - buildings and other structures – Supply is fixed in the short run – Supply of services is responsive – Additions to supply are small – Additions based on future demand – The cost and availability of financing

Chapter 2 Real Estate Markets Impact of Uniqueness Defining real estate markets – Geographic Location Neighborhood – Property type District

Chapter 2 Real Estate Markets Real Estate Demand Factors – Income – Employment – Population Shift in demand – Increase in use of existing properties – Increase in prices and rents – Increase in construction and supply

Chapter 2 Real Estate Markets Asset market – Real estate exists in several capital asset markets – Owners of income producing real estate receive cash flows – Investors compete on available real estate where the prices are set

Chapter 2 Real Estate Markets Market Analysis: supply & demand analysis on specific property type – Construction – Vacancy (natural) – Absorption – Rents/price levels – What is key for each property?

Chapter 2 Real Estate Markets Residential Market Characteristics – Heavy use of debt – Government intervention – Psychological benefit – Type of investor Pure Mixed

Causes of urban growth – Comparative advantages – Economic Base Chapter 3 Urban Economics

Comparative advantages – Transportation (Ports, Rail, Air) – Education (Austin, Boston, North Carolina) – Natural resources (Iron & Steel) – Environment (utilities, tax rates, culture) – Climate (Florida) – Leadership (pro/anti growth)

Chapter 3 Urban Economics Economic Base – Export activities – Pop. serving activities Types: – Financial – Retail – Manufacturing – Technology

Location of People – Why do people locate where they do? – Jobs and Employment – Climate (Snow Birds) Chapter 3 Urban Economics

Highest and Best Use Concept That use of the land likely to produce the greatest long-term economic return to the owner. Vacant land Land with improvements – Interim use – Adaptive use – warehouse lofts Returns to owner versus returns to society

Chapter 3 Urban Economics Highest and best Use is defined in the Dictionary of Real Estate Appraisal, 3rd edition, page 171, as: – "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability."

Chapter 3 Urban Economics Bid-Rent Curve: relationship of land rent and distance from the center of the community Determines highest and best use with respect to distance

Chapter 3 Urban Economics A city may grow in several ways – Vertically – In-filling – Extension of settled areas Models of urban growth – Concentric circle – Axial growth – Sector growth – Multiple nuclei growth Filtering

Chapter 3 Urban Economics Neighborhood Life Cycle – Gestation Time from idea to completion of development – Youth Increase in commerce and services – Maturity Not much change

Chapter 3 Urban Economics Neighborhood Life Cycle – Incipient decline Due to filtering – Clear decline Costly to maintain – Accelerating decline/abandonment – (Gentrification)

Chapter 3 Urban Economics Summary – Comparative advantages – Economic Base – Bid-rent curve – Models of growth – Neighborhood life cycle