Basic Concepts of Real Estate Marketability AnalysisProperty Productivity ConceptsSlide 3Property Productivity: Site and ImprovementsSlide 5Slide 6Slide 7Slide 8Property Productivity: Legal and Regulatory AttributesSlide 10Slide 11Property Productivity: Location DeterminantsSlide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Urban Growth Structure AnalysisSlide 22Slide 23Slide 24Slide 25Slide 26Slide 27Slide 28Slide 29Slide 30Market Area ConceptsDemand Concepts Local Economic AnalysisRelationship of the Local Economic Overview to the Marketability Analysis ProcessDemand Side Economic VariablesSlide 35Slide 36Slide 37Slide 38Slide 39Slide 40Slide 41Slide 42Demand AnalysisSlide 44Supply AnalysisSupply and Demand InteractionSummary of the Basic ConceptsSlide 48Slide 49Feasibility RentFeasibility Rent an exampleSlide 52Slide 53So That’s Basic Concepts of Real Estate Marketability Analysis1Basic Concepts of Real Estate Marketability AnalysisWayne Foss, DBA, MAI, CRE, FRICSFoss Consulting GroupEmail: [email protected] Productivity ConceptsProductivity Analysis - Analysis of a property’s capacity to deliver services to meet human needs, house economic activities, and supply satisfaction and amenities.A parcel of real estate produces (supplies) services for those who use it.Price paid is a function of:its supply of services relative to potential users’ purchasing powerneed for its servicesinability to find good substitutes at a lower priceMarket Analysis in Real Estate is different from other types of market analysisreal estate is not well definedproduct can change over timelocation is fixed3Property Productivity ConceptsFocus of the discussion for all aspects of the subject property is to:Segment the subject market to address advantages and disadvantagesProperty Productivity Analysis seeks to answer:What does the subject have to offer to the market?What are the subject’s competitive advantages and disadvantages4Property Productivity:Site and ImprovementsDesign and condition of the subject can limit the potential market it can serve.Physical attributes analysis is the initial action in marketability analysisPhysical attributes of the site:Size, Shape, Topography, ClimateVegetation, Natural Drainage, FloodplainSoil and Subsoil5678Property Productivity:Site and ImprovementsPhysical Attributes of a StructureExterior physical featuresSubstructure and SuperstructureInterior physical features:Walls, Supports and FinishEquipment and Mechanical SystemsPlumbing, Heating, Ventilating, and air-conditioningElectricalMiscellaneous including fire protection, sprinklers, escalators and elevators, signal, alarm or call systemsMarket Appeal AttributesUnique and Special features of a propertyThink: Appeal to Who or what group of users?9Property Productivity: Legal and Regulatory AttributesRegulations may be Public or PrivateCan enhance or detract from the value of the propertyExamples of Constraints:Local Zoning Ordinances and General Plansrestrict a site that is ideal for an office building to residential housingstrong neighborhood association prevents changes in useLocal Subdivision Codesrequirements for extra wide streets and landscaping increase cost of development, thereby reducing the supplyExamples of Enhancements:Rezoning of a neighborhood that is undergoing transition to a higher and more intensive use. (i.e.: residential to commercial)101112Property Productivity: Location DeterminantsLinkages:Transportation linkagesMovement of people, goods and services to and from the subjectUtility linkages: gas pipelines, sewer, water, telephone, electricityComponentsRoute: The established or directed course of travel between two spatially separate parcels of real estateAccess: The ability to enter or pass to a site from a route, or to a route from a site.Examples are streets, curb cuts, sewer lateralsTravel Mode: The locomotion method for traversing a route and gaining access.Examples are automobile, bus, train, truck, airplane, boats, etc.Route Orientation: A route may be oriented inward toward the subject, outward from the subject or dual directional.Example, a grocery store located on a busy street so that people returning from work can easily stop.131415Property Productivity: Location DeterminantsExposure and ExternalitiesMay have positive or negative effects on the productivity of the site and its linkagesNeighborhood Externalitiesneighborhood character - properties compatibility with each otherLinkage Externalitiesimpairment to the productivity of the land such as when a sewer has reached it’s capacity, but the neighborhood is only one-half developed or streets are too narrow and overcrowded.Classification of Externalitiescan be Positive or Negative, Natural or Man-made16Property Productivity: Location DeterminantsAssociations: Different types of property require different linkages and land use associationsHousing must be linked to jobs, shopping and community facilitiesRetail uses need customersOffice uses are supported by hotels, print shops and restaurants17181920Property Productivity: Location DeterminantsSitus Analysis as a Land Use PredictorDefinition: The total urban environment as it relates to a specific land use on a specific land parcel as they function in time.A Process of analysis of the subject locationIdentifying activities in the areaEstablishing the nature of associations between the activitiesIdentifying and analyzing the accessibility of the site to the surrounding areaIdentifying and evaluating the total environmental impact of the area on the site use.21Urban Growth Structure AnalysisTheories of Urban GrowthConcentric Zone StructurePresumes five concentric zones that influence property usePresumes growth is outward from the central core.Can be a ripple effect from the center of major intersections of transportation arteriesSector StructureUrban area will develop in sectors in which high, middle and low-income residents will tend to groupHigh income groups will purchase the most desirable areas for their housesMiddle groups will strive to join the upper-income groupsBasic premise is that higher-income groups establish the general direction of urban growthPresumes that