1. Supply and Demand in the Space Market
David M. Harrison, Ph.D.
Texas Tech University

2. Shape of RE Space Market Supply Curve
Why might LRMC be Rising?
Costs more to build the next unit than the last one
Why might LRMC be Falling?
Costs less to build the next unit than the last one
David M. Harrison, Ph.D.
Texas Tech University

3. Long-run Equilibrium Rent
Note: You need to forecast changes in both future demand and future supply, and consider than the “kink point” moves out with increases in the current stock of supply.
David M. Harrison, Ph.D.
Texas Tech University

4. Evaluating Changes in Demand
Starting in Equilibrium:
Starting with Excess Supply:
Notes:
David M. Harrison, Ph.D.
Texas Tech University

5. Evaluating Changes in Demand
Starting with Excess Demand:
What About LRMC?
Notes:
David M. Harrison, Ph.D.
Texas Tech University

6. House Prices and Inflation
David M. Harrison, Ph.D.
Texas Tech University

7. More Market Definitions
Asset (Property) Market –
Vreal estate assets
Further Delineating Capital Markets
Public Markets –
Private Markets –
Debt Markets –
Equity Markets –
David M. Harrison, Ph.D.
Texas Tech University

8. R.E. in U.S. Capital Markets
David M. Harrison, Ph.D.
Texas Tech University

9. Size of U.S. Real Estate Markets
David M. Harrison, Ph.D.
Texas Tech University

10. Size of U.S. Real Estate Markets
David M. Harrison, Ph.D.
Texas Tech University

11. The Real Estate System
David M. Harrison, Ph.D.
Texas Tech University

12. Asset Markets and Property Values
Commercial property prices are typically quoted in terms of “Cap Rates”
David M. Harrison, Ph.D.
Texas Tech University

13. Cap Rate Determinants Opportunity Cost of Capital Growth Expectations
Risk
David M. Harrison, Ph.D.
Texas Tech University

14. Market Segmentation Space Market Asset Market
Segmented due to type and location specificity
Asset Market
Generally not segmented. Money is money, and financial capital easily flows from one project to another.
Asset prices adjust such that expected returns are the same for properties with the same risk, across different property market segments
David M. Harrison, Ph.D.
Texas Tech University

15. The Development Industry
Development is a creative, entrepreneurial process characterized by…
R.E. Development is therefore dealing with the dynamic “cutting edge” of the physical built environment.
This makes development the most cyclical branch of the real estate industry.
David M. Harrison, Ph.D.
Texas Tech University

16. Construction Starts
David M. Harrison, Ph.D.
Texas Tech University

17. Negative Feedback Loops
Mechanisms within a system that tend to dampen the changes in the system, helping to keep it in control, preventing it from spiraling out of control.
David M. Harrison, Ph.D.
Texas Tech University

18. Feedback Loops in the Real Estate System
David M. Harrison, Ph.D.
Texas Tech University