RE market Analysis

MARKET ANALYSIS STUDY (aka Term Paper) +

This assignment focuses on 3 areas of analysis:

1. The relationship between economic analysis & demand for real estate development or investment.

2. The factors influencing net absorption for a particular real estate product in a specific location.

3. The practical application of using economic analysis in the decision-making process.

I) Report and Proposal

A market analysis examining economic viability of a selected aspect of commercial real estate development is required. Suitable topics include product segments within one of the five sectors of commercial real estate as well as related infrastructure, public policies and issues related to financing development. Topic areas of interest range across international, national or regional market areas. Reports are generally 18 - 20 pages in length (double-spaced), not including tables, figures and documentation.

OBJECTIVE: to soundly frame and examine a specific market decision by forming expectations for risk and profitability based on targeted market demand in a specific location. This includes forming expectations for the economic and financial environments as well as applying the relevant local knowledge for your analysis. Emphasis is on careful evaluation of your selected project statement. The term paper is NOT merely description of published data, nor is it a project feasibility study. It is an analysis of the economic viability of your topic.

All analyses must include a supply and demand analysis, demographics of the targeted market area, the interaction between the public and private sectors and a monitoring strategy. All reports must be written in standard third-person, formal English with complete footnotes or endnotes and a bibliography in a recognized format.

A one-page proposal and an oral presentation are also required. The proposal is not a formal outline of your final report but rather a summary of your proposed objective and analytical strategy. As you proceed and develop more expertise with your topic, these may change, but to begin you must describe as specifically as possible:

· Analytical Question and Context

· Analytical Strategy

· Resources and Data

· Any Anticipated Challenges for Your Analysis

Proposals are due October 26. Market area definitions are due November 2. Analytical statements, definitions and rationales are due November 9. Market Analysis Reports are due November 30. Oral Presentations Nov 23 & Nov 30.

II) Oral Presentation

An oral presentation is required. The oral presentation is NOT a verbal reading of your report. It is a presentation of your most important findings to your professional peers. The objective is to make your analysis and results understood. A successful presentation is one that is well-prepared and focused. The tone is less formal than the report but nonetheless disciplined, informative and pertinent. Presentations are limited to 5 minutes. Questions will be entertained as time permits. A general guideline for effective presentations of this length is to make one or two clear main points in the context of your analysis. This usually means a (1) clear statement of you research and rationale, and (2) your findings followed by what they suggest for future expectations and analysis,

Presentations demonstrating no preparation will be deducted a minimum of 5 points. Power point is not required but will be available. If you choose to use power point, your presentation must be loaded before class begins. Other audio-visual equipment must be requested two weeks in advance.

III) Report Requirements

All reports are expected to clearly identify the specific issues relevant to your analytical question and their implications for the decision-making process. The importance of each factor varies by topic, but all reports must cover:

· Analytical Statement and Project Definition

· Primary Market: Generally 30-50% Total Demand

· Secondary Market: Generally 20-30% Total Demand

· Market Potential

· Competitive Supply

· Area Economic Overview, including economic bases and demographics

· Public Policy, including interaction between public and private sectors

· Local Knowledge, including developer quality

· Findings, including expectations for capture rates and net absorption

· Monitoring Strategy

· Conclusion: Analytical limitations and/or recommendations for further analysis

Your market analysis must also demonstrate proficiency with the ESRI 3.0 GIS database available through CCIM, and you must use it to collect the population and income data for your market areas.

IV) Sample Analytical Areas of Interest and Analytical Topics

· Governor’s Island: What mix of uses (e.g. entertainment, research, residential) will meet New York City’s objectives?

· Chelsea: Will the High Line catalyze far west side residential development and help alleviate the City’s housing shortage?

· Hudson Yards: What infrastructure development (e.g. Number 7 Subway extension) will make Hudson Yards successful?

· Atlantic Yards: Is demand sufficient to make a stadium development successful as economic development?

· Columbus Circle: Why has vertical retail development succeeded at the Time Warner Center whereas earlier attempts have underperformed or failed in New York City?

· Lower Manhattan: How will the New World Trade Center impact office or residential values and rents?

Real Estate Economics and Market Analysis

Market Analysis Definition and Core Concepts

Real estate market analysis is the identification and study of demand and supply, usually for the purpose of real estate investment and development. Market analysis forms the basis for decisions regarding location, size, design and quality, features, and target use. Development projects should match locational demands of firms and households and satisfy those demands competitively. Market analysis continues through the development and eventual disposition of the project, particularly in unfamiliar or highly competitive markets, and therefore focuses on effective application of theory to practice. Real estate market analysis provides guidance for the many decision-makers, both private and public sector professionals involved in real estate development.  Analytical factors may include but are not limited to:

I. MacroEconomy and Centrality of Real Estate

a. Relation and Importance of Analysis to Real Estate

b. Profile of Economy

c. Profile of Each Component

d. Relevant Indicators

e. Relation of Economy to Global Economy

f. Fiscal Policy

g. Real Estate as Key Instrument of Monetary Policy

h. Central Role of Real Estate in Property and Economic Cycles

II. Five Commercial Sectors of Real Estate （Choose one）

a. Office

b. Retail

c. Industrial

d. Hospitality and Leisure

e. Multi-Family Housing

III. Agglomeration and Economic Geography

a. External Economies of Scale

b. Global Cities

c. International Urbanization

IV. Cities as Engines of Economic Growth

a. Urban Economic Growth – Economic Base Approach

i. Multiplier Process

ii. Location Quotient and Proxy

iii. Profile of Urban Economic Bases

iv. Agglomeration and Economic Geography

b. Urban Economic Growth – Other Approaches

i. Input/Output Models

ii. Trend Analysis

c. Competitive/Creative Cities

d. Connectivity

V. Locational Supply and Demand for Real Estate

a. Fundamentals and Linkages Between Market for Use and Market for Investment

b. Public Policy

i. Type-of-Use Zoning

ii. Land-use Regulations

iii. Real Estate Taxes

c. Tax and Other Incentives

d. Impact of Local Government on Supply and Demand

i. Infrastructure

ii. Public Services; Quality and Mix

iii. Fiscal Zoning

iv. Fiscal Capitalization

v. Public/Private Partnerships

VI. Institutions and Principles of Land Use

a. Product Type in Terms of Location Decision

b. Demand in Relation to Location

c. Cities as Value Propositions